What coverages do I need?
Each state determines the minimum amount of coverage you need to purchase in order to satisfy their requirements. So, basically if you want to spend the least amount of money on an insurance policy then you should buy the minimum amount of coverage required by your state. Many people are not comfortable with the state minimums so they choose to “up” their coverage in order to sleep a little easier each night. Here are the required coverages that all states deem necessary :
- No– Fault– In a nut shell no fault coverage takes care of you and your passengers in an auto accident regardless of who is at fault. No- fault saves a lot of time and hassle in the processing of claims because of the elimination of the courtroom process.
- Bodily Injury Liability Insurance– The term liability refers to the passengers in the “other” vehicle that you may have collided with. This protection is one of the most expensive parts of the entire policy. You can purchase as much or as little as your state requires. Most states require a 50,000/100,000 minimum amount. The 50,000 is the amount your company will payout to any one individual in the collision. The 100,000 amount is the total the company will pay out for the entire accident.
- Property Damage Liability– Again the term liability refers to the “other” persons vehicle you may have hit. Most companies require a minimum of 10,000 in coverage.
- Uninsured Motorist Protection– In the event you are hit by a hit and run driver or someone who is uninsured you need to have this protection. Most people purchase the state minimum here.
Optional Insurance
You could go the “el cheapo” route and purchase the mandatory coverages above at their minimum amounts, but that is not what most consumers do. Here is a list a few of the optional types of insurance and the coverages they provide:
- Collision– This coverage becomes mandatory when you take out a loan for your car. Since the bank or lending agency really still owns the car they make you take out collision coverage on your vehicle. Collision works in deductible amounts. In other words if you have 100 dollar deductible, you would pay the first 100 dollars in damages and the insurance company would pick up the rest. Needless to say the higher the deductible the less expensive the collision coverage is.
- Medical Payments– Medical payments coverage basically picks up where your n0-fault left off. Most people purchase additional coverage through medical payments.
- Comprehensive-Covers such things as vandalism, fire, flood, animal damage, windstorms, hail etc. Basically anything that is non-collision.
- Towing and Glass– This may be included with other items in your basic policy, some companies allow you to purchase them separately. If you are a member of an auto club this purchase may be unnecessary.
Saving Money!
Your next step should be to look at how many cars you will be insuring and who will be driving them. This is valuable information for both you and the insurance company. Here are the questions the insurance company will ask you and the effect it will have on the total cost of your insurance policy:
Personal Information
- Your Age– Risk Pool is ages 16-25, these young adults will obviously pay more!
- Male or Female– Females are statistically safer drivers.
- Marital Status– Maried couple pay less than singles.
- Where You Live– Sorry city dwellers you pay more. Your state is divided into rating territories. The territorries with the highest accident rates pay higher amounts in premiums.
- Employment– How far will you commute to work? The more miles the more you pay.
- Driving Record– No points and no accidents. Congratulations you pay less.
The Car
- What is it worth? The more its worth the more you pay.
- Type of Car– How is it ranked “safety wise.” The safer the better!
- Age of Car– If your car is older and paid off you may be able to save lots of $$$$ by dropping your collision coverage.
- Is it Garaged? If it is you are protecting its value and thats a good thing.
- Lots of high tech extras? You will most likely have to add comprehensive insurance to protect these things.
Added Savings!
- Did you take Driver Education? If you did congratulations you will save between 10-15% through your risk “pool years.”
- Did you get good grades in school? Many companies offer “good student”discounts.
- Take a defensive driving course– Many states will offer up to 10% yearly savings up to 3 years by taking this important class.
- Driver Monitoring– Agree to hook up a device to your car that monitors your driving habits and you can save big!
Comparison Shop
Once you have determined your insurance needs write them down and begin contacting different companies. Many insurance companies will give you quotes over the phone or by email. You will be surprised to learn that may of the quotes are very different. That is why it makes sense to shop new companies every couple of years or so. Many companies get comfortable with the relationship and gradually increase premiums over time. Keep them honest by continually shopping around for a better rate.
It is important to be comfortable not only with the rate, but also with the insurance company themselves. Check out their ratings online. It is not only important to protect your wallet and assets it is equally important to protect your health. Before signing on that dotted line make sure you feel comfortable with the coverages and the amounts that you will be purchasing. Read the policy carefully to ensure it includes these important coverages. And always remember if you are unhappy with your company, you can change it at any time.
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