The General Car Insurance Principles

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Buying a car insurance can be a troublesome process. In order to make the best choice for yourself it is important to understand the car insurance principles. Understanding these principles will help you avoid possible rejected claims in the future. It will also help you understand how the insurance world works.

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The insurance business is based on risk calculation. When you file a claim, you are asking the insurer to take on your daily car crash risks in return for regular premiums. As you can imagine, this business needs to be profitable for the insurance companies, therefore the premiums are calculated according to the level of risk. If you are a young driver or you are driving an expensive and powerful sports car, you are considered to be a higher insurance risk and therefore your car insurance quotes will be higher than average.

Full disclosure
One of the most important car insurance principles is full disclosure. Understanding this principle will help you avoid the possibility of having a rejected car insurance claim in the future. In order to determine your risk profile, a car insurance company will have you answering a series of personal and professional questions. It is utterly important that you are completely honest when answering these questions. Usually when an auto insurance company received a very expensive car insurance claim, they make a deeper investigation in the insured’s profile. If they discover that you hid or manipulated some essential information they are entitled to reject your claim. The reasoning for this is the fact that when you are hiding information you are doing it in order to lower your insurance level of risk so that your car insurance premiums will be cheaper.

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Insurance clauses and coverages
Most states have laws that dictate car insurance is mandatory for all drivers. Furthermore there is a minimum coverage that all drivers are forced to acquire. In addition to the minimum coverage, you can also acquire other coverages such as collision coverage. This particular coverage dictates that your insurance company will cover the repair costs for your car even if the accident was your fault. As most insurance clauses, the collision coverage is based on the principle of insurable interest. This means that you must have an insurable interest in the assets that you want to include in your policy. The property right is usually the most solid insurable interest. When purchasing the collision coverage it is better if you hire a professional evaluation company in order to determine the value of the car.

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Exclusions and excesses
When buying an insurance policy you need to be mindful of a few insurance traps such as exclusions and excesses. Excesses apply to several situations in which your insurance company does not cover your damages. For example a water exclusion means that in case you drive into a pond or another type of water formation your insurance will not cover the repair cost. Excesses are clauses which state that when filling a claim you too must pay an amount of money.

These are the main car insurance principles. They apply to all types of car insurance but they can vary from state to state. This is why it is extremely important that you read your car insurance policy carefully. Make sure that your understand how the ambiguous parts apply. Ask your insurance agent as many questions as possible in order to avoid misunderstandings.