Who Pays First In A Car Accident: Driver Or Owner's Insurance?

Auto insurance is typically billed a month, six months, or a year in advance, depending on the provider. This means that, when you pay for your car insurance, you're paying for your coverage in advance. Most car insurance companies write their policies for six months, but they also offer monthly payment plans.

How to get the best auto insurance rates as a first-time buyer

Auto insurance is usually billed monthly, every six months, or annually, depending on the provider. When you pay for your car insurance, you're paying for your coverage in advance.

• Compare quotes from multiple companies: Shop around and compare insurance rates from different companies to find the best deal. Rates can vary significantly between insurers, so it's important to get multiple quotes.
• Choose the right amount of coverage: Decide on the type and amount of coverage you need. You can choose between full coverage, which includes comprehensive and collision insurance, or liability-only coverage. Consider the value of your car and the likelihood of repairs to determine if full coverage is worth the cost.
• Ask for discounts: Look for insurance companies that offer discounts such as multi-policy, new car, good student, multi-car, safe driver, or defensive driver discounts.
• Improve your credit score: Maintaining a good credit score can help lower your insurance premiums. Most states allow insurance companies to use credit scores as a pricing factor, so improving your credit can lead to better rates.
• Bundle policies: Consider bundling your auto insurance with other types of insurance, such as renters or homeowners insurance. Many companies offer significant discounts when you purchase multiple policies from them.
• Safe driving habits: Practicing safe driving habits and avoiding accidents can help you qualify for lower rates. You can also consider enrolling in a defensive driving course, which may lead to additional discounts.
• Increase your deductible: Raising your deductible can lower your insurance premiums. Just make sure you can afford to pay the deductible in case you need to file a claim.
• Compare apples to apples: When comparing quotes from different companies, ensure you are getting quotes for the same levels of coverage, limits, and types of vehicles to make an accurate comparison.
• Get quotes online or through an agent: You can obtain insurance quotes online or by working with an insurance agent. Online quotes are often free and allow you to compare rates from multiple companies at once. An agent can provide personalized advice and help you find the best coverage for your needs.

The pros and cons of paying monthly vs annually

Auto insurance is usually billed a month, six months, or a year in advance, depending on the provider. The billing cycle you choose will depend on your financial situation and comfort level. Here are some pros and cons of paying monthly vs annually to help you decide which option is best for you.

Paying Monthly: Pros

• Affordability: Paying monthly is more affordable for those who cannot afford to pay the full year's premium upfront.
• Manageable payments: Spreading the cost over monthly payments reduces strain on your budget and makes it easier to manage your finances.
• Improving your credit score: Making timely repayments improves your credit score as it shows lenders that you are financially responsible.
• Knowing the due date: With a monthly payment, you are aware of the exact due date and can prepare for it, instead of waiting for the insurer to notify you about the total premium payment.

Paying Monthly: Cons

• More expensive: Since you are paying in instalments, you are essentially borrowing money from the insurance company and will be charged interest, making it more expensive overall.
• Negatively affecting your credit score: Missed payments can negatively impact your credit score and remain on your credit file for up to six years, affecting applications for other credit services.
• Risk of losing coverage: If you miss a payment, your policy may be cancelled, and driving without insurance is illegal.

Paying Annually: Pros

• Cheaper: Paying annually is almost always the cheapest option as there are no added interest charges.
• Peace of mind: Once you've paid, you don't have to worry about your car insurance for the entire year, and you know you're covered even if you face unexpected financial difficulties.
• Better money management: Paying annually helps with money management as you don't have to worry about monthly bills and have a whole year to save for the next payment.
• No late fees: You won't have to worry about incurring late fees or having your insurance cancelled due to missed payments.

Paying Annually: Cons

• Large one-time payment: The main disadvantage of paying annually is that you have to pay a large sum of money upfront, which may not be feasible for everyone.
• Fluctuating income: If you have a fluctuating or seasonal income, paying annually may be challenging as you need to pay a large sum at once.

How to save money on auto insurance

Auto insurance is billed in advance, with policyholders paying premiums upfront. The billing cycle can vary, with options for monthly, semi-annual, or annual payments. While it's necessary to have auto insurance, there are ways to save money on it. Here are some tips to help you reduce your auto insurance costs:

• Shop around and compare rates: Compare quotes from multiple insurance companies online or through an independent insurance agent. Rates can vary significantly between companies, so it's worth shopping around to find the best deal.
• Take advantage of discounts: Insurance companies offer various discounts such as safe driver, good student, and multi-policy discounts. Ask your agent about available discounts or check the insurer's website.
• Improve your driving record: Speeding tickets, accidents, and traffic violations increase your premium. Consider taking a defensive driving course to improve your skills and reduce your premium.
• Drop unnecessary coverage: If your car is older and not worth much, consider dropping collision and comprehensive insurance. Evaluate whether the coverage is worth the cost and set aside money for repairs or a newer car.
• Choose a cheaper car to insure: Safe and moderately priced vehicles, such as small SUVs, tend to have lower insurance rates than flashy and expensive cars. Compare insurance rates for different models before buying a new car.
• Increase your deductible: By raising your deductible, you can lower your premium. Just make sure you can afford to pay the higher out-of-pocket cost in the event of a claim.
• Improve your credit score: In most states, insurance companies use credit scores to determine premiums. Improving your credit score can lead to significant savings on your auto insurance.
• Consider usage-based insurance: If you're comfortable with your driving behavior being tracked, usage-based or pay-per-mile insurance can lower your premium. However, be aware that unsafe driving behavior may lead to increased rates.
• Bundle your policies: Combining your auto insurance with other types of insurance, such as homeowners or renters insurance, from the same company can often result in a discount.
• Review your policy regularly: Life events such as moving, changing jobs, getting married or divorced, and adding or removing drivers can impact your insurance needs and rates. Review your policy periodically to ensure it still meets your requirements and that you're getting the best value.

The different types of auto insurance coverage

Auto insurance is typically billed monthly, every six months, or annually, depending on the provider. It is usually paid in advance to avoid unexpected coverage lapses and guarantee continuous protection.

Now, here's an overview of the different types of auto insurance coverage:

Liability Coverages

Liability coverages include bodily injury liability and property damage liability. Bodily injury liability covers damages for bodily injury or death resulting from an accident where you are at fault. Property damage liability, on the other hand, covers damage to someone else's property resulting from an accident caused by you. It is a good idea to have the same level of bodily injury coverage for all your cars and consider an umbrella policy for additional coverage in more serious accidents and lawsuits.

Medical Payments Coverage

Medical payments coverage, or MedPay, covers your medical expenses after a car accident, regardless of who was at fault. It also covers medical expenses for injured passengers if you were the at-fault driver.

Personal Injury Protection Coverage

Personal injury protection, or PIP, is similar to MedPay but may also cover funeral costs, child care, or lost wages due to injuries from an accident. PIP is required by law in 17 no-fault states.

Uninsured and Underinsured Motorist Coverages

Uninsured motorist coverage protects you in case you are hit by a driver without insurance. Underinsured motorist coverage, on the other hand, kicks in when the at-fault driver's insurance limits are insufficient to cover all the injuries or damage they caused.

Collision Coverage

Collision coverage pays for damage to your car when it hits or is hit by another vehicle or object, regardless of who is at fault.

Comprehensive Coverage

Comprehensive coverage pays for damage to your car resulting from incidents other than a collision, such as theft, vandalism, flood, fire, or other covered losses.

Additional Auto Insurance Coverages

Aside from the coverages mentioned above, there are several other optional coverages you can add to your policy, including emergency road service, rental reimbursement, mechanical breakdown insurance, and more.

What to do if you can't afford auto insurance

Auto insurance is typically billed monthly, every six months, or annually, depending on the provider. While it can be challenging if you can't afford auto insurance, there are several options to consider:

• Don't cancel your policy: Although it may be tempting to forgo insurance, this can have long-term consequences. Every state except Virginia requires drivers to have some level of auto insurance. Driving without insurance can result in fines, an insurance lapse on your record, and future insurance costs may increase. It could also lead to your license being suspended, and your car being repossessed if you have an auto loan or lease.
• Contact your insurance company: Get in touch with your insurance provider as soon as possible to discuss alternative payment options and discounts. They may allow you to delay or combine payments. Most insurers offer a grace period for late payments, but it's best to act quickly to avoid policy cancellation.
• Raise your deductible: Increasing your deductible is a way to lower your insurance costs. If you're a safe driver with no recent claims or don't drive frequently, a higher deductible may be a viable option. However, ensure you can afford the larger deductible if needed.
• Change your coverage: If your car is older and paid off, you may be able to reduce your coverage. Comprehensive and collision coverage are often unnecessary for older vehicles, as they may only pay out up to the car's market value, minus the deductible. Consider carrying only the state-mandated minimum coverage, which typically includes liability insurance.
• Explore pay-per-mile insurance: If you don't drive frequently, pay-per-mile insurance could be a more affordable option. It calculates your premium based on the number of miles you drive, usually tracked through a smartphone app or a device plugged into your car's diagnostic port.
• Shop for a new policy: Comparing rates from different insurance companies is an effective way to find cheaper alternatives. New customers often receive discounts, so it's worth checking with several providers at least once a year.
• Improve your credit score: In most states, credit scores influence car insurance premiums. Focus on paying your bills on time and maintaining low credit card balances to gradually improve your credit score, which can lead to lower insurance costs over time.
• Consider alternative transportation: If you've tried the above options and still can't reduce your bill, consider using public transportation, ridesharing, carpooling, or even walking or biking for shorter distances. If you have access to someone else's vehicle, a non-owner car insurance policy can be a more affordable option.

Frequently asked questions