QuickOverview

When purchasing auto insurance, consumers should make sure they are well protected, while making sure they are not paying for coverage they don't need. When speaking to insurance agents, it is important to understand that the agent benefits from selling as much insurance as possible, even if it is not beneficial to the buyer.

Questions to consider before buying car insurance:

How much liability coverage do you need?

When an accident occurs that is your fault, the liability portion of your insurance pays for the medical bills of any passengers in your car or others' cars. It also pays for the property damage you caused to other vehicles. If you are an individual of net worth of $100,000 or more, or you are a child and your parents have a high net worth, it is a good idea to get a high limit of liability so that your assets are protected. In such an instance, it may be a good idea to get $500,000 to $1,000,000 in liability insurance. If you don't have a high net worth, it is probably acceptable to get a smaller amount of liability coverage. In such cases, $25,000 is probably acceptable. Some states have minimum liability coverage requirement laws, and your agent can provide you with that information.

How big should your deductible be?

Collision insurance covers damage to your own vehicle when it is involved in an accident. The amount of coverage will be the replacement value of your vehicle. So if your vehicle is totalled (or destroyed to the point where it costs more to fix than replace), you will receive an insurance payment equal to the amount it would cost you to buy another vehicle of the same age and condition to yours before the accident.

When you receive a payment for damage to your vehicle, the deductible you choose will be deducted from the payment you receive. For example, if your hit a light pole with you vehicle and incur $1,000 of damage and your deductible is $250, you will receive an insurance payment of $750.

In general, keeping a deductible is a good opportunity for you to save money on your insurance premium. In general, deductibles range from $0 to $1,000. The higher the deductible, the cheaper your insurance premium. It is advisable to plan on fixing the little dings to your car by yourself and to save money on your insurance premium. Keep in mind that if you still owe money on your car, you will need to check with the bank on the highest possible deductible you will be allowed to carry. Most banks require a deductible of $500 or lower.

What other coverage should I consider?

In general, you should make sure you receive comprehensive insurance (covering theft, fire, etc.) as well as uninsured motorist insurance which covers you in the event you suffer a crash with a driver that has no insurance. Besides that, it is generally a good idea to skip the other bells and whistles to save money.

What factors affect my premium?

Your age, sex, address, driving record, automobile, and the amount you drive all affect the premium that insurance companies will charge you. Different companies specialize in different types of drivers, so shop around. Just because one company is cheaper for a specific driver doesn't mean it will be cheaper for other drivers.

Many insurance companies offer discounts if you carry insurance with the same company for your homeowners insurance as well.

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