Understanding Auto Insurance

Auto insurance can be very confusing when you are trying to determine what you need and don’t need.  It can be as simple as just covering “the other car and/or person” or as detailed as protecting every financial risk you might have by owning or operating a vehicle.  The levels of insurance you need are dependent on many factors including your assets, the value of your vehicle and the rules of your state. auto-car-insurance

Basic Auto Insurance Coverage

Auto liability coverage. This type of coverage is essential and mandatory limits are required for all but 3 states in the U.S. (those states require a bond).  Being in an accident can result in you being responsible for injury to someone or damage to their property.  Auto liability insurance will assist in paying the injured person’s medical and repair expenses.  This portion of your policy’s cost is usually the greatest.

The amount of liability coverage that you need is determined by your assets including but not limited to your home and your income (present & future).  The more assets you have, the greater the coverage you need. Discuss the coverage and costs with an insurance agent.  Also, if a driver that is uninsured or under-insured hurts you, your policy may help cover your expenses.

Collision coverage. This portion of your policy covers repairs to your vehicle after an accident, no matter who caused it.  If the vehicle is financed, the lender will require this coverage to assist in paying off the loan if the vehicle is totaled.  Both collision and comprehensive insurance are generally written to cover the car’s fair market value which is also the basis for the cost.  If your car has value, you should have this type of coverage. If your car is old and has very little value, you may want to drop this portion of the coverage.

Comprehensive coverage.  This portion of your insurance covers damage to your car as a result of loss due to fire, theft, flood, weather, vandalism, flying/falling objects and animals.  The cost of this coverage is also based on the vehicle’s fair market value.  Many drivers choose to keep comprehensive coverage on less valuable cars even if they drop their collision coverage because it tends to be cheaper.  But, the insurer will not pay more than the vehicle is worth.

Reducing your auto insurance costs.  Your premiums are based on factors such as the age of the drivers in the household, the rating of the vehicle, your credit rating, your community, and the amount of driving that you do.

Costs for auto insurance vary greatly from area to area and company to company.  It makes sense to check out several companies when choosing.  Consider the premium levels and also the service level you can expect from the company.  There are few things worse than not being able to get in touch with the insurance company after an accident or having to drive 50 miles to get your damaged car inspected or repaired.

You can also reduce your premiums by considering the following ideas:

  1. Drive safely. Insurance companies give discounts to drivers with no accidents or driving tickets.
  2. Raise your deductibles. Low deductibles increase premiums. Making claims for small damages is also a hassle.
  3. Limit unnecessary driving. If you have a short commute to work or take public transportation, your rates may be less.
  4. Check the insurance rating of the vehicle prior to purchase.  Your agent will have this information and there are also internet sites that provide crash test information.
  5. Use the same insurance company for all of your insurance needs.  There may be an overall discount if you have auto and homeowners insurance from the same company.
  6. If there is a student driver, good grades are important.  Many insurance companies offer discounts if a student driver gets B’s or better in their studies.  In addition, many companies provide discounts for college graduates.
  7. Pay the premium all at once. Most companies allow policyholders to pay their premiums annually, semi-annually, quarterly or in some cases monthly.  Do the math and you will find that paying annually will save you money.  Or opt for an automatic payment to avoid service and late fees.

Once you have auto insurance why not join AAA?   Whether you’re traveling across town, across the country or around the world, AAA provides convenience, savings and peace of mind.  Enjoy the benefits of AAA Membership at a special group rate.  Your savings and benefits can start immediately.

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Not guaranteed by Standard Bank and Trust Co. Not a deposit of Standard Bank and Trust Co. Not  FDIC insured. Not insured by any federal government agency. May lose value.

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