What do I need to know about auto insurance?
Let's face it...
...Murphy's Law does exist. At some point in your life you are going to have one of those days that just doesn't go your way. That deer is going to come out of nowhere, or the little old man that just didn't see you, or the drunken driver that just drives off is going to happen. Even the little fender bender in the parking lot can try to ruin your day. It may indeed ruin your day, DON't LET IT RUIN YOUR LIFE. You don't pay for auto insurance just to pay for a new car if you total it or pay to get that dent fixed, you pay for insurance to protect your assets.
There are several things to think about when you purchase auto insurance. How much do I need. What does it pay for? How do deductibles work? What is full coverage? I will answer these questions and many more, but first you should know this. I don't know anyone who admits outloud that they are a bad driver. I'm not saying that everyone is, but most likely, sometime in your life you will be at fault in an accident. If you are, your insurance is going to have to pay for bodily injury liability, property damage liability coverage, personal injury protection, medical payments coverage, The combination of these coverages is the most basic form of of an auto insurance policy.
Bodily Injury Liability coverage- This is mandatory coverage in most states. Bodily injury liability coverage pays for medical bills, lost wages, rehabilitation,tretment, and/or funeral costs for anyone injured or killed by your car. This coverage will pay for "pain and suffering" damages when a third pary succesfully sues. Many experts agree that this is the most important type of coverage to carry. The biggest mistake consumers make is being underinsured on bodily injury liability coverage. Consumer Reports reccomends that you should purchase at least $100,000 per person and $300,000 per accident. If you have sizable assets, consider increasing those limits to $250,000 per person and $500,000 per accident. Such added coverage wll raise your premium about 10%...but if you have considerable assets it is worth it. Consumer Reports also reccomends "that people with a high net worth should purchase an umbrella policy," to insure against a lawsuit that could go beyond your auto policy limits. Typically you have to purchase higher insurance rates to qualify for an umbrella policy.
Property Damage- This coverage pays to repair or replace another persons vehicle or other property damaged by your car. States typically require only $10,000 to $25,000, but I suggest at least $100,000 in property damage coverage.
Uninsured & Underinsured motorist coverage- This covers medical bills, rehabilitation, and funeral costs, as well as losses for pain and suffering for you or the passengers in your car when an accident is caused by a hit-and-run driver or someone who has little or no insurance. You should get the same amount of Uninsured and Underinsured motorist coverage as you purchase in bodily injury coverage. If someone who has no insurance hits you, your medical costs will be covered.
Coverage you'll Probably Need
Collision and Comprehensive- Collision coverage pays to repair or replace your car Collision coverage pays to repair or replace your car no matter who or what caused the accident. Comprehensive pays to repair or replace your car if it's stolen or damaged as a result of a storm or other natural event. Coverage kicks in for the amount above your deductible. Choose the highest deductible you can afford to pay out of pocket--at least $500. Once the cost of this coverage equals 10 percent of your vehicle's book value, you might want to cancel it, since you will collect no more than your vehicle's market worth. Antique vehicles or cars with collector value sometimes are insured through a separate rider; or you may have to find a separate, specialty insurer.
Personal-injury protection. PIP reimburses you for lost wages and in-home care needed as a result of an accident. If you have separate health and disability policies, you can buy just the state-required minimum for PIP. The other policies should cover the balance of your needs.
Medical-payments coverage. Sometimes called med-pay, this covers medical bills for you and your passengers, regardless of who's at fault. When this coverage isn't automatically included in your policy, its costs are minimal. You may not require any if you have good health insurance. To protect passengers who may not have their own health coverage, you may want to carry at least $5,000 of this coverage.
Additional types of coverage
Roadside assistance. This coverage pays to have your vehicle towed. If you already have an auto-club membership or your car's manufacturer provides this service for free, don't buy this extra coverage.
Rental reimbursement. This coverage typically costs $30 per year and pays for a rental car--usually for up to 30 days--if your vehicle is stolen or is in the shop for repairs sustained in an accident. There's usually a cap on the amount you're reimbursed per day and per occurrence.
MONEY-SAVING TIPS
Ask for the top tier. Insurers sort customers according to their likelihood of filing a claim, then assign them to one of several categories commonly referred to as tiers. Top-tier customers who have had few or no claims in the past several years and live in neighborhoods where auto-theft rates are low, for example, can easily save 15 percent or more off the standard rate. But simply because you qualify initially or improve your driving record doesn't mean you automatically get top-tier status.
Check rates before you buy a car. The difference in premiums between one car or truck and another can be substantial. Much of that has to do with the cost of repairing collision damage, which can vary greatly even among seemingly similar vehicles.
Get equipment discounts. You may qualify for extra discounts if your car has current safety equipment such as air bags or antilock brakes. Also check about anti-theft equipment such as an alarm system, which can get you a break on the comprehensive part of your coverage.
Group your policies. Most insurers will give you a multiple-policy price break if you let them write your auto, home, and personal-liability coverage.
Improve your driving skills. Completing a certified defensive-driving course can reduce your premium in some states.
Kid factors. If you have children who drive, you'll save if they get good grades or if they attend a school located more than 100 miles from your home and don't use the car there.
Group discounts. Insurers award discounts to low-risk consumers who share a common affiliation such as a membership in an employee group, a company pension fund, or an alumni association. These so-called affinity discounts can be sizable, so if they apply to you, it pays to take advantage of them. Ask your insurer if any groups to which you belong qualify for such a discount. Alternatively, ask representatives of the groups if they work with any insurance companies.
Keep repair options open. Some insurers insist you use generic replacement parts or encourage you to bring your vehicle to certain body shops in an effort to cut claims costs. While this arrangement may lower your premium, you may want to preserve your flexibility by insuring with a company that lets you decide which parts are used (original equipment or aftermarket copies), and who does the repairs. In tests a few years ago, we found none of the aftermarket replacement bumpers tested fit as well as factory-original bumpers or stood up as well to low-speed impacts. We also had trouble making generic fenders fit properly.