Automobile Insurance
If you own an automobile, you need to read this unit. As an owner, you are responsible for the way that you and others operate your car. If your car causes property damage or personal injury, you can be required to pay to make the injured party whole. Since that could potentially mean hundreds of thousands of dollars, this unit is essential for anyone who owns a car.
For many people, buying automobile insurance is the first experience they have with the insurance industry. It is very common for young adults to acquire a car and come up against the realities of what it means to protect themselves and their property through the paying of a premium. If you are currently paying high premiums, take heart. With each passing year and a good driving record, your costs should go down. That is, until your own children begin to drive. Then you will once again find out how much it costs to have teenage drivers in the family.
The most important coverage you have with auto insurance is liability coverage. The cost of the car itself is usually quite small when compared to the potential liability of paying for the damage you might be held responsible for if you are at fault in a car accident. Most people focus on other coverage such as comprehensive and collision, and while they may be important to your financial future, they are usually not as important as adequate liability insurance.
“Comprehensive” covers you for damage done to your car in a number of ways. You will need to check your policy, but normally this includes fire, theft, riot, glass breakage, vandalism, windstorm, hail, and flood. Losses suffered in other ways would not be covered.
“Collision” covers you if you damage your car in an accident. It doesn’t matter if you are responsible for a one-car accident or a multi-car accident. This coverage will make you whole in that you will be restored to the value of the car prior to the accident. Please note that this does not mean you will be given the value of the car when it was new. Rather, you will be given the lesser of the cost to repair the automobile to its “pre-accident” condition, or your car will be “totaled” and the insurance company will give you the depreciated value of your automobile.
Many states have adopted a “No Fault” type of insurance for automobiles. Rather than having the parties to an accident each try to prove that the other was at fault, each one simply goes to their own insurance company and is made whole by the coverage that they themselves have in place. Since attorney fees are absent from claims, the overall cost of insurance (and therefore premiums) should be less.
You will need to pay attention to the deductibles that you have. Generally, carry the largest deductible that you are comfortable with and can cover out of the emergency fund that you have established. An increase in the deductible means a decrease in the premium, and the difference should be saved to cover the costs that you will need to pay should something happen where the cost is below the deductible.
As your automobile grows older, the amount that the insurance company will pay declines—should you suffer a total loss. Many find when they have owned a car for about six or seven years, the value they would receive if it were totaled is not sufficient to justify maintaining collision coverage. If you have been saving for a replacement automobile and have an emergency fund, which together would allow you to acquire a replacement automobile without too much difficulty, you should give consideration to dropping coverage and putting the difference into your savings.
There are a number of other points that you need to consider when securing coverage. They include the following:
- What discounts are available? It may be helpful to list some of these: multi-car, multi-product, safe driver, good student, time with company, claim-free years.
- Am I covered when I rent an automobile?
- What available insurance options do I need and which ones (based on my own experience and current use) can I pass on?
Shop around and do like comparisons between policies and premiums. If both of the companies offering the policies are financially solid, then go with the lower premium unless there is some compelling reason to do otherwise.
WEB SITES
http://www.edmunds.com/advice/insurance/articles/89618/article.html?tid=edmunds.a. landing.insurance..2.*
http://www.autoinsuranceindepth.com/
http://www.pueblo.gsa.gov/cic_text/cars/autoinsu/autoinsu.htm
http://info.insure.com/auto/
http://www.usaaedfoundation.org/insurance/ai01.asp
This is a good Web site to use when working through the process of determining what kinds of auto insurance you need and how much.
https://secure1.insweb.com/cgi-bin/gic.exe?id=b0oIPquXHrQ8_iPFcKd-DWjMkxJ&page=/gic/auto/estimator/default.htj&TLName3=AutoTool-TLB