5 Steps for Choosing the Right Car Insurance Policy

Most of us are often inundated with offers to lower our car insurance costs. Unfortunately, most people do not know the basics of car insurance. It is important to find an agent that will not only make the prospective buyer comfortable but will also explain the coverages.

The first step in choosing the right car insurance policy is to know the state’s minimum liability limits. Liability is what pays the claimant’s bodily injury and/or property damage. For instance, Texas’ minimum limits are 25/50/25. These means an auto policy will pay up to $25,000 for bodily injury per person with a total paid per accident of $50,000. The policy will also pay up to $25,000 for property damage.

The second step is to consider the differences between PIP, or personal injury protection, and medical payments. Again, each state varies in their policies. Generally, PIP pays not only medical expenses but also a portion of lost wages caused by an accident. PIP and medical payments coverage generally start at $2,500 and usually go up to $10,000. Since PIP offers additional coverages than medical payments, it is generally a more expensive but comprehensive coverage.

The third step in choosing the right policy is to determine if there is need for uninsured motorist coverage. This is the coverage that pays the insured when they are hit by someone who either does not have insurance or does not have enough insurance. The limits look like liability limits and most states will allow individuals to have a less amount on uninsured motorist coverage than they carry on liability coverage. Some people feel that they do not need this coverage if they have medical insurance and can pay for the damages to their car themselves.

The fourth step is considering the need for physical damage for the automobile being insured. If the vehicle is damaged in an accident, could the insured pay for the damages themselves? Most policies pay actual cash value for the vehicle and not replacement cost. Does it make sense to pay $500 more a year for the coverage if the company is only going to give the insured $1,000?

The last step in picking the right car insurance policy is to determine the need for additional coverages like towing and rental reimbursement. Many people are members of driving clubs that offer them free towing assistance. For these individuals, towing is not a coverage they would need on their auto policy. Rental reimbursement pays for a rental car if the insured vehicle is in the repair shop because of a covered loss. This does not cover the cost of renting a vehicle while on vacation.

There are many things to think about when purchasing an auto policy. It is important to understand the basic policy and determine what coverages will help the most. A good agent should walk a prospective buyer through these steps and explain all coverages to ensure that the buyer is getting the right kind of coverage at a price they can afford.

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