One thing most people aren't aware of is that they should get a replacement value rider for new cars. It's very inexpensive - usually less than $20/mo and certainly less than my latte budget. Yet it can be critically important. Most people are aware that they are "upside down" on a new car for quite a while. However, if you wreck that new car, the insurance policy pays on the worth of the car, not the replacement cost, and can leave you owing thousands. Carrying that rider for the time you are "upside down" doesn't cost that much and can save so much headache! And most agents don't think to sell it.
If you have a car, then you need auto insurance. There’s a good chance you’ll never need to file a claim, but car insurance is one of those things that you’re thankful you have if you do. Depending on many factors such as how many vehicles you have, your driving record, and age, auto insurance can run into the thousands of dollars per year. Because of this high cost you can probably see what it’s important to find a policy with low premiums. Even though the cost of the policy is important, it is also important to make sure you’re adequately covered. If not, just one minor claim could cost you far more than the money you thought you were saving.
The insurance industry is very competitive, and there are seemingly countless companies to choose from. So, with so many options available the best thing you can do is to shop around. You’ll be surprised how the exact same level of coverage can vary between companies. So don’t just pick one or two popular names, get quotes, and stop there. You should probably check with 3-5 insurers so you have a good idea of what’s out there for you.
With a lot of companies offering online services, it is easier than ever to get quotes, but don’t stop there. You’ve seen the commercials for companies that boast about the savings, but don’t ignore your local insurance companies. Usually a quick phone call is all it takes to obtain a quote from them and believe it or not, they may even be cheaper than one of the companies you see on TV.
Ask About Discounts
Do you have a clean driving record? You may qualify for a discount. Are you a member of a professional organization or auto club? You may qualify for a discount. There are many ways that you can obtain a discount on your policy, so be sure that when you’re shopping around, you mention anything that might qualify. Even something as simple as letting your insurer know you have a car alarm or how many miles you usually drive can qualify you for a nice discount.
Also, don’t forget multiple policy discounts. If you own a home it might be worthwhile to check with that insurance company to see what kind of discount you could receive by purchasing your auto insurance through them. In many cases, this could mean a reduction of up to 20% on either your homeowners or auto insurance premium. When you’re talking 20% off something like a $1,000 annual premium that’s some real savings. Use this discount to weigh against the other quotes you get and see if it’s worth switching.
Drive a Less Expensive Car or Drop Some Coverage
The type of car you drive plays a big role in determining how much your premium will be. Just like insuring a larger and more expensive house will require a higher premium the same goes for vehicles. That luxury SUV is going to sometimes cost double that of a standard sedan. In addition, insurance companies keep tabs on what vehicles are more likely to be stolen. If you drive a car that is a target for thieves, expect to pay more for coverage. Here are a few things to think about before buying your next car.
If you are insuring an older vehicle it may be time to drop full coverage. For example, if you are driving an older car that is only worth a couple thousand dollars, it probably isn’t worth paying for comprehensive coverage. In many cases, after you factor in the premium and deductible after an accident, you have spent more than the car is worth. So, it might make sense to drop everything but liability coverage on an older vehicle. Keep in mind that this may not be possible if you still have an outstanding loan on the vehicle so if full coverage on a car that’s only worth $5,000 is killing you yet you still have a balance on the loan this may be a good incentive to get that loan paid off early so you can modify your policy.
If you are facing high premiums, don’t simply reduce coverage in order to save money. Remember, when you are driving, you are putting your life and the lives of others on the line. Reducing coverage will simply reduce the amount of liability and injury coverage. With the high cost of medical treatment, even a relatively minor injury to you or others could go beyond what a low coverage policy might cover. And don’t think it can’t happen to you. People will sue for anything in this country and it can takes years and a mountain of legal fees just to clean up a relatively small claim. That fender bender you got in could cost you tens or even hundreds of thousands. Suddenly, saving $50 on your insurance premium doesn’t sound like a good idea when you’re on the hook for $50,000 in uncovered medical bills and legal fees.
You want to be sure that you are insured enough to protect yourself and your assets in the case of a lawsuit. While most states have minimum coverage requirements, they are usually far lower than what you should be considering if you want to protect yourself. Your car can make you poor, but not having enough coverage can bankrupt you.
Buy Insurance from a Reputable Company
In the event of a claim, you want to be insured by a company that will pay out. If you try to save a few bucks by dealing with an insurance company that isn’t highly rated, you may find yourself having difficulty if you need file a claim. Many of these companies will also entice you with a low initial quote, but come renewal time, they will surprise you with a large increase. After an accident or damage to your car the last thing you want to be doing is spending months fighting with your insurer to get a legitimate claim paid.
Additional Reading: 8 Ways to Save on Auto Insurance
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About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.