GUIDE HOW TO BUY CHEAP INSURANCE: Tutorial: Introduction To Insurance

Tutorial: Introduction To Insurance

Whether an auto collision is your fault or somebody else's, your auto insurance coverage should help you. How much it helps, however, is up to you, and this is determined by the combination of options that comprise your insurance policy. Despite what the TV commercials would have you believe, there is no one-size-fits-all insurance package, and it can be confusing to choose the best options for your situation.

In order to protect yourself without overpaying, let's explore what factors you should consider in putting together the right coverage for your vehicle, as well as how to select a good insurance company that will handle your claims if an accident happens.

Factors to Consider Before Buying Auto Insurance

Personal Injury or Personal Liability - Always put you and your family's safety before anything else. Personal injury or personal liability coverage should be given great importance when putting together an insurance package. During accident situations, health insurance is the first thing requested by any medical facility treating you. If you don't have health insurance, load up this option with hefty coverage that will pay for any medical expenses incurred in a major accident. (For help with health insurance, read 20 Ways To Save On Medical Bills and How To Choose A Healthcare Plan.)
Uninsured Drivers - According to an Insurance Research Council (IRC) study, if someone is injured in an auto accident, the chances are about one-in-seven that the at-fault driver is uninsured. Don't trust other drivers and don't take for granted that they will have as good of coverage as you do. Though it can be hard to digest that you must pay a premium and the deductible for someone else's mistake, it's better than forgoing this coverage and risking losing your vehicle.
Major Accidents - You should never neglect the worst-case scenario when selecting insurance. What if your car is totaled and needs to be replaced? If the accident is not your fault, the other driver's insurance (or your uninsured motorist coverage) will pay for the vehicle. But, there are other situations and natural calamities that can also destroy your vehicle, and in those cases, you'll only be able to rely on your own insurance. In case such a situation arises, it is better to have enough coverage to fully repair or replace your vehicle.
Getting Stranded - A vehicle is a combination of mechanical, electrical and rubber parts. Things can go wrong at any time and they are not always in your power to prevent. But being prepared for those events is in your power if you add towing and rental coverage to your insurance. This might work out better than having a separate towing club membership, which could save you those annual fees.
Deductible Vs. Premium - The insurance deductible is inversely proportional to the premium amount. If the deductible goes up, the premium goes down and vice versa. This relationship reflects whether you prefer to pay more or less from your own pocket before stretching out your hand to the insurer. Whichever option you choose, make sure you can afford it. Some people are better off paying a higher monthly premium in exchange for a lower deductible to avoid any large payments after an accident.
Quality and Age of Your Vehicle - A new vehicle probably will not break down for at least a year or two, so your towing coverage should be minimal (though flat tires are still a concern). Some dealers even offer free towing for mechanical breakdowns on new cars. However, a new car will also be expensive to fix or replace in the event of an accident, so make sure your choice of coverage reflects this. (To fix a sour deal on your car, check out Did You Buy A Lemon?)
If you own an old vehicle or an out-of-warranty on one, you will need better towing and rental coverage. Rental coverage becomes important if you are at fault and your car is damaged. If you don't have a second vehicle and you need a car to get to work, rental coverage will tide you over while your car is being repaired or replaced.
Driving Experience - Many insurance companies automatically recommend certain coverage for particular drivers. For example, if you have a teen driver at home, it is better to have good personal liability coverage with a lower deductible because new drivers are prone to making mistakes. On top of that, rates to cover teen drivers will automatically be higher because of their lack of driving experience. Try not to let the higher rates prevent you from getting ample coverage, though.
Experienced drivers with past mistakes, such as moving violations or accidents, can also have higher premiums. Defensive driving courses help to offset some of the cost, but not all of it, so drive carefully and consciously to avoid paying higher premiums later in life.