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Auto Insurance Coverage and Deductibles

Auto insurance is an expense that all drivers have to live with. In nearly every state across the country, auto insurance in some form is required by law. Drivers who operate their vehicles with no insurance are subject to the punitive measures included in these pieces of legislation. Yet many of us are often hard pressed to manage the costs of our auto policies. If the cost of your car insurance plan is too much to handle, do not just cancel coverage or let it lapse. Don't risk much larger consequences in the name of saving a few dollars in the short term. There are things you can do as a driver and covered car owner to save money on your insurance policy. Take the time to consider your auto insurance coverage and deductibles if you are really in need of lower premiums.

Insurance Rates Based On Coverage

All around the country, there are countless drivers struggling to keep up with the cost of owning and insurance an automobile. These costs seem to continually rise even as our wages remain flat or decrease over these past few years. The reality of the legal basis for car insurance is that there is not a whole lot you can do about this expense. If you want to drive a car and get it properly registered with the state you live in, you need to have legally adequate insurance on your vehicle. There are other benefits to having auto insurance, of course; but for the purposes of this discussion we are focusing primarily on the legal aspects of coverage and the fact that most of us are bound to carry a policy for fear of the legal consequences of non compliance.

Auto insurance rates to a large extent are based on coverage. You get what you pay for, in essence. This makes logical sense, of course. The more extensive protection you choose to include in your policy, the more money you will have to pay to get it. There is no arguing the logic behind this principle, nor would anyone probably try to argue it. Still, it can be disconcerting to know that creating a policy with great protection can also create a premium you cannot fit into your budget.

The levels of coverage we choose to include in our auto plans are a large contributor to the prices we pay for insurance. Surely any one of us would love to be able to make insurance choices without regard to price as if money was no object. But unfortunately, cost always has to be a factor. For some drivers among us, it is the first and last and probably the only factor, because our budgets dictate as much. Therefore even though it would be preferable to avoid it, an examination of the different types of coverage with an eye on what may be expendable is in order.

Auto insurance law in the U.S. is determined at the state level. That means the policy you are required to carry will depend on what your state legislature comes up with for a list of requirements. So the first thing you need to do as a driver and auto owner is to find out exactly what your state requires for car coverage. The reason this is so important is that a lot of insurers will sell policies far exceeding the legal minimums as their default or standard offerings. In other words, if you are looking for a liability plan because your state requires liability insurance, be sure you are aware of the state's regulations on liability before shopping for a plan. Do not be bowled over by an insurer pressuring you into buying a policy you can't afford with limits far higher than what your state mandates

This is not to say that higher limits of coverage are a bad thing. On the contrary, they are hugely beneficial if you can afford them. The more protection you have when you get into an accident, the better off you will be. But even with this being said, there are times and situations when consumers cannot afford to take on any higher limits than are legally necessary in a policy. If this is the case for you, if your budget is extremely limited, consider a few other options before you opt for bare bones auto insurance.

Deductible Increases Can Save Money

One of these alternative options is to increase your deductibles. A deductible in an auto insurance policy is simply the financial obligation the customer must meet before any claim can be paid. For example, if you get into an at fault accident with $15,000 worth of damage and your deductible is $500, you have to handle that $500 out of pocket before the insurer will provide the remaining $14,500 (as long as your liability property damage plan includes that much protection). In auto policies, deductible increases substantially lower premiums. One reason is fairly obvious. They cut back on the out of pocket cost for the insurer for every claim you might make on a plan.

But another reason is maybe not quite as obvious. This other reason is something to keep in mind before you decide to increase your deductibles on your plan. If the default deductible is $250, for example, and you increase it to $1,000, you may save a lot of money on your premium. But on the other hand, you will also effectively eliminate your ability to file any claim for a loss of less than $1,000. Even claims for losses slightly above that level will be questionable because you know that by filing claims you are apt to increase your rates when renewal time comes. So increasing your deductible must be done judiciously. You have to realize that the upfront savings can potentially be offset by long term losses on the flexibility and limits of coverage. Any fender bender or parking lot dings and scratches will either come out of your pocket, or more than likely just go unrepaired. So even though deductible increases can save you a lot of money on your premium, you should consider their downside before making a choice to go ahead with them.

Other Factors to Consider

Aside from stripping down your coverage and raising your deductibles, there are other alternatives worth exploring as ways to help you cut down on the prices you pay for car coverage. One easy thing you can do that does not reduce the strength of the policy is to find as many discounts as possible to hold down costs. Insurers offer discounts of all kinds to drivers as enticements to recruit and retain them, from good student to safe driver to loyalty discounts. Find out what your insurer offers in the way of discounts and do not be afraid to ask for one if you feel that you qualify.

Also, comparison shopping for cheaper prices is always an option. Keep an eye on the market and grab a few quotes before each policy renewal to make sure you are getting your best deal. Auto insurance coverage and deductibles are two areas among several to explore for savings.


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