WHAT IS 'Standard Auto Insurance'
Standard auto insurance refers to the most basic auto insurance offered to drivers who fall into an average risk profile.
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NONSTANDARD AUTO INSURANCE
COMPREHENSIVE INSURANCE
AUTOMOBILE LIABILITY INSURANCE
BREAKING DOWN 'Standard Auto Insurance'
Standard auto insurance takes into account a driver’s characteristics, and the premium charge is based off of actuarial information compiled from similar drivers’ records.
The ability to accurately estimate the risk in underwriting a new policy can make or break an insurance company. If the company prices the policy correctly and understands the claim risk, it can be profitable, since the premiums it brings in will exceed the benefits it pays out. If the insurer does not effectively understand the risk associated with underwriting a policy, the company can wind up paying out more benefits than it receives in premiums.
Insurance companies pay close attention to individuals and businesses when determining whether to underwrite a new policy. In the case of auto insurance, the insurer will consider the driver’s age, driving record, car usage, credit history, and location, and will compare the driver’s characteristics with actuarial information. This information helps the company determine the likelihood of the driver getting into an accident. The insurance company uses this information to set the premium charge for coverage.
Qualifications for Standard Auto Insurance
A driver must meet certain qualifications to be able to purchase a standard insurance policy. These qualifications often include a clean driving record with a history of few claims. The type of vehicle a driver owns can also affect their ability to purchase a standard insurance policy. Auto insurance companies rate drivers on different categories of risk, including age, gender and credit history.
In addition to standard auto insurance, other types of insurance, such as comprehensive and collision, can be added to a consumer’s policy for more protection. Collision insurance reimburses the insured for damage sustained to their personal automobile due to the fault of the insured driver. This type of insurance is often added as an extension of a basic policy. Comprehensive insurance covers damage to a consumer’s car from causes other than a collision, such as damage from a tornado, vandalism, collapsing garage, or dents caused by a run-in with a deer.
State law requires drivers to carry liability insurance, which covers bodily injury and property damage claims resulting from an accident that is primarily the fault of the insured individual, but collision and comprehensive policies are typically optional. Collision and comprehensive insurance each have their own deductibles, or figure the consumer must pay out of pocket before the insurance company starts paying.
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