The Essentials of Auto Insurance

Posted on Oct 31st 2009, 01:52 am, under Auto Insurance 101

All over the country, Americans are trying to cut back on consumption and save as much money as possible. They are taking fewer vacations, keeping their vehicles longer, reducing their dependence on credit cards; in short, delaying big purchases or avoiding them entirely. In addition, most people are trying to pay off their debts and reduce their monthly expenditure. This involves a re-evaluation of their insurance policies and investments. However, don’t be tempted to shave off your insurance coverage in order to save a few more dollars each month

Your monthly insurance payment can vary depending on your insurance provider and individual policy. It pays to review ALL of your insurance policies every few years so you can make sure that everything necessary is still covered, and that you're paying just enough; not too much, not too little. Let's take a critical look at your auto insurance so you can decide if what you have is still worth paying for. 

One vital factor that every vehicle owner should be insured against is damage from uninsured motorists. Although getting auto insurance is mandatory in almost every state, many drivers still fail to get enough coverage, and some drive without any insurance at all despite the law. If you get into an accident with one of these individuals, you need to make sure that your own policy will provide you with enough money to fix your vehicle.

Liability is undoubtedly the central component of any insurance policy. If you cause an auto accident and you happen to seriously injure the other party, the cost of repairing the vehicles might be the least of your worries. Hospital bills can easily run into the hundreds of thousands of dollars. Therefore, make sure you have high limits for medical and property damage.

Another important component is collision and comprehensive coverage, especially if you own a loan on your vehicle. Collision coverage protects against any damages your car sustains in a moving accident, while comprehensive insurance pays for other damages, such as thefts and accidents of nature (such as fires and floods). If you don't have either of these and you have a car loan, you will have to pay your lender to buy insurance on your behalf, at six times the normal rate.

If you want to get the best rate possible, get a deductible of around $500. It's low enough that you can quickly obtain it from your savings or from other sources in case of emergency, yet high enough to keep the insurance rates reasonable. Although a higher deductible will get you a lower insurance rate, you'll probably use the policy well before you derive any benefit from the additional savings.