WSJ Web Slice
- Check out your state's minimum insurance requirements. It's possible that the minimum coverage required might not be that different than what you really need.
- When deciding how much coverage you need, make sure you're covered for an amount equal to the total value of your assets.
- To keep premiums low, choose collision coverage with a high deductible, and plan to pay routine repair costs with your own money.
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Your auto insurance is a collection of different policies that cover you in different ways. Here’s how they break down:
• Liability coverage – These policies help cover liability and expenses when you’re at fault in and accident. The money will go to the people you hit, but it won’t cover the people in your car.
• Bodily Injury Liability (BIL) – This policy pays for the medical expenses of people injured in a crash in which you’re at fault. You’ll often see BIL policies described as a “20/50” policy or a “100/300” policy. These numbers describe the maximum dollar amount the policy will pay for a single person’s injuries and the maximum for all the injuries sustained by all the occupants of the other car. For example, a 20/50 policy will pay a maximum of $20,000 for a single person’s injuries, and up to $50,000 total for the injuries of everyone in the car you hit.
• Property Damage Liability – This policy pays for damage done to the other car if you’re at fault in an accident. Property liability is sometimes referred to alongside BIL as a third number, so a 20/50/10 liability package will cover up to $10,000 for damages to the other car.
The following policies cover you and your card in an accident:
• Personal Injury Protection (PIP) – This covers your and your passengers’ medical expenses after an accident. If you lose time at work because of your injuries, this policy may also cover lost wages.
• Uninsured/Underinsured Motorist Coverage – This helps cover costs if you are hit by someone without insurance, or minimal coverage.
• Collision – This policy covers repairs to your car after an accident.
• Comprehensive – This policy covers costs if your car is stolen or damaged outside of an accident.
Nearly every state requires car owners to carry auto insurance, and most states have required minimum values for different policies. If you don’t carry insurance, the state can impound your vehicle. To find out what your state’s minimums are, check out this Web site.
Minimum coverage isn’t necessarily all you should have. New Jersey, for example, requires car owners to carry a 15/30/5 liability package. If you’re involved in a serious accident, it’s possible that an individual’s medical expenses could exceed $15,000, or a group’s expenses could total more than $30,000. In addition, $5,000 for car repairs isn’t a lot, considering that the average car now costs a little more than $20,000.
You’re on the hook when costs exceed your coverage limits. That’s why many people opt for policies that cover more than required minimums, particularly if they have assets that can be seized to pay for repairs and medical care.
A good rule of thumb: Make sure you’re covered for an amount equal to the total value of your assets (Add up the dollar values of your house, your car, savings and investments).
How much insurance do you need for yourself?
You probably don’t need to spend a lot of money on a Personal Injury Protection policy. You should be covered if you have health insurance and disability insurance through your employer. Just buy the required minimum.
You do need to make sure you have adequate coverage against uninsured and under-insured drivers. It’s relatively inexpensive in most states (something like $40 a year for $100,000 worth of coverage) and if you are in a collision with an uninsured driver, will help cover costs your
health insurance won’t. If you’ve decided to carry BIL for $100,000/$300,000, do the same for yourself.
Collision and comprehensive coverage is worth having if you would want to repair or replace your car after an accident. These policies have a deductible (the amount you have to pay out-of-pocket before coverage kicks in), and they pay out based on the current value of your car, not what you paid for it.
Choose the highest deductible you can afford, because a higher deductible will significantly lower your premium. You’re seeking coverage for major damages to your car, not for every little thing that can go wrong. It’s better to spend $500 of your own money on minor repairs every so often than pay an extra $50 a month whether you need repairs or not. Save collision insurance for when you have car repairs that cost thousands, not hundreds. Remember, if you submit a claim for every little thing, your premium will increase.
A handful of states require car owners to carry no-fault insurance, policies that pay out no matter which driver is at fault in an accident and limit your ability to sue other drivers.
Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, Utah and Puerto Rico requires car owners to carry this protection, though the rules around how these policies work vary by state. These policies tend to be expensive, so be sure to shop around for the best deal if you live in a no-fault state.
How to Shop for Car Insurance
Once you’ve decided how much car insurance you need, it’s time to begin shopping. Auto insurance policies vary widely depending on your car, your driving record and your credit, so it’s wise to do some research.
Go to insweb.com and Insurance.com and fill out the application form. After a short time, you’ll receive comparable quotes from several insurers. There are three kinds of insurers:
Direct sellers – You’re likely familiar with these brand names, such as GEICOs and Progressive. These companies sell coverage directly to you, bypassing traditional insurance agents. Since there’s no agent, there’s no commission; theoretically the savings are passed on to you. But these insurers accept only the best drivers, so you may have trouble qualifying for coverage if you have a history of accidents or moving violations.
Large national brands – Allstate and State Farm are better equipped for drivers with a bit of a blotchy past, and their rates are usually pretty good (they may even be able to match some of the offers from the direct sellers). These companies sell through local agents, but their agents are exclusive—a State Farm agent sells State Farm coverage and nothing else, so you’ll have to do your own comparison shopping.
Independent insurance agents – These sellers offer all kinds of insurance from many different companies. If you have any issues affecting your ability to get coverage (such as a patchy driving record or a teenage driver in your house) independent agents can usually find you better coverage at better prices than what you’d find on your own. Ask friends and family whether they have an insurance agent they would recommend.
A few tips for negotiating with an insurer:
Ask about all available discounts – There is almost always a way to save money. You may get a discount if your car has anti-lock brakes, if you don’t drive your car that often or that far, and so on. Request a list of all possible discounts to see if you qualify.
Skip towing insurance – It’s better to take that extra money and join an auto club (such as AAA) instead. In addition to towing, you’ll have roadside assistance when you need it.
Consider glass insurance - You can chip a windshield at any time, and auto glass is expensive to replace. Just make sure that glass is part of your comprehensive coverage, and not as a separate policy, which can be costly.
Category: Auto Insurance