What you need to know before getting auto insurance estimates

classicMany of us get caught in a routine when getting auto insurance estimates or even worse, we renew with that small or large rate increase without shopping around.  We don’t really know what is in our policy and for those of us who do, we don’t know what it all means.  You won’t be able to evaulate auto insurance estimates if you don’t know what the numers mean so let’s take some time to figure it out.


First, the different monetary levels of coverage don’t hurt your wallet that much.  Most of the time, the minimum coverage offered isn’t enough in the event that something happens.  With that in mind, let’s take a look at some of the options:


How about the deductable?  The deductable is the amount of money you have to pay before insurance takes over.  Let’s say you hit a utility pole and it causes $2,000 worth of damage.  If you have a $500 deductable for your auto insurance, you pay the first $500 and insurance pays the remaining $1,500.  Here is a tip.  I keep my deductable at $2,000.  I do this by keeping $2,000 in my emergency fund for just this purpose.  My insurance premium is lower and I’m gaining interest on my $2,000.  The only catch is that often, your bank won’t let you have a deductable that is higher than $1,000.  Check with your bank before getting auto insurance estimates.


Depending on what kind of car it is, (and the condition of it) you may want to skip the optional coverage options.  You may not need comprehensive coverage on an old car, for example.


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Now, let’s take a look at the important parts of your auto insurance policy:


Bodily Injury Liability– Required in all states, this protects you from losing everything if you injure somebody in an auto accident and you have to pay their medical expenses.  Tell the companies giving you the auto insurance estimates to keep this as high as you can.


Property Damage– This is the part of your policy that covers any damage to actual property.  Your car, their car, a traffic light, a mailbox, or a house.  When you’re deciding on how much coverage to purchase, remember that the cost of repairing that 2009 Mercedes that you hit which caused it to break a utility pole could be 5 figures.


Medical Payments– If you cause an accident and you or your passengers are injured, this is the area of your policy that covers it.  Your health insurance will cover much of your costs in this area.


Uninsured Motorists– If somebody hits you who has no insurance, this part of your policy goes to work.  There are limitations on what is covered.  Often it is only bodily injury.


Physical Damage– This is the part that normally comes in two numbers.  The first is Collision.  Collision covers your vehicle if you are in an accident.  Comprehensive is everything else including vandalism, theft, and other acts of God.


Gap Insurance– You should consider buying gap insurance if you are leasing or financing.  Read my article about gap insurance here.  If you lease a car, make sure your auto insurance estimates include gap insurance.


There you go.  Now, check out your policy and see how well you now understand the numbers.  Remember that the coverage limits should be as high as you can afford if you own a car that is relatively new.  Also, if you are leasing or financing, the bank or financing company may have some specific requirements for you.  Auto insurance estimates are much easier to compare when you know what the numbers mean

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