Buying Auto Insurance - Other Provisions
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This is a continuation of previous post regarding buying auto insurance.
• Collision and comprehensive coverage. If you carry collision coverage, your insurer will pay for the repairs to your car in the wake of a smash-up. Comprehensive coverage takes care of damages from fire, storm, vandalism, or theft. Few banks and finance companies will approve you for a car loan unless you buy both kinds. Together, collision and comprehensive coverage can get expensive: they typically represent at least 30% to 40% of your total premium.
Both of these coverages are subject to a deductible, the amount you must pay out of your own pocket before the insurance kicks in. Beefing up your deductible can really cut your car insurance premiums. By raising your deductible from $100 to $500, for example, you can cut your collision premium by about a third; raise it to $1,000, and you’ll cut this part of your premium in half. A tip: Deposit in the bank the money you’re saving by upping your deductible, earmarking it to pay for fender-benders that don’t reach the new deductible level.
If your car is more than five years old and on the decline, consider skipping collision and comprehensive coverage altogether. The reason: Your insurer will pay you no more than the car’s market value if it’s totaled or stolen. When the annual cost of your collision and comprehensive insurance exceeds 10% of your car’s “blue-book” value – the amount you’d get if you sold the auto –drop the coverage. Your insurance agent can tell you the current blue-book value of your car.• Uninsured / underinsured motorist coverage. It has become a fact of modern American life: in many places, the streets are thick with drivers cruising blissfully without car insurance –or without enough insurance. The provision known as uninsured / underinsured motorist coverage means that if you have a close encounter with an uninsured, underinsured, or hit-and-run driver, your insurer will pay for injuries to your passengers, your own “pain and suffering”, and other expenses that health plans don’t pick-up. If you don’t buy this coverage and hit by one of these scofflaws, you’ll have to pay for everything your medical insurance doesn’t cover plus other expenses resulting from the accident. You can buy as much coverage as you carry under the liability section of your policy, but it’s a good idea to fork over the $40 or so a year that $100,000 of uninsured / underinsured coverage will cost.
• Personal injury protection (PIP). You must purchase this type of coverage if you live in a state with no-fault insurance laws, which generally require your insurer to pick up medical costs for your injuries regardless of whether you or someone else caused the accident. Your agent can tell you whether you need PIP.
Just as with homeowners insurers, there are three main kinds of auto insurers: those like Allstate and State Farm that sell policies through their own agents in local offices nationwide; those like Aetna and Travelers that sell policies through independent agents who earn a commission for each policy sold; and those like Amica and GEICO that sell policies through toll-free telephone numbers. It’s impossible to say which insurer will offer you the best deal. Premiums for identical policies in the same city often vary be hundreds of dollars a year, so compare price quotes from a minimum of five years.
In general, though, if you have a pristine driving record, you may have the best luck with an 800-number insurer: they choose only better-than-average risks, and they pass on to you the economics of noncommission telephone selling. If you’ve had a few speeding tickets or accidents in the past three years, try Allstate or State Farm: they cover a much broader range of drivers, and their premiums are generally not outrageous.
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