How to Make Your Auto Insurance Coverage Go the Farthest

Everyone is looking for ways to save money these days. One area many people look to is insurance. Of course, we cannot do without insurance entirely, but we can look for ways to pay less while still getting the coverage we need.

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Skimping on car insurance can cost you a lot in the end. So getting the most out of auto insurance is more than just paying the least amount. It is about getting the most value.

Ensure You Have Enough Liability

Perhaps the biggest mistake many people make is not carrying enough liability insurance. Liability is required by the state, as it covers damage to the other car and the people in it. It will pay for the car repairs as well as reimbursing the owner for the value of the car if it is unfixable. It will also pay for any doctor or hospital bills resulting from the accident and victims’ pain and suffering.

The biggest problem comes when drivers do not carry enough liability. The law requires that you pay for the damage you cause. However, the amounts required by the state are often very low.

 

For example, in Florida, the minimum limits you must buy are $10,000 per person for bodily injury and $20,000 if you have been in an accident before. If you have not, you are not even required to carry bodily injury liability. You must carry property liability of $10,000.

Dale Appell, a lawyer based in Tampa, warns that the minimum limits in Florida are particularly low. Carrying these low amounts can open you up to having to pay for thousands of dollars on medical bills and any car repair or replacement costs exceeding $10,000. With the price of cars today, $10,000 does not go very far.

Though you may not need comprehensive or collision coverage, and liability may be enough for your circumstances, carrying too little liability is shortsighted.

If you are sued because of an accident you cause, you could be out of your retirement and savings, and may even lose your home or have future earnings garnished to pay for the damage.

No matter what your state’s minimum requirements are, you always have the option of buying more liability insurance.

In fact, the Rocky Mountain Insurance Information Association and other financial and insurance experts suggest carrying at least 100/300/50 levels of liability. The amount should be higher if you have many assets to protect.

Medical Coverage

In some states, you are also required to have some sort of medical coverage. If you live in one of these states, you will have no choice. If you do not, you have the choice whether to buy it or not.

There are two types of medical coverage sold by auto insurance companies. They both cover anyone in the car, whether they are related to you or not. They also both will cover the medical expenses, no matter who is at fault in the accident. They each have a limit, often in multiples of $5,000 per person.

Medical coverage is the first type. It simply covers the hospital, doctor, therapy or prescription bills incurred after a traffic accident. Personal injury protection, or PIP, covers all these, and funeral expenses, lost wages and even house and yard care services if you cannot perform these tasks yourself during recovery.

If you have the option to carry these, you will need to examine your individual situation. If you have no health insurance, this is definitely a good value for the money.

If you have good health insurance that will cover auto accidents, you can use this and decline med pay or PIP.

If you have health insurance that has very high deductibles, it might be a good idea to buy either PIP or med pay to cover those deductibles.

Uninsured Motorist

Many states also require that all drivers carry uninsured/underinsured motorist coverage as well as liability. Uninsured motorist covers a couple of scenarios.

The first scenario is that you are in an accident caused by a driver who has no insurance. Although the insurance company can sue him to try to recover the money for the damage, this can take a very long time. Often, people who do not have insurance do not have any money to pay for the damage anyway.

 

Uninsured motorist will then kick in at this point. This allows you to get the repairs and medical attention you need immediately. There is usually a small deductible, around $250, but otherwise it covers everything the driver’s liability should have covered. This would also be the case if you were the victim of a hit-and-run driver.

The second scenario is that a driver who only has the state-required liability limits hits you. Let’s say you live in Florida and the driver totals your $20,000 vehicle. The required amount of property liability in Florida is only $10,000, and that is all his insurance company would pay if he had the minimum. Your underinsured motorist coverage would then pay the $10,000 gap to get you the money you need to replace the vehicle. That is some reliable coverage when the going gets tough!

If your state does not require uninsured or underinsured coverage, you do not have to buy it.

However, if you want to get the most out of your auto insurance policy, you need to consider whether it is really a good idea to decline uninsured/underinsured coverage.

After all, USA Today reports that one out of every seven drivers does not have auto coverage. If you decide not to carry it, you have the option of filing under your collision insurance coverage or paying for the damage yourself. If you file under your collision policy, your premium will probably go up. Usually, claims against the uninsured motorist will not affect your insurance costs since it was not your fault.

When to Drop Comp and Collision

Many people try to save money by dropping comprehensive and collision coverage as soon as they pay the car loans off. This can be an effective way to save money on car insurance, especially on older cars, but you must understand what this means before doing so.

Comprehensive and collision coverage is the part of the insurance policy that covers repairs to your car either if you are in an accident that is your fault or if your car is stolen or damaged in a storm or other non-traffic related disaster. Liability only covers the other driver. They will also pay you market value for your vehicle if it is too badly damaged to repair or is stolen.

If you cancel this part of your auto insurance policy, you will be responsible for any repair if your car gets hail damage or you cause a wreck while driving it. This could run thousands of dollars, depending on the damage. Alternatively, you could need to replace it completely out of pocket if it is totaled.

If your car is worth more than just a few thousand dollars, it is probably better that you keep these policies so that you can get the most out of your auto insurance. Paying the premium for these is far cheaper than replacing a $20,000 vehicle.

However, if you have an older car, dropping them might be a better option.

The general guideline for knowing if and when it is time to drop comprehensive and collision is the “ten times” rule.

So says the Insurance Information Institute, which advises you to find the vehicle’s market value or Kelley Blue Book value. This information can be found online.

Next, look at your insurance bill and find the amount you pay just for comprehensive and collision on this vehicle. Then multiply that number by ten. If the amount you get is less than the market value of the car, you are probably better off canceling comprehensive and collision. You will not get a high enough value for your premium by keeping it. Instead, put the amount you are saving aside to save up for another car or for repairs to this one.

Optional Coverage

You can often purchase optional packages along with your auto insurance policy. These are never required by the state. The two most common are rental car and towing packages.

 

The rental car provision will pay for a rental car if you were to have an at-fault accident. If your car is in the shop for a repair that falls under your comprehensive or collision coverage, these will not cover a rental car during the repair. This additional provision will do so.

However, you will need to evaluate whether this is a smart use of your money. Before signing up for this additional cost, call around and find out how much a rental would cost you.

You might find that the provision is more expensive than paying for the rental yourself, if you even need it. Often, families have more than one car and can manage on just one vehicle for a few days.

The other option is a towing package. This will pay a tow company to pull your car to a repair or mechanic’s shop. The nice thing about this coverage is that it will even cover mechanical breakdowns, not just traffic accidents.

However, it is often redundant coverage. If your car is under warranty or you are a member of a car club, you probably already have towing coverage. Even if you do not already have this, it might be cheaper to pay for a tow once every six months than it is to pay for the coverage.

Ways to Lower Insurance Costs

To get the most bang for your premium buck, look for ways to save money on the coverage you need. There are many ways to do this without sacrificing coverage.

First, rather than cutting comprehensive and collision, raise your deductible. By offering to pay a larger portion of a repair, your deductible can be up to 40% lower, especially if you raise it to $1,000.

In addition, combine as much of your insurance with one company as possible. Usually, companies give hefty discounts to clients who have more than one type of policy with them. Look for a company that gives the lowest possible cost on both your car and homeowner’s insurance. Moreover, if you also own a motorcycle, RV or boat, or need life insurance, try to get these with the same company as well.

 

To make sure you are getting the best deal on all these, get quotes from multiple sources. Also, ask each one about other discounts, like for a clean driving record. Then take the time to look at your credit score. Insurance companies consider this when computing your premium. An inaccurate credit history could be raising your insurance costs.

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