Did you ever receive your auto insurance bill? Are you wondering if there are too many coverages you don’t need? So many options are available, so how can one decide what is worth it and what isn’t? Many options offered may be duplicates of coverage you already have. This is my attempt to help you navigate the maze of options and to help you create a policy that meets your needs without sacrificing coverage you don’t need.
Disclaimer: I cannot speak in detail and you should ask your agent questions if you don’t understand certain parts of what I am talking about. Keep in mind that an insurance agent can make more money by selling you more policies, so he/she might not be objective.
OK let’s get started. If you are able, look into discounts on multiple policies. You can get significant discounts if you own a home and have multiple cars insured with the same carrier. Insuring multiple vehicles with the same carrier can save you money, but it is not always cheaper.
The first number to consider is liability. This is the part of insurance that is required by law in each state. This is the insurance that pays other people, not you. Calculate your net worth, excluding any assets that are not of your residence, to determine how much liability you need. Your liability should be doubled up to $300,000.00. If you require more coverage, you can ask for a 1,000,000 dollar umbrella policy that will also cover your car and home. If you are able to afford $50,000.00, make sure to check the minimum state laws. There are usually three numbers: 50/100/50. The first number is the amount that would be paid to one person. The second is the total amount that could be paid for an event. And the third is the maximum amount of property damage (typically other peoples vehicles) that can covered. You should keep this number at $50,000.00. However, you might be able to make it work with $25,000.00. Although there are many vehicles with a value of $50,000.00 or more, most people who drive such cars will be covered by under-insured.
The next numbers are collision and comprehensive. Comprehensive pays for damage to your car that is not caused by a collision. Collision pays for damage to your vehicle as a result of any collision. The first thing you need to know is that either one of these payouts is limited to the blue book value. As your vehicle’s value decreases, comprehensive pays for any damage not caused by collision. The insurance company might not pay you enough if your car’s value is less than $2000.00. It would be reasonable to assume that these coverages have lower premiums because they cover less vehicle value each year, but it doesn’t seem that this is the case. There are also deductibles. The deductible is usually the highest, so the premium will be lower. We found that a $250.00 or $500.00 deductible can be just a few dollars less than a $500.00 one. Auto body shops often offer a break on collision deductibles, so we have never had to spend less than $500.00. Because it is not something that anyone wants to pay, we keep our comprehensive at $250.00.
After you have collision, liability and comprehensive, you will have all the necessary information to create an auto policy that suits your needs. There are many other coverages that are available. Some you might not need and some others you may.
1. Uninsured/Under-insured motorists coverage. This coverage is the most expensive. It makes us pay for the debts of those who can’t pay. This coverage is only necessary if your vehicle’s value exceeds $25,000.00. If you are struck by an uninsured driver, your collision coverage will kick in to take care of the situation. If they don’t cover your deductible and the accident is their fault, you can sue them in small claims court. This part should be verified with your agent. However, if collision is not covered, you can purchase additional coverage. If this happens, it will be considered a duplication. Your insurance company will not pay twice, no matter how many duplicates you buy. If possible, you should consider removing this coverage. You may not need this coverage if you own a more costly vehicle. However, if your insurance covers enough, then your collision coverage will not be applicable. You might be able to purchase it for just that vehicle. You may only be able to cover one vehicle in some states.
2. Towing coverage. This one is a scare tactic used by agents to scare you. “What happens if you have to tow?” They ask. You might have to pay for it. We have found that towing is usually an option that comes with the repair of your vehicle. Towing coverage has never been an issue for us. In fact, in seven trips, we were towable about $60.00 each time. This premium will save you money.
3. Rent-a-Car Coverage. You can’t say no. You can rent a car at a body shop for $10.00 per day if you absolutely need it. They may offer the rental car for free. This is a waste premium dollars.
4. Insurance for medical expenses. Your liability coverage will pay for injuries to others in an accident not your fault. The additional medical premium covers you in the event that you are hurt in an accident. If you have health insurance, this is likely to be a duplicate of your coverage. Also, remember that it only covers you if you are in a car. Your health insurance covers you for any injuries. This is likely a duplicate coverage for most people and should be avoided.
5. PIP is Personal Injury Protection or “No Fault”. This is a failing idea, and it is often a duplicate of another coverage. You can either accept the minimum coverage required by law or you can refuse to cover it. When I refuse to accept this coverage, my agent doesn’t even try to convince me.
6. This is the most recent insurance invention. There may be a coverage that you are interested in that is not listed here. There is a good chance that you will never need coverage that was just invented. Identity theft coverage is not necessary for your auto policy.
You can organize your auto insurance according the information you have read and be confident that you are effectively spending your insurance dollars.
