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Accident with two carsWhether you’re just getting your license or purchasing your first sports car, you have to consider auto insurance.  Containing as many features as your car itself, sorting through the options and buying the right car insurance could confound a PhD.

Let’s go through some of the coverage and pricing tips so you can be an informed consumer when purchasing car insurance, no matter where you live.

Auto Insurance and the Law

Each state requires that drivers have a minimum amount of liability coverage. This is to protect you in the event of a car related accident where you’re found to be legally responsible. For example, in Illinois, state law requires you have:

  • Minimum bodily injury liability limits of $20,000 per person per accident and $40,000 if more than one person who is injured or killed per accident.
  • Minimum property damage limits of $15,000. This covers damage to property of another person.

Other types of coverage may be required by law in your state, so it’s best to check with your state insurance commissioner. You can get more information at the National Association of Insurance Commissioners (NAIC) (http://www.naic.org/) or through your insurance agent.

Seven Non-Liability Auto Coverage’s

Collision

Collision coverage pays to repair or replace your vehicle in the event it’s damaged in an accident or collision. A deductible can be applied (lowering premiums) at the insured’s request.

In most states collision insurance is an optional and not a required coverage.

Comprehensive or Other than Collision (OTC)

This insures your car against damage caused by other than an auto accident. This includes fire, theft, vandalism, etc.

Uninsured/Underinsured Motorist

If you live in a “no fault insurance state” your own insurance will cover your losses in the event you’re involved in an accident with an uninsured or underinsured motorist.

Otherwise this coverage can provide protection for your passengers, lost wages and more.

Medical Payments or Personal Injury Protection (PIP)

Coverage will be extended to various medical payments and/or funeral expenses for you and your passengers.

PIP coverage may be mandatory in some states.

Gap Coverages

This coverage pays the difference between the actual cash value of your car and the amount you owe on it. It applies if your car has been totaled in a covered accident.

Towing and Labor or Roadside Assistance

Towing usually covers the cost of towing your vehicle to an auto shop for repair. It can also cover minor repairs.  Roadside assistance covers the same things plus fuel delivery even if an accident didn’t occur.

Rental Reimbursement

If your car isn’t drivable after an accident, the cost of renting a replacement car will be picked up if you have this coverage.

Car Insurance Rates

Rates vary widely for car insurance in every state. Some of the factors that go into creating rates which make up your premium can be:

–      Your age

–      Your gender

–      Where you live

–      Your driving history

Because each insurance company looks at these and other factors differently, two companies comparing the same driver can apply vastly different rates. That’s why it’s best to compare rates and coverages for different firms prior to purchasing car insurance.

What to Consider when Shopping for Car Insurance

On average a motor vehicle crash occurs every 5 seconds. Every 11 seconds, a person gets injured. And a fatal injury is recorded every 12 minutes.

So, regardless of whether or not insurance is mandatory in your state, it’s a good idea to have as much insurance as affordable.

And because rates do vary so much between the hundreds of insurance companies, it makes good sense to perform due diligence when selecting your insurance carrier.

Following are seven insurance shopping tips:

  • Drive Safely- At some companies, a price break may be available if you have no accidents or moving violation for 3 or 5 years.

  • Research Deductibles- You can usually select from a $250 to $1000 deductible (the amount you’ll pay before coverage kicks in). The higher the deductible, the less the premium.

  • Check for Discounts- Make sure you check with your agent or company for discounts. These separate line items usually take a percentage off your total premium. While many different discounts exist,  three of the them are:

      • Good Student- If your high school or college student can maintain a B average, you can realize a significant premium reduction (maybe 15%).

      • Hybrid Vehicle- When you purchase a hybrid vehicle, some companies will discount your premium.

      • Multiple Policy Discount- If you buy several policies with the same carrier (homeowner, auto, etc.), you can qualify for premium reduction.
  • Install Safety or Anti-Theft Devices- Equipping your car with anti-lock brakes, automatic seat belts and airbags, among other devices, can make you eligible for discounts. They reduce the chances of your car getting stolen or vandalized.

  • Garage Your Car- Keeping your car garaged may get you a slight discount. That’s because a vehicle maintained in a garage makes it less likely it will be stolen, vandalized or struck by another vehicle.

  • Avoid Business Use- If you use your car for business, you may be charged a business use surcharge. However, make sure you tell your agent if you are using your car for business. You want to be sure you’re covered.

  • Adjust Your Limits- Play around with seeing how the premium changes based on different limits. This can dramatically reduce your premium. 

Other Car Insurance Decision Factors

Consider the reputation and stability of the companies you’re comparing. Insurance companies get rated yearly by non-partisan agencies for their ability to pay claims. You can see insurance company ratings at A.M. Best (www.ambest.com).

Use the internet and your agent to check the company’s claim paying process, reputation for paying claims fairly and on time.

Additional Information

Check out the Institute of Insurance Information for informative articles and statistics on auto insurance. http://www.iii.org/media/facts/statsbyissue/auto/.

The Insurance Institute for Highway Safety has important driving safety tips and current driver data.  http://www.iihs.org/research/hldi/fact_sheets/default.html