20 Facts about Car Insurance everyone Should Know!

Smartchoice Editorial
May 30, 2021

Car insurance seems like an indispensable evil to many of us. We really don’t want to spend money on the vehicle. But the thing that needs reminder is that, if an individual is going to drive a car, one has to have car insurance in place.

It’s time to dispel some of the myths and learn the important facts about auto insurance so you can feel confident about your coverage. The price of your car insurance premium is mostly determined by where you live, and what kind of car you drive. The make, model, and year of your car also factor in.

But there are other factors, too, including your age, marital status, and how many miles you drive each year. Here are 20 auto insurance facts that will help everyone to make smarter decisions.

1. Companies Can Non-Renew your Policy

If you have had a lot of incidents and accidents there can be that insurance companies are allowed to non-renew your policy. When we say that, the policyholder can decide to cancel your policy to prevent the individual from renewing. While the policyholder can be able to ride out the remainder, you’ll have to get another insurance company when the term is completed.

2. Minor Accidents Can Sky-Rocket the policyholder Premium

This insurance fact means that whether you rear-end someone or bump into a pole or a tree, every accident and incident count if you make a claim. If you hit a mailbox once and there’s not much damage, your bill might not go up. However, repeated wrongdoings will eventually increase your premium on your renewal enough to cover regular issues. In other words, drive safely and pay attention to your car’s surroundings! Be vigilant and be safe!

3. Reckless Driving lead to heavy insurance coverage

According to the law in Pakistan having third party collision insurance is mandatory. An individual cannot drive a car without having this coverage. This kind of insurance does not cover the policyholder but provides coverage to the party injured. If an individual is a reckless driver he/she may need to buy comprehensive insurance to cover the losses to property of all the parties involved in an accident.

4. Your Car’s Make, Model, and Engine Change the Cost

If an individual drives a brand-new, expensive, high-powered car, the policyholder will have to pay much more money on their car insurance premium. The car insurance premium calculation is based on several factors, including how much repair your car and cost. Since high-priced vehicles charge more for maintenance, your policy premium will be higher. The premium also depends on the fact that which vehicle is more prone to being stolen, if the vehicle falls under that category it shall be charged higher than another vehicle of the same price range in the market.

5. Credit Is Crucial

One of the most influential factors of car insurance policies is your credit score with the bank and insurance agencies. If you have poor credit, it’ll increase the price of an individual policy. Unfortunately, it could cause a difference of over thousands of rupees. Building the credit as quickly as possible will keep the policyholder insurance from going too high. The policyholder can get a credit check when they renew their car insurance policy, too.

6. Driving Records Can Show Life Expectancy of an individual

According to the website Cheap Insurance, people who drive safely and don’t get any car fines or challans or get into accidents tend to live longer and have more life chances than those who drive recklessly. Even if they don’t get into a severe accident while driving, most people who repeatedly crash or drive under substance influence and drive without caution tend to have a shorter life expectancy.

7. If Your Name Is on the papers, You’re Charged for Any Accidents

Whether you’re loaning the car to a roommate for a short drive to the grocery store or letting your parents borrow your jeep for a long drive, the policyholder is responsible for any problems along the way if caused by anyone the policyholder has loaned the vehicle to. If they get into a crash or collision, the policyholder has to pay the bill and deal with possible premium increases with the insurance provider upon renewal.

8. 50% of Your Premium Isn’t for Coverage

That’s right; Half of the premium you pay in place of your car insurance policy goes to cover the costs of running the insurance company. They have to pay salaries to the employees, air conditioning of the office, website maintenance, and so on. The other half is added in a pool to pay out for insurance claims. The car insurance money paid as a premium might go to pay someone else’s claim if the policyholder never has to use it.

9. Driver’s Insurance is not mandatory

It might seem convenient that an individual has to carry car insurance, but you’ll have to pay thousands of rupees for any accidents. Furthermore, if you have car insurance and the other driver doesn’t, but they leave the scene of the incident, you’re left with the payment of any incident or undesired accident.

10. Lifestyle Changes affect your car Insurance Bill

Moving to a new geographical space, driving more on a work commute, or spending more time travelling on road trips may affect your car insurance premium, as the chances for damage to the vehicle or increase in incidents. Let your insurance provider know if there is anything as such that is to be known to set the correct amount. Failure or negligence to do so will result in consequences, including insurance premium hike and non-renewals.

11. Family favours can Ruin Your Insurance Premium

It is to be noted that if you let your family members drive your car (including when you’re teaching them how to drive), you would be responsible for all the damages to the car. Even if they get into a minor collision or crash, there’s an active chance you’ll have to pay the bill and deal with your annual premiums on your car insurance.

12. Loaning Your Car Can Cost You Thousands

It is strictly advised that never let someone borrow your car if they’re not on the car insurance policy. As you’ve read in a couple of aforementioned points, everything done to the car is your responsibility. One thing to remember is that car insurance companies insure the driver, not the whole world who drives the car.

13. Many Delivery and rider Vehicles Aren’t Covered

In Pakistan, you might have trouble finding coverage for Uber, Careem and other delivery and commercial taxis. Even if they double your personal vehicle, they have many more miles and hours on the road. Even if you can get a policy, which many insurers refrain in Pakistan keeping in view the usage of the vehicle on the road? If an individual can find one, they will have to pay a higher car insurance premium.

14. Failure To Get third-party Insurance Is Punishable by Law

In Pakistan having third-party liability insurance is obligatory, while a policyholder doesn’t require comprehensive car insurance, a policyholder will be in deep trouble if you’re caught driving without it anywhere else. Car insurance saves a dent in your wallet, car, and other drivers. It’s a matter of the complete legal responsibility of an individual.

15. Car insurance depends on the age of your vehicle

The car insurance you get is calculated based on the model of the car and the age of the car. The older the car the premiums rates are lesser. The coverage depends on the predetermined year of the make of the car. You can pick and choose the coverage you desire for your old car paying lesser premiums for an individual car.

16. Where You Live Matters

Living in a low-traffic rural area costs less than living in a busy city. There’s a higher chance of an accident, so companies charge more money. However, small cities often don’t have much of a premium increase due to the constant/ no change in lifestyle.

17. Customizing Your Premium Could Hurt Your Wallet

If you don’t know the difference between different coverages, it’s best to leave it to the professionals. Customize plans can be good if your organization offers you customized corporate plans. If you plan to acquire customize car insurance plans individually they may cost you a lot on your insurance premiums.

18. Personal Coverage Doesn’t Include Business/Commercial Vehicles

It is something that needs to be understood that whether you own the company or work for an employer, your business/commercial vehicle isn’t covered as a personal (individual) vehicle. If you want to get it insured let your insurance provider know so they can add it. Large businesses in Pakistan often have preset insurance, though.

19. Payment Gaps Increase Insurance Costs

If you’re not driving for six to twelve months, it might be tempting to skip insurance payments. This mistake could cost you hundreds of rupees because car insurance companies don’t like seeing a gap in insurance history. It shows you haven’t been on the road for a while. Make sure to purchase car insurance before your current policy is cancelled or expired.

20. Auto Insurance Surfing Is a Poor Practice

Never jump from one company to another too often. You won’t reap the benefit of long-term commitments that lower your payments. Some people skip from one to another and think they’re saving money, but it costs them much more in the long run!

These 20 insurance facts about car insurance will help you determine the nitty gritty involved in car insurance plans and how it affects the work of a whole coverage and impacts the wallet of an individual. knowing these facts would make an individual more vigilant and assist the individual in acquiring the right policy.

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