Wednesday, March 22, 2023


See how car insurance works and what to consider before hiring yours. From coverage to sinister!

Do you really know how car insurance works? Knowing the particularities, terms and conditions of the contract, for example, is essential to know how to compare the available options. From there, you will have more knowledge to make a safe decision and choose the best offer.

Do you want to find cheaper car insurance without losing quality? So this post is for you. Stay with us and learn more about the subject below!

How does car insurance work?

Car insurance, as with other goods, such as a motorcycle, property or even travel, works as a kind of guarantee for the owner. He pays a monthly fee (or an annual amount) so that he is entitled to be compensated if there is a problem with his vehicle . 

Every relationship between the insured and the insurer generates the so -called insurance policy , which is basically a contract in which the coverage to which the asset is insured is described in detail.

In the event of an event outside the contracted coverage, the insurer is not obliged to reimburse the owner. That is why this negotiation between the two parties before issuing the policy is the most important process in this relationship. 

When something happens to the vehicle, the owner informs the company, which opens a record called an accident , a kind of occurrence about the fact. In the case of a traffic accident, for example, the claim contains what happened and the details of those involved, both the insured and the third party.

It is with this number that both parties will be able to solve the problem, such as fixing the damage resulting from the accident, for example.   

Although we commonly treat it as car insurance, there are several types of insurance that fit the most varied profile of owners. The costs are also different according to the agreed characteristics and conditions.

What types of coverage exist?

Now that you have a better understanding of how car insurance works, let’s show you what coverage there is on the market.

Burglary and theft insurance

When a car is stolen, the owner must, in the first place, call the police, file a police report and notify the insurer of the fact. Compensation, in this case, only comes out if the asset is not recovered. In general, the insurance policy provides for a period (often 30 days after the fact) for the vehicle to be found. After that period, it must indemnify the owner according to market value. 

Third-party damage coverage

Insurance that includes the possibility of coverage for damage to third parties ensures that, if the insured person is responsible for an accident, the other party involved is also entitled to coverage , be it medical-hospital or damage and breakdowns.

In this case, the third party must contact the insurer and inform the claim number so that it can be attended to. In general, the company already indemnifies the hospital, if applicable, or a partner workshop for the service provided to that person.

passenger accidents

This type of insurance is ideal for taxi and app drivers , for example, who usually transport passengers all the time. Coverage generally includes payment of compensation if someone other than the driver is the victim of a traffic accident. The insurance may cover disability compensation or the cost of medical expenses . 

accessories insurance

This type of service is sold as a kind of add-on to basic car insurance. In general, it encompasses items such as radio, windows and mirrors , which can be stolen or damaged both in an accident and in an involuntary crash. In this case, the insured informs the insurer about the damage and is forwarded to a partner workshop. 

What are the other types of car insurance?

Did you know that there are other types of auto insurance? See below.

Vehicle Protection Association

The APVs, Vehicle Protection Associations, are organizations that bring together people with the same interest: to guarantee protection for their vehicles. They run away from the logic of an insurance company because they are characterized as a non-profit organization. In general terms, an APV works as a kind of fund in which the members share among themselves the monthly costs of accidents that occur among their members . 

The objective of APV is not to generate profit for a person or group and, therefore, the monthly cost is proportionally lower . Consequently, this is a valid option for drivers who are unwilling or unable to pay insurance. This is the great advantage of this type of insurance.

However, as associations are not supervised or managed by any body (precisely because they are associations), there is less certainty that you will be fully reimbursed if you have an accident. There are reports on sites such as Reclame Aqui, of associates who felt aggrieved by an accident not covered by an APV.  

DPVAT: the mandatory insurance

DPVAT is an acronym for Compulsory Insurance for Personal Injuries Caused by Land Motor Vehicles, but it is popularly called compulsory insurance .

This is because, each year, when a car owner renews the vehicle’s license, he must pay the DPVAT fee. This can be done with the annual licensing itself, with the first installment of the Motor Vehicle Property Tax (IPVA) or even with the registration of a new car.

This insurance is administered by the Lider insurance company and covers compensation for traffic accidents throughout the country . If a person is hit by a car, medical expenses or even compensation in case of death or disability are covered by the DPVAT. 

Why is it important to pay attention to the price of car insurance?

Some people choose not to hire auto insurance for the price. However, not always the amount you will pay for car insurance will be high . It is important to know that there are different types of insurance and that you should check what best matches your profile.

If you don’t usually use your car at night, for example, it doesn’t justify the need to maintain assistance day and night, with additional services such as locksmith or mechanic coverage if necessary.

If you don’t usually share the car with other people or take passengers, it is not so necessary that you have access to a passenger protection service. 

Withdrawing extras that don’t make much sense and getting closer to your driver profile is the differential for you to get the best cost-benefit for your car insurance.

What factors influence the value of car insurance?

In addition to knowing how car insurance works, it’s worth understanding what factors can make car insurance cheaper or more expensive.

The analysis made by insurance brokers involves a series of questions so that they understand your habit as a driver . And the conditions of use of the vehicle.

You must answer the questions correctly without omitting information . This is because, in some cases, if it is proven that the insured person lied to the company, coverage may be affected and even denied. 

Below we list some of them.

Age of drivers

The age of the main driver and the others (spouse or children) directly influence the amount charged for insurance. Young people are more involved in accidents, for example. Therefore, the price of the service increases significantly if there is a driver aged between 18 and 25 years old. 

Garage at home and at work

Another question that may seem strange, but which influences the price of insurance, is whether he has a garage at home and at work to store his car. That’s because, in the parking lot, the car is less exposed to theft and robbery , for example. Therefore, the chances of a claim for this reason are lower, in the assessment of insurers.

Theft rate in the region

One of the statistics considered is the rate of robberies in different parts of the city . Insurance companies have access to data on thefts and robberies and are able to verify which regions are more or less exposed to these occurrences. And this can directly impact the price if you live or work close to these areas.

Type of car

Another factor that changes the amount of insurance is the type of car insured. More expensive cars that require imported parts to repair malfunctions; very old cars, which parts are hard to find, and even those that are discontinued tend to have the highest price . Cars highly targeted by thieves also usually have an additional one. 

Driver history

How many car accidents have you been involved in in the last year? How many times did you need to call the insurer? All of this is part of your history as a driver and also impacts the amount charged by the company.

It can also be included in the calculation if you are a good payer or if you tend to delay the payment of installments and even if you opt for automatic debit as a means of collection.

Some insurers have a kind of bonus in which the higher the owner’s rating, the lower the amount he will pay .

Driver’s marital status and gender

Yes! This also makes a difference in the assessment of the insurer. Singles and divorced people pay more than married people, as they tend to be involved in more accidents.

Those who usually take their children in the car to school, for example, pay less than others, as they tend to drive more carefully . According to statistics, men are involved in more accidents (and more serious ones!) than women, which makes insurance for them also more expensive.

Why get a car insurance quote?

The auto insurance quote helps you compare different options on the market and identify which one is the most suitable for your profile. This means that there is a greater possibility of finding cheaper than average car insurance.

For this, look for different companies and give preference to those that offer a good service. Here on the site, we have already made a list of the 7 best car insurances to help you in this mission.

In addition to paying attention to the value of insurance, also consider the service provided by companies, the rate of resolution of problems presented by customers , among other very important issues. Also consult the Procon website, and Reclame Aqui, where you will find the insurers ‘ indexes.

How to get cheaper car insurance?

In addition to carrying out an intelligent insurance contract, carrying out different quotes, it is also important to use different methods to save. At the time of the insurance quote, different products and alternatives will be presented to you so that your needs are met. However, other, minimal factors may also reduce hiring costs.

For example, you can opt for the higher value deductible . Yes, it seems contradictory, but let’s explain the situation: the deductible is the mandatory amount that the contractor must pay in cases of claims resulting in partial loss.

The individual will always pay part of the damages, an amount that is already predefined in the contract. Hiring a higher deductible, the insurance value will decrease. However, be very careful before opting for this alternative, as it is only advantageous for policyholders who do not cause so many accidents and who adopt a defensive driving.

How to buy car insurance?

Basically, you can take out insurance in two ways: by contacting the insurer or your bank directly (if they offer car protection services) or by contacting insurance brokers. Currently, some companies offer the option of hiring online, as is the case with Youse.

One facility is that, nowadays, it is possible to do online simulations to get an idea of ​​prices and be able to compare the cost-effectiveness of each of the companies.

Another option is to look for your trusted broker, if you have one. In general, brokers have direct contact with several insurers and are able to offer an option that is more worthwhile , giving opinions on the one with the best service and better payment conditions and benefits, for example. But in any case, it’s important that you do your own research.

Ask friends and family for referrals about the car insurance used by him. Referrals work well because, as people have already used the services, the chance of you having a problem for not knowing the company you are dealing with is less.  

And finally, be sure to negotiate . Check the details of the insurer’s proposal, ask to reduce or withdraw some type of assistance that does not fit your profile until you arrive at an offer that you like more. 

Required documentation

Finally, make sure you have all the necessary documents to purchase auto insurance:

  • personal documents (RG, CPF and CNH);
  • Vehicle Registration Certificate (CRV);
  • Vehicle Registration and Licensing Certificate (CRLV);
  • purchase invoice, if the car is new.

What are the main terms used by vehicle insurers?

Policy : is the contract signed between the insured and the insurer, which contains details about the coverage, the amount of the deductible (see below) and others. 

DPVAT : is the mandatory insurance that every vehicle owner pays in the country. It finances medical expenses and compensation for death or disability resulting from a traffic accident.

Deductible : is an amount that the insured person must bear as a kind of co-participation in the event of a traffic accident that causes material damage to his vehicle. If your deductible is $1,500, that will be the maximum cost you should incur for the repair.

Insurance Premium : This is the amount you must pay the insurance company for vehicle protection. 

Accident : is any occurrence that is related to insurance, such as an accident or even vehicle theft. When the insured calls the company to communicate about any event, it opens a claim, which is registered by a number.

Third : is the other person involved in a claim. In a traffic accident, for example, the third party is the driver who was in the other car hit in the crash. 


Now do you understand better how car insurance works? We try to cover as many doubts as possible on the subject. But if you still have any that weren’t mentioned, be sure to share in the comments.

The objective here is to make you even more aware of how the products work so that the decisions are as right as possible, considering your needs, but without forgetting to be light on your pocket as well.

Frequently asked questions about how car insurance works

How does car insurance payment work?

The payment method for car insurance varies according to each insurer. In any case, the most accepted means of payment are usually bank slips, credit cards and direct debits.

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