Wiser Drivers Wise Up

Buying Automobile Insurance - 3 Smart Steps
(PR110)

As a consumer what do you think about automobile insurance? Is it: (a) A necessary evil; (b) A major cost of owning a car; (c) An inexpensive way to protect yourself against the high cost of accidents and theft of your car and contents, or; (d) All of the above. The best answer?... "All of the above"

It is required by law in every state to protect the interests of the individuals and companies who drive, ride in, manufacture, sell and finance vehicles. Why? Because if you own, lease or rent a vehicle and drive that car, truck or motorcycle on public streets and highways you MUST be able to pay for any damage caused by you if you have an accident. Some people plan to use cash or other assets. But most of us buy insurance...we contract with an outside company to pay any losses we may have and handle all of the details for us if we have any claim There are three steps you can follow to buy a policy that is right for you.

When you buy a policy it will generally cover three potential expenses: Property - damage to or theft of your car; Liability - your legal responsibility for bodily injury or property damage to others; and, Medical - the cost of treating injuries. Other items such as "uninsured" or "under insured" motorists, and "optional coverage" like "rental reimbursement" and "towing", may be available.

Each state has its own minimum requirements for how much coverage you need to have in each area. (see the Resources for Consumers section at the end of this Product Report) But wise consumers don't stop there.

Step 1: What insurance do I really need?

First, contact the office where you get your drivers license to find out specifically what coverage and financial limits are required in your state. This is your starting point.
Now, ask yourself how much money you can, or are willing to pay out of your own pocket or other assets if your car is stolen or you are in an accident?
Then, ask yourself how much it would cost to replace your car...both, what it is worth to you and what it would cost to replace it with a car in a similar model, year and condition. Be sure to include the cost of any "special" equipment such as electronics or other items you've added to your car.
Finally, take a close look at how important your car is to you. Some professionals estimate that even a minor accident may keep you without your car for a minimum of two weeks. How will you get to work, do your errands and take the kids to soccer? What if you are in an accident on the freeway or while you're on a trip? What about towing and hotel or other expenses? What if a driver hits you who doesn't have insurance or who has the minimum required and your expenses are more than that? Who will pay the difference?
We buy insurance to protect us from unexpected and unnecessary costs. Be sure you've thought through what you need before you make your final decision.

Step 2: How can I save money?

First, don't duplicate your insurance. If you own a home, you may have some coverage available with your homeowners or umbrella policy. Or, some small business insurance provides for umbrella liability coverage that will cover your accidents, too. And, even some credit cards will cover certain contents against theft.
If you have a homeowners policy, that company should be the first one, but not the only one, you talk to. In fact, you may find that you can save more money by going with a company that will create an umbrella policy for you that covers your home and cars together. Check it out carefully.
Second, increasing your deductible may have a significant effect on your premium. Generally, the higher the deductible the less you pay. Ask if you can have different deductibles for different vehicles or types of coverage.
Next, evaluate the type and age of car you drive. The way an insurance company classifies a car (New, luxury, sports, etc.) will impact the premium. It may be different than you think and not all insurance companies use the same criteria.
Finally, your age and driving record, how you use your car, the number of miles your drive and where you live can all impact what you pay. Be sure to ask an agent what factors and conditions are used to determine your premium.

Step 3: How do I choose an insurance company?

You want your insurance company to be around when you have a problem, so their stability and claims history are important. Ask your friends, family and co-workers who they use and what their experience has been.
Get quotes from brokers and company agents and the Internet. A company agent generally sells the insurance products of one company. They know what they have to offer and many times they can combine different coverage, such as homeowners and auto to get you a great rate. A broker handles policies from a number of companies. Sometimes they can create a policy to match your unique requirements at a savings. For example if you have a unique vehicle or have been rejected by other companies because of health or your driving record they may find a company who will write coverage for you.
Internet sites can provide you with excellent and very competitive quotes. Make sure that you know who you are dealing with and that you really understand what is being offered to you. Remember...who are you going to call when you have an accident and what is going to be paid. That is not the time for surprises! Or, for you to say...but I thought...
Get at least three price quotes from different companies, agents and on the Internet. Look carefully at what they include and always ask what they're excluding from your quote. Ask what changes you can make to your coverage that will raise or lower your premium.
Finally, be sure you can develop a relationship with your insurance company that you're comfortable with...Good advertising and a friendly sales staff will not be any use to you when you're in an accident. Talk with other policy holders from that company and auto repair shops to find out how different companies handle claims.

Resources for Consumers