Figures from the American Federation of Insurers gave 90.9 million cars insured in 2015. Yet many cars are still driving around without insurance, with police saying they see about 100,000 insurance defaults per year. If you haven’t insured your car or are planning to, here are 5 things to know about car insurance.
What does car insurance cover?
Everyone who owns a vehicle is required to have auto insurance to cover at least their liability. This means that even a car that is not in use and is permanently parked on the street must be insured because it can still cause damage to a third party (bad parking, vehicle fire…). There are three different types of car insurance which are adapted to each insured profile:
- Third party insurance: this contract is the minimum required to be able to drive. It includes the civil liability guarantee which covers bodily and material damages that could be caused to others. For example, if you are responsible for an accident, your insurance will compensate the other driver. Conversely, if you are the victim of an accident, you will be compensated by the insurance of the driver at fault.
- Third party insurance: this is the intermediate formula between the basic third party contract and the all risks formula. It covers civil liability, fire and theft, but it is also possible to add some optional guarantees for a better coverage. For example, you can add the “glass breakage” guarantee which covers repairs or replacement of the windshield or the rear window.
- All risks insurance: this formula includes the guarantees of the two previous ones but adds the all-accident damage guarantee, which allows coverage even in case of responsible accident. It is possible to add an optional driver protection guarantee which is not always acquired.
A deductible is applied for each at-fault claim and represents the costs remaining at the driver’s expense. It can be fixed in advance by the insurer, expressed as a percentage of the cost of the claim (and therefore variable) or relative and in this case, the insurer will not reimburse you below the determined amount.
The bonus-malus principle is a legal obligation for insurers. It allows them to reward good drivers and penalize those responsible for accidents by applying a coefficient to their annual premium.
Example of an annual premium of 100dollarss:
- Bonus: After one year without an accident, you will benefit from a bonus coefficient that will reduce your premium by 5%. It will then drop to 95 dollars per year, then to 90 dollars after two years and so on until the thirteenth year when you will reach the maximum bonus (bonus 50) which will reduce your initial premium by half. Moreover, if you manage to keep your bonus 50 for three more years, no malus will be applied on your first at-fault accident.
- Malus: On your first at-fault accident, a malus will be applied that represents 25% of your premium (equal to a coefficient of 1.25). Since it was 100, it will increase to 125 dollars per year. At the second accident, it will increase by 25% and so on until a maximum coefficient of 3.5 (it is very rare to reach this point and your insurance company will surely cancel the contract). Note that to cancel a malus, it will take 2 years without responsible accidents.
Who is concerned by this insurance ?
Since the law of 1958, any person owning a vehicle is required to insure it, a lack of insurance is punished by a 3750 dollars fine. It is important to know that even a car that is not in use must be insured as a minimum, i.e. in civil liability. Each insured person has the possibility to choose between a third party, third party+ or all risks formula according to his profile, his budget and the type of vehicle to be insured.
What are the advantages of car insurance?
- Third-party formula: in case of an at-fault accident, your insurance will compensate the other car for the damage you have caused. On the contrary, if you are the victim, you will be compensated by the insurance of the responsible driver.
- Third Party+: fire and theft are part of the basic guarantees of this insurance formula but the owner also has the possibility to add optional guarantees to his coverage such as glass breakage or legal protection.
- All Risks: the essence of the all risks insurance is the all accident damage guarantee. Whether you are responsible or not, this guarantee will provide coverage.
What are the limits?
- Third Party Coverage: It is important to know that this coverage only covers damage caused to third parties and will not take into account material and bodily damage that you may suffer.
- All Risks : the protection of the driver in case of accident is not always acquired by this formula. It will be necessary to subscribe an optional guarantee which will make it possible to cover the physical damage of the driver in the event of accident.
What is the cost of a car insurance ?
To choose the right car insurance, several criteria must be taken into account. First of all, you must evaluate the age of the vehicle, because an All Risks policy will be of little interest for an old car. The evaluation of the risk to which one is exposed is also an essential criterion because it makes it possible to determine the guarantees necessary according to your need. Indeed, a person who drives every day is more likely to have an accident than a person who drives only occasionally. Finally, you should pay particular attention to the deductibles that will determine your compensation and your remaining expenses in case of an accident.
Rates and guarantees vary according to the driver’s profile and budget, but on average, with a good profile and a small car, you should expect to pay about 25 dollars per month with a third-party policy, 30 dollars per month with a third-party policy and 40 dollars per month with an All Risks policy.