Consumers can save money on car insurance by understanding what they really need as determined by their individual situations. Study first to understand the terms, then shop wisely.
What does Car Insurance Cost
Generally, car insurance consists of a policy to protect a car if it is damaged and to protect the car owner in case of legal action resulting from a automobile accident. Medical bills incurred by passengers can also be covered as well as damage to a car resulting from a falling tree, hail, or other “acts of God.”
The price of the insurance will be determined by how much coverage is purchased in the different categories described above. Collision insurance, which pays for damage to the car in an accident, typically has a deductible amount that the customer is willing to pay. For example, if the policy holder has collision that is $500 deductable and the cost of having a car repaired as a result of an accident is $1200, then the policy holder will be responsible for $500 and the insurance company will pay the balance of $700.
There is a substantial savings in carrying a higher deductible of perhaps $1,000, so customers must weigh their ability to shell out the deductible amount against paying a larger fee for a lower deductible. Predicting and accident is impossible, but if one drives little in a location where traffic is light a higher deductable might save lots of money over the years.
Furthermore, if the car being insured is a clunker, there is little sense in having a low deductible. The car’s value may be such that the owner would not consider having it repaired, so a high deductable is wise. The money saved by having a high deductable can be put in the bank to help pay for an accident.
If a car is “totaled” in an accident, the insurance company will not replace it with a new car, even if it is new. Cars depreciate as soon as they are driven off the lot. The replacement cost will be based on the “book value” of the car generally based on mileage and condition.
Liability Insurance is a Vital Part of Car Insurance
All states require car owners to carry a minimum amount of liability insurance and many people carry the minimum to save money. However, a person with considerable assets to lose is advised to adjust liability insurance upward to protect assets. Also, more driving generally will increase the risk of an accident. Those who drive substantially more than what might be considered average might want to consider carrying more than the minimum.
Determining the exact amount of liability insurance is to purchase is always a guess. It is basically a matter of risk tolerance. The Internet is a good place to look for advice on risk tolerance and management.
Save Money on Comprehensive Insurance
Once again the decision of how much comprehensive insurance to carry is a guess, and it is subject to a deductable amount chosen by the buyer. Comprehensive insurance covers events not generally considered accidental like vandalism, hail, or other damages that result from unexpected events. A buyer can get an informal idea about how often comprehensive insurance is used by asking friends.
Comprehensive insurance, like collision, can be reduced if a policy owner owns a car that would not likely be repaired if it sustains minor damage or if its value is simply too low warrant repair. For example, if a car has 150,000 miles on the odometer and the engine is showing signs of failure, then it makes little sense to pay $1,500 to remove dents from the trunk caused by hail.
Comparing Car Insurance Companies
Comparisons of companies are easy on the Internet. Major companies invite quotes and can often give results within minutes. The customer must be certain that the same information is compared to get fair comparisons.
Also, consider the advantages of dealing with a company with a local agent. Sometimes the convenience of having an agent who tries to develop relationships with customers is worth paying a few dollars more and can save money in the long term. Furthermore, an agent can keep customers up to date regarding special perks offered by the company.
In comparing agencies, it is worth asking if the company can insure one's home as well. Significant savings are possible by insuring one’s home and car with one company.
Check Ratings of Car Insurance Companies
Like many businesses, car insurance companies are rated by independent consumer agencies. J.D. Power rates a variety of companies and their seal of approval is considered a plus.
A high national ranking is a good sign, but it doesn’t guarantee that every office is functioning equally.
Car insurance is something all car drivers need. Potential customers should research and compare companies as well as educate themselves regarding the various terms used in insurance. It is easy to look for good deals on the Internet provided customers know what they are looking for. Be careful not to over-insure or under-insure. Consider the advantages of having a local agent.
Harvey Craft - I am a retired educator with diverse experience. I read anything science, education, and history. I write to share what I learn.
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