Getting Your Car Insurance Right

I sat in my insurance agent’s office, updating my coverage to add Doug since we had just gotten married.  I trusted that she would give me all of the information I needed to make sure my policy was right for me.  Because I had been a good customer for 10 years, I’m in good hands, they’re my good neighbor, right?  No way!  Don’t forget that car insurance is a business, and a very profitable one.  So at the risk of sounding like a cheap discount insurance commercial, I am going to tell you how understanding your car insurance can save you money and make sure you have the right amount of coverage.

Disclaimer:  I am not your financial adviser or personal fortune teller.  I do not know the insurance rules for all 50 states.  I do think it is quite likely you are overpaying for car insurance.  I hope you will carefully check your own insurance policy and decide if you need to make any changes.

1.  First of all, have a good understanding of the different types of coverage. At the end of this post is a glossary of common coverages.  Your insurance agent is legally required to offer you a standard package, but it is not a one-size-fits-all.  It is up to you to determine which coverage you need, and to decline the coverage you don’t.  The More You Know…. 

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2.  Do not skimp on your liability coverage for Bodily Injury and Property Damage.  Considering how big medical expenses can be, and how much cars can cost these days, these coverage levels should be high.  Trying to save money here could cost you far more if you end up getting sued for causing more damage than what your policy covered.

3.  If you have Collision coverage, consider canceling Uninsured/Underinsured Motorists coverage for Property Damage.  If you get hit, and if the other driver doesn’t have car insurance, you could use your Collision coverage to pay for the cost of your car repairs.  What would be the benefit of having both types of coverage at the same time?  Well if you file a claim on your Collision coverage, it might raise your premium for three years.  So basically you pay for Uninsured/Underinsured coverage for Property Damage just to avoid the chance of paying more for Collision if you use it for that.  The Uninsured/Underinsured coverage for Bodily Injury may be unnecessary too if you already have medical coverage.  Go look at how much it costs, weigh the odds, and decide if it is really worth it to you.  

4.  If you have benefits through an employer or organization, consider canceling Personal Injury Protection (PIP).  You do not need Medical coverage from your car insurance agent if you have it from work.  The same goes for Disability coverage.  A Life Insurance policy that covers you no matter what is better than one that only covers you in an auto accident.  One exception here is that PIP covers other passengers in your car as well, so you might want to keep it if you often have friends, carpools, or clients ride in your car with you.  

5.  Do not assume that just because you have been a customer for several years and there is a renewal discount on your policy, that you are getting the best rate.  Call and get a quote from another insurance company, just to make sure.

6.  Raise your deductible to lower your premiums.  If you eventually do need to pay the deductible, you can use the savings from your lower premiums.

7.  Try to qualify for other discounts.  Find out if it is worth it to take a defensive driving course.  Get a policy discount by buying your home insurance from the same company.  Teenagers can receive good student discounts.  You could even get a discount from having a shorter commute.

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Auto Insurance Quick Reference:

Bodily Injury — pays for injuries caused by you.  It does not pay for injuries to yourself or other passengers in your car with you.

Property Damage — pays for damage that you cause to someone else’s car or property.

Uninsured/Underinsured Motorists — pays for your injury or property damage if you are hit by a driver with no or not enough coverage.

Personal Injury Protection (PIP) — can also be called No Fault Medical.  It covers medical expenses, lost wages, essential services, and a death benefit to you and your passengers.

Collision Coverage — pays to repair your car due to a car accident.  

Comprehensive — pays to repair your car due to causes other than a collision.

 

 


This post is part of the Carnival of Personal Finance.

About Rachel

I write about practical tips that will help you simplify at home. Connect with me on Pinterest and Twitter.

Comments

  1. arsene says:

    excellent informations . iam an insurance agent in Houston. New in the business and i always try to break down the coverages for my customers so they can seewhat they are getting.

  2. smallnotebook says:

    Thanks arsene! It’s nice when agents take time for their clients to make sure they understand.

  3. Great info, rachel! I always get a little blurry-headed when it comes to anything having to do with insurance.

    (LOVE the More You Know reference and shooting star. heeee!)

  4. Very helpful little list! Thanks for the tips; I’ll bookmark this on Del.icio.us and StumbleUpon.

  5. Brandon says:

    Careful! Some states have an uninsured/underinsured motorist PROPERTY DAMAGE coverage, while most states only have un/underinsured BODILY INJURY coverage. Un/underinsured motorist bodily injury coverage will not pay for damage to your vehicle. The above advice for dropping un/underinsured motorist coverage in favor of collision coverage will only apply in states that have the un/underinsured property damage coverage.

  6. smallnotebook says:

    That’s a great point of clarification, Brandon. I think dropping the Uninsured/Underinsured coverage for Bodily Injury can still be a good idea for those who already have medical coverage. I’ll update the post to reflect the distinction. Thank you

  7. I totally agree with you. When it comes to financial matter the more you know the better you are. Do not expect insurance advisors to do your homework, they are saleman running a business. Use the internet to read all you can about car insurance, so you can make an inform decision.