Auto Insurance Advice
Your auto insurance is a collection of different policies that cover you in different ways. Here’s how they break down:
- Liability coverage– These policies help cover liability and expenses when you’re at fault in and accident. The money will go to the people you hit, but it won’t cover the people in your car.
- Bodily Injury Liability (BIL)– This policy pays for the medical expenses of people injured in a crash in which you’re at fault. You’ll often see BIL policies described as a “20/50” policy or a “100/300” policy. These numbers describe the maximum dollar amount the policy will pay for a single person’s injuries and the maximum for all the injuries sustained by all the occupants of the other car. For example, a 20/50 policy will pay a maximum of $20,000 for a single person’s injuries, and up to $50,000 total for the injuries of everyone in the car you hit.
- Property Damage Liability – This policy pays for damage done to the other car if you’re at fault in an accident. Property liability is sometimes referred to alongside BIL as a third number, so a 20/50/10 liability package will cover up to $10,000 for damages to the other car. Although this has been a standard coverage, if your policy only covers up to $10,000 for another car that you damage then you’ll likely pay any additional damage out of your own pocket.
The following policies cover you and your car in an accident:
• Medical Coverage – This covers your and your passengers’ medical expenses after an accident. If you lose time at work because of your injuries, this policy may also cover lost wages.
- Uninsured/Underinsured Motorist Coverage– This helps cover costs if you are hit by someone without insurance, or minimal coverage. This coverage does not cover your car if damaged by an uninsured or underinsured driver.
- Collision – This policy covers repairs to your car after an accident.
- Comprehensive– This policy covers costs if your car is stolen or damaged outside of an accident.
Every state requires car owners to carry auto insurance, and most states have required minimum values for different policies. If you don’t carry insurance, you can get a ticket or the state can impound your vehicle.
You’re on the hook when costs exceed your coverage limits. That’s why many people opt for policies that cover more than required minimums, particularly if they have assets that can be seized to pay for repairs and medical care.
A good rule of thumb: Make sure you’re covered for an amount equal to the total value of your assets (Add up the dollar values of your house, your car, savings and investments).
How much insurance do you need for yourself?
You probably don’t need to spend a lot of money on a Medical or Personal Injury Protection policy. You should be covered if you have health insurance and disability insurance through your employer. Just buy the required minimum.
You do need to make sure you have adequate coverage against uninsured and under-insured drivers. It’s relatively inexpensive in most states (something like $40 a year for $100,000 worth of coverage) and if you are in a collision with an uninsured driver, will help cover costs your health insurance won’t. If you’ve decided to carry BIL for $100,000/$300,000, why not do the same for yourself.
Collision and comprehensive coverage is worth having if you would want to repair or replace your car after an accident. These policies have a deductible (the amount you have to pay out-of-pocket before coverage kicks in), and they pay out based on the current value of your car, not what you paid for it.
Choose the highest deductible you can afford, because a higher deductible will significantly lower your premium. You’re seeking coverage for major damages to your car, not for every little thing that can go wrong. It’s better to spend $500 of your own money on minor repairs every so often than pay an extra $50 a month whether you need repairs or not. Save collision insurance for when you have car repairs that cost thousands, not hundreds. Remember, if you submit a claim for every little thing, your premium will sky rocket or you’ll be cancelled.
How to Shop for Car Insurance
Once you’ve decided how much car insurance you need, it’s time to begin shopping. Auto insurance policies vary widely depending on your car, your driving record and your credit, so it’s wise to do some research.
Large national brands – Allstate and State Farm are good for drivers with a bit of a blotchy past but with good credit, and their rates are usually pretty good (they may even be able to match some of the offers from the direct sellers). These companies sell through local agents, but their agents are exclusive—a State Farm agent only sells State Farm coverage and nothing else, so you’ll have to do your own comparison shopping calling multiple agents and agencies.
Independent insurance agents – These agents offer all kinds of insurance from many different companies. If you have any issues affecting your ability to get coverage (such as a patchy driving record or a teenage driver in your house) independent agents can usually find you better coverage at better prices than what you’d find on your own. Ask friends and family whether they have an insurance agent they would recommend. The independent insurance agents can and will do your shopping for you so you don’t have to spend the afternoon calling multiple agents or agencies.
A few tips for negotiating with an insurer:
Ask about all available discounts – There are almost unlimited ways to save money. You may get a discount if your car has anti-lock brakes, if you don’t drive your car that often or that far, and so on. Request a list of all possible discounts to see if you qualify.
Skip towing insurance – It’s better to take that extra money and join an auto club (such as AAA) instead. In addition to towing, you’ll have roadside assistance when you need it.
Consider glass insurance – You can chip a windshield at any time, and auto glass is expensive to replace. Just make sure that glass is part of your comprehensive coverage, and not as a separate policy, which can be costly.