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AUTOMOBILE INSURANCE -
Deciding On Coverage & Deductible Amounts
The first thing you should consider when trying to save money on automobile insurance is deciding what types of coverage to purchase and in what amounts. As noted above, some types of coverage and the minimum amounts of coverage are mandated by state law. Over and above state requirements, the decision is yours. Of course, when it comes to automobile insurance, if you never have a serious accident you will probably feel you over insured, and wasted money if you purchased any coverage over the state mandated minimums. And, if you do have a serious accident, you may wish you had not tried to save money on auto insurance and had purchased additional coverage. While no one knows what the future holds, here are some thoughts on the amount and types of coverage and deductible levels you may want to consider. In any case, consult with your insurance agent to make sure you understand all the ramifications of whatever decisions you make.
1. Collision & comprehensive coverage. If your vehicle is relatively new and
has a fairly significant value, consider insuring the vehicle for its value. However,
if you can afford to absorb a reasonable amount of loss, raise the deductible to
$500-
2. Liability protection. Most likely, your state will mandate minimum coverage amounts that you must carry. Whether you choose to carry higher coverage amounts is a personal decision, but many people base their decision on their relative level of financial net worth. In other words, the more you have to lose the greater levels of liability insurance you buy.
a. Some people recommend buying liability protection up to the level of your net worth (although this may require an “umbrella” policy discussed under the “Property & Liability Insurance” heading in the “Home Finance” section). However, if you are considering additional coverage, remember that generally your greatest risk is harm you cause to people, as compared to property damage for which you may be liable. Therefore, you will probably want coverage limits much higher for bodily injury liability protection, than for property liability protection.
b. Buying higher coverage amounts has another benefit. If you have a high level of liability coverage, the insurance company has more to lose if you are found liable for a large claim. Therefore, if you have a high coverage amount they are more likely to defend you in any legal action at their cost, in order to protect their interests. If you have a low coverage amount, they may quickly decide to settle the claim, leaving you totally on your own with respect to any claims over and above the insurance company’s settlement. Also, if you are considering buying an “umbrella” liability policy to provide even more liability protection, you will probably need to buy at least $300,000 of liability coverage in your automobile policy.
3. Bodily injury protection. While some of this coverage may be mandated by law, if you have a good level of liability protection, and/or a good medical plan, you may be able to make do with minimal amounts of coverage, or no coverage at all. If you or your family are injured, your medical plan should cover medical expenses, regardless of who is at fault. If a passenger is injured, your liability protection should cover their expenses, if you are at fault, or perhaps their medical coverage will cover their expenses. However, if you are not at fault, and the driver that is at fault has no coverage or inadequate coverage, money may not be available for medical and other costs. In any case, without appropriate coverage, or other secondary coverage, lost income claims will not be funded. Once again, make sure to consult with your insurance agent so you understand the implication of any decision you make.
4. Uninsured/underinsured motorists property damage coverage. If your property is otherwise insured through collision, comprehensive or other property coverage this insurance may not be necessary. Check with your insurance agent to make sure.
If you want to save on automobile insurance, make sure you get all the discounts that may be available to you. Discounts come in all shapes and sizes, but generally relate to either the vehicle or the driver, or combining insurance policies. So ask your agent for a list of all discounts offered to see if you qualify. Some of the discounts available include:
1. Vehicle discounts.
a. Multi-
b. Passive restraint discounts are available if you have a passive restraint system such as air bags.
c. Discounts are available if you have an anti-
d. Many vehicles are by their design considered safer, or less apt to cause damage or be damaged, and receive a discount.
e. If you have an anti-
f. If your annual vehicle mileage is low and/or the vehicle is mostly used for pleasure and not driven regularly to work, discounts are available.
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