What you need to know about insurance!
04-18-2006, 06:35 PM
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What you need to know about insurance! Car insurance is a trade off. More security means a larger premium, while budgeting too closely can leave you without the protection you want. However, you can design a car insurance plan that will cover your needs without costing you an arm and a leg.
Basic liability coverage
This is the single most important type of auto insurance coverage. Carrying too little auto accident liability can expose you to judgments and legal costs for years to come.
Most states require something like 25/50/10 in liability coverage. That's up to $25,000 coverage for any single person injured by you in an auto accident, and up to $50,000 for everyone injured. Not a lot of money for medical bills, lost wages, and compensation for pain and suffering.
You should probably carry more.
Additional auto insurance coverage (anything you get over the minimum) gets cheaper as you buy more. This means that your premium goes up a little while your protection goes up a lot.
Pay special attention to bodily injury liability. It's easy to imagine the cost of personal injuries (plus pain and suffering and lost wages) totalling a million dollars from a somewhat serious accident.
The standard (the average, not the minimum) auto liability policy is 100/300, where the 300 stands for $300,000 in total bodily injury liability.
But I would recommend that you take out at least $300,000-$500,000 worth of personal injury liability, even if that means less property damage coverage.
Why? Because property damage from an accident won't be nearly as expensive as injuries can be. So the $25,000 worth of property damage liability coverage in our example policy is probably adequate. (Of course, you can be on the safe side with a little more.)
Uninsured Motorist Coverage
Uninsured and underinsured motorist coverage protections are a very important part of your policy. One of the best pieces of auto insurance advice I can give is this:
!!! Make sure you carry these two coverages !!!
How important are they? Around 24% of all drivers have no auto insurance coverage. If you're injured in an accident caused by one of these drivers, you won't be reimbursed without this coverage.
And unlike medical coverage, uninsured and underinsured motorist coverage will compensate you for not only the out-of-pocket expense of your injuries, but for your pain and suffering as well. That's why these two types of insurance are so important.
How much uninsured and underinsured motorist coverage do you need? Consider carrying the same limits as your liability coverage.
After all, it makes sense to protect yourself and your family as much as you protect other drivers on the road.
Protecting yourself also means protecting your assets. Often uninsured/underinsured coverage will also reimburse you for property damage you may incur in an accident.
Medical Payments Coverage
Medical payments coverage, also called personal injury protection, or PIP, covers the cost of injuries to you, your family, and your passengers. Sounds like a good idea, right?
Often it's not.
Medical payments coverage can be useless and costly. Why? First off, if you have good health insurance, you don't need PIP. Your health policy should pay for treatment of injuries from a car accident, and it will probably cover more than a PIP policy would.
Secondly, PIP is limited. It pays for a trip to the hospital caused by an automobile. But it doesn't cover any other trip to the hospital. See the problem? You're better off putting your money toward a good heath policy. That way you'll be covered no matter what sent you to the hospital.
If your state requires PIP, consider going with the bare minimum, and putting the money you save toward a better heath insurance policy.
Save on Collision and Comprehensive
The best way to save money on car insurance is to keep a high deductible on both of these policies.
A low deductible may seem to be worth the comfort of never having to fork over $500 or $1000 for car repairs before your insurance kicks in. But it usually isn't.
Consider that raising your deductible by as little as $250 can buy you a couple hundred thousand dollars more worth of liability coverage. Which will make you feel more secure? Paying even $1000 for repairs beats paying 100 times that for someone else's hospital bills!
And a lot drivers are paying for these types of coverage when they really shouldn't be. If you're driving an older car with a very low resale value, the cost of comprehensive and collision coverages for a couple of years may be costing you more than the car is worth!
For cheaper car insurance, consider dropping these policies altogether, especially if you have a poor driving record that inflates your rates.
These policies are not worthless. If you drive a new car, you need them. But you shouldn't carry them in place of reasonable levels of other types of coverage.
Save on Car Insurance Endorsements
Car insurance endorsements include coverage for towing, on-site labor, and rental car expenses. These are inexpensive car insurance policies, but they're not always necessary.
Weigh their benefits versus cost. You may be able to earn a lower premium by going without them.
Towing and labor insurance is popular but usually not very economical. I recommend going with an auto club like AAA for towing and labor protection instead.
The price is similar, and auto clubs provide a lot of other additional services for their members. Dealing with an auto club will also be a lot less hassle than filing a claim every time you use the service.
Daily rental insurance may be a better deal, especially if you're a driver who really relies on their car. The cost is low and the convenience level high. However, if you have other forms of transportation available (another car, a car pool, public transport) you might want to pass. You'll get cheaper car insurance.
Your lifestyle
I know, you're not going to turn the way you live upside down just to save a few bucks on car insurance. I wouldn't either. But there are some small things you can do to save yourself big money.
Drive less and drive more safely. Insurance companies always offer safe driver incentives, which can mean a big auto insurance discount. Drivers with no points in the last three years qualify for much lower car insurance rates.
There's good reason for this. For every speeding ticket you get within one year, your chances of being at fault in a motor vehicle rise dramatically. (We're talking almost 100% per ticket.) So slow down!
The less you drive the less you pay, too. If you can carpool or use public transit to and from work, your rate will go down. Lower your mileage and you'll lower your premium.
If you have kids who drive, it's going to be harder to qualify for a safe driver insurance plan. But teenage drivers who are good students, or who drive older model cars, may earn you an auto insurance discount. And college kids who attend school more than 100 miles away from home (without a car) might too.
One factor that will definetely influence your premiums is the presence of teen-aged drivers in your home.
Your car
The kind of car you drive can have a big effect on your insurance costs. High profile cars (this means both sporty coupes like ours and popular cars preferred by thieves, like Honda Accords) will earn higher premiums than lower profile sedans and station wagons.
Of course, new and expensive cars mean higher collision and comprehensive premiums. Driving an older model can lower your car insurance premium by quite a bit.
Don't feel like trading in your ride? An easier way to earn a discount auto insurance rate is to install safety devices on your car. Air bags, automatic seatbelts, and anti-lock breaks will all improve your rate on medical and un/under-insured motorist coverage.
Car alarms and locator devices can also reduce the cost of comprehensive coverage. Many insurance providers (in fact, almost all of them) will offer you a discount if you provide proof of having some sort of anti-theft device installed.
Your provider
Shopping around several car insurance companies might be the best way to save on car insurance. Quotes for the same coverage can vary widely from lender to lender, and gathering a few before you make your decision can be a real money saver.
Shopping for the cheapest auto insurance online is great way to get multiple quotes without a lot of hassle or commitment. The major car insurance companies can get you several low quotes with one easy application. And even if you don't decide to go with any of them, you'll have some figures to use comparison shopping.
Basic liability coverage
This is the single most important type of auto insurance coverage. Carrying too little auto accident liability can expose you to judgments and legal costs for years to come.
Most states require something like 25/50/10 in liability coverage. That's up to $25,000 coverage for any single person injured by you in an auto accident, and up to $50,000 for everyone injured. Not a lot of money for medical bills, lost wages, and compensation for pain and suffering.
You should probably carry more.
Additional auto insurance coverage (anything you get over the minimum) gets cheaper as you buy more. This means that your premium goes up a little while your protection goes up a lot.
Pay special attention to bodily injury liability. It's easy to imagine the cost of personal injuries (plus pain and suffering and lost wages) totalling a million dollars from a somewhat serious accident.
The standard (the average, not the minimum) auto liability policy is 100/300, where the 300 stands for $300,000 in total bodily injury liability.
But I would recommend that you take out at least $300,000-$500,000 worth of personal injury liability, even if that means less property damage coverage.
Why? Because property damage from an accident won't be nearly as expensive as injuries can be. So the $25,000 worth of property damage liability coverage in our example policy is probably adequate. (Of course, you can be on the safe side with a little more.)
Uninsured Motorist Coverage
Uninsured and underinsured motorist coverage protections are a very important part of your policy. One of the best pieces of auto insurance advice I can give is this:
!!! Make sure you carry these two coverages !!!
How important are they? Around 24% of all drivers have no auto insurance coverage. If you're injured in an accident caused by one of these drivers, you won't be reimbursed without this coverage.
And unlike medical coverage, uninsured and underinsured motorist coverage will compensate you for not only the out-of-pocket expense of your injuries, but for your pain and suffering as well. That's why these two types of insurance are so important.
How much uninsured and underinsured motorist coverage do you need? Consider carrying the same limits as your liability coverage.
After all, it makes sense to protect yourself and your family as much as you protect other drivers on the road.
Protecting yourself also means protecting your assets. Often uninsured/underinsured coverage will also reimburse you for property damage you may incur in an accident.
Medical Payments Coverage
Medical payments coverage, also called personal injury protection, or PIP, covers the cost of injuries to you, your family, and your passengers. Sounds like a good idea, right?
Often it's not.
Medical payments coverage can be useless and costly. Why? First off, if you have good health insurance, you don't need PIP. Your health policy should pay for treatment of injuries from a car accident, and it will probably cover more than a PIP policy would.
Secondly, PIP is limited. It pays for a trip to the hospital caused by an automobile. But it doesn't cover any other trip to the hospital. See the problem? You're better off putting your money toward a good heath policy. That way you'll be covered no matter what sent you to the hospital.
If your state requires PIP, consider going with the bare minimum, and putting the money you save toward a better heath insurance policy.
Save on Collision and Comprehensive
The best way to save money on car insurance is to keep a high deductible on both of these policies.
A low deductible may seem to be worth the comfort of never having to fork over $500 or $1000 for car repairs before your insurance kicks in. But it usually isn't.
Consider that raising your deductible by as little as $250 can buy you a couple hundred thousand dollars more worth of liability coverage. Which will make you feel more secure? Paying even $1000 for repairs beats paying 100 times that for someone else's hospital bills!
And a lot drivers are paying for these types of coverage when they really shouldn't be. If you're driving an older car with a very low resale value, the cost of comprehensive and collision coverages for a couple of years may be costing you more than the car is worth!
For cheaper car insurance, consider dropping these policies altogether, especially if you have a poor driving record that inflates your rates.
These policies are not worthless. If you drive a new car, you need them. But you shouldn't carry them in place of reasonable levels of other types of coverage.
Save on Car Insurance Endorsements
Car insurance endorsements include coverage for towing, on-site labor, and rental car expenses. These are inexpensive car insurance policies, but they're not always necessary.
Weigh their benefits versus cost. You may be able to earn a lower premium by going without them.
Towing and labor insurance is popular but usually not very economical. I recommend going with an auto club like AAA for towing and labor protection instead.
The price is similar, and auto clubs provide a lot of other additional services for their members. Dealing with an auto club will also be a lot less hassle than filing a claim every time you use the service.
Daily rental insurance may be a better deal, especially if you're a driver who really relies on their car. The cost is low and the convenience level high. However, if you have other forms of transportation available (another car, a car pool, public transport) you might want to pass. You'll get cheaper car insurance.
Your lifestyle
I know, you're not going to turn the way you live upside down just to save a few bucks on car insurance. I wouldn't either. But there are some small things you can do to save yourself big money.
Drive less and drive more safely. Insurance companies always offer safe driver incentives, which can mean a big auto insurance discount. Drivers with no points in the last three years qualify for much lower car insurance rates.
There's good reason for this. For every speeding ticket you get within one year, your chances of being at fault in a motor vehicle rise dramatically. (We're talking almost 100% per ticket.) So slow down!
The less you drive the less you pay, too. If you can carpool or use public transit to and from work, your rate will go down. Lower your mileage and you'll lower your premium.
If you have kids who drive, it's going to be harder to qualify for a safe driver insurance plan. But teenage drivers who are good students, or who drive older model cars, may earn you an auto insurance discount. And college kids who attend school more than 100 miles away from home (without a car) might too.
One factor that will definetely influence your premiums is the presence of teen-aged drivers in your home.
Your car
The kind of car you drive can have a big effect on your insurance costs. High profile cars (this means both sporty coupes like ours and popular cars preferred by thieves, like Honda Accords) will earn higher premiums than lower profile sedans and station wagons.
Of course, new and expensive cars mean higher collision and comprehensive premiums. Driving an older model can lower your car insurance premium by quite a bit.
Don't feel like trading in your ride? An easier way to earn a discount auto insurance rate is to install safety devices on your car. Air bags, automatic seatbelts, and anti-lock breaks will all improve your rate on medical and un/under-insured motorist coverage.
Car alarms and locator devices can also reduce the cost of comprehensive coverage. Many insurance providers (in fact, almost all of them) will offer you a discount if you provide proof of having some sort of anti-theft device installed.
Your provider
Shopping around several car insurance companies might be the best way to save on car insurance. Quotes for the same coverage can vary widely from lender to lender, and gathering a few before you make your decision can be a real money saver.
Shopping for the cheapest auto insurance online is great way to get multiple quotes without a lot of hassle or commitment. The major car insurance companies can get you several low quotes with one easy application. And even if you don't decide to go with any of them, you'll have some figures to use comparison shopping.
