How Much Auto Insurance Do You Need?

Posted on Oct 31st 2009, 01:29 am, under Auto Insurance 101

When you first buy a car, one of your primary concerns is getting insurance for it. We all know that it's dangerous to drive around uninsured, and if you get into an accident without auto insurance, you put your property at risk. However, the minimum amount required by your state is usually insufficient.

This minimum varies from state to state. Some require as little as $30,000 per accident, $5000 for property damage, and $15,000 per person. Around half of all states require $50,000 per accident and $25,000 per person. But as we mentioned, this is often not enough, so you should buy more than the minimum if you can afford it. 

However, having TOO much insurance can also be a costly mistake. You'll end up paying an excessive amount when you could have done just as well with less. The trick lies in making the correct judgment, based on your assets and income. So just how much auto insurance do you need?

Generally, the more you own and the more you earn, the more coverage you need. Many insurers recommend a minimum of $50,000 property damage coverage (if you own assets like a house), $100,000 personal insurance, and $300,000 accident insurance.

In addition, some insurers advise you to take out a "personal liability umbrella" policy worth $1 million. This works in combination with your homeowner's coverage; the umbrella policy protects you and your family in case you have to pay damages in a major lawsuit.

Of course, given the variability of individual circumstances, there is no "one size fits all" recommendation for buying insurance. Recent surveys show that an individual could pay anything from $500 to $2000 each year to get the same insurance package from different companies, because rates are so varied.

What can you do to get the best deal? Compare a few of the largest auto insurers (for example, Allstate and Statefarm). Then, ask around among independent agents who can quote premiums from differing companies. Always check insurance websites; several companies offer their quotes online nowadays. Basically, assess your financial standing, shop around and compare as many rates as possible. You'll get a much better deal that way.

What Does Your Auto Insurance Cover?

Posted on Oct 31st 2009, 01:24 am, under Are You Covered?

When you buy auto insurance, it's not enough to just hand out your money, then sit back and consider yourself set. Are you familiar with the details of what you just bought? You owe it to yourself and your family to know exactly what your insurance covers. Here are several components that may be included in your auto insurance policy:

Property damage liability - If your car damages someone else's property in an accident, this item will cover it. Because this form of coverage exists for the other party's protection, it has become a requirement in practically every single state in the country.

Bodily injury liability - In the worst case scenario, if your car happens to injure or kill someone, this item covers claims made against you for death and injury, as well as legal costs.

Collision coverage - This one covers your car up to its book value in case it sustains damage. Though it is not legally required, most lending institutions require this form of coverage. It carries a deductible (i.e., a certain amount you must pay for each claim before the insurance takes effect). If your deductible is low, then you'll definitely pay a high premium.

Comprehensive coverage - This item insures your car against several non-accident causes, such as fire, flood, theft, and vandalism. Like collision coverage, you'll still have to pay a deductible before you can avail of the benefits.

Uninsured motorist protection - If your car is damaged or its occupants injured in an accident with a motorist that has no insurance, this particular item will cover the costs. It also protects against hit-and-run drivers and motorists with an insufficient amount of insurance ("under-insured" coverage). This is a particularly important form of protection, since up to 30 percent of drivers have no insurance in some states.

Medical payments - An optional item in some states, this insures you against injuries that you or your car's occupants might sustain. However, no-fault states where you need not provide proof of fault to get reimbursed) replace medical payments insurance with personal injury protection.

Eight Elements That Influence Your Auto Insurance Rate

Posted on Oct 31st 2009, 01:19 am, under Improve Your Auto Insurance Rate

There are many factors that indirectly affect your car insurance rate, and they are all related to the amount of risk the insurance agency will undertake, should you choose a certain policy. When you're shopping around for the best auto insurance price, you must know what the sellers will be taking into account, so you can realistically adjust your expectations.

1. Where you live: If you live in a large city where the traffic volume is much greater, then there's obviously a higher chance of car accidents. Therefore, expect a higher insurance rate.

2. What you drive: Insurance companies have extensive statistics that show which vehicle types are more likely to get into accidents (in fact, even the color of your car influences the chance of collisions). Higher rates are set for owners of more accident-prone vehicles.

3. Your driving record: If you've got a lot of speeding tickets and moving violations in your history, you're a greater risk for the car insurance company.

4. How much you drive: The less time you spend on the road, the better. If you use your car for long daily trips or regular weekend getaways, you're a bigger risk than someone who uses the car only to buy groceries.

5. Your age: Statistics have shown time and again that younger drivers are more accident-prone than older drivers. As a result, the latter can expect more favorable rates from auto insurance companies.

6. Your gender: This factor isn't skewed the way you might think. According to statistics, males under the age of 25 are more likely to be involved in car accidents than young females due to the greater aggressiveness at the wheel. Fortunately for the men, gender as a factor is disregarded if the applicant is over 25 years old.

7. Your marital status: If you're single, you can expect to receive a slightly higher rate from insurers than a married individual.

8. Your record of accident claims: If you've filed a lot of accident claims before, it's highly likely that you'll get a higher rate than someone who has not, since you'll be perceived as a greater risk.