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
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