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Car Insurance for Dummies

When most people are first exposed to buying car insurance, it can be an annoying, confusing, frustrating experience. There is a whole new language that one needs to speak when you talk with an insurance agent, especially a car insurance agent. Well, sit back and relax and I will do everything in my power to explain to you how the car insurance game works and how to speak the language. Here is your course in car insurance for dummies.

Learning all about car insurance can be very confusing at first. There is so much to consider all at once, which coverage goes on what, what the state requires, and trying to save money all at the same time. One option to cut down on the stress would be to try to do your car insurance shopping on line. You will not have someone in front of you trying to get a signature out of you, and you can take your time to find out what all those policy limits, deductibles, minimums, coverage waivers, and price of policy really mean. While you are shopping on line, you should get as many quotes as you can, because rates between companies can differ by as much as 40%.

As I said earlier, the first and best thing you can do to assure that you get the best rate possible is to shop around. You must keep in mind that different companies are looking for different types of customers. What I mean by this is that you can go to one company and they only want preferred drivers, (people with good records, certain age group, married and driving a 4 door sedan). This company’s rate for someone with a couple of tickets will be outrageous, simply because they would rather not have to insure you. What your driving record shows, will dictate what insurance companies you should go to for a quote. If you have a great record you would want to try some of the big name companies, (you know, the ones that advertise and are household names), because they mostly insure preferred drivers. If your record shows 2 or 3 tickets over the last couple of years, you will want to try the insurance companies that market insurance for “not so perfect drivers”.

The other thing you can do to lower your rates is to realize that your rate is based on you as a risk. You could clean up the driving record, find a car that is inexpensive to insure, increase the comprehensive and collision deductibles, and of course, shop around. Basically, driving an expensive car, having multiple tickets or both at the same time will raise your rates substantially.
What are coverage options?

When it comes to coverage options, there are only two hard and fast insurance options that you must have. The first is the minimum liability coverage amounts that the state you live in requires all drivers to carry on their vehicle. The second is if you finance your car, the bank will tell you what coverage you have to have under the terms of the loan.

Any other coverage amounts that you want are options that you can decide on. The coverage amounts that you place on yourself and your car should be in line with the liability you have in regards to your net worth, and you should make sure that you have enough coverage for the car that you drive.

When you align your coverage amounts for liability you need to take into consideration what someone or another insurance company could collect from you. You will not want to have to sell your home to cover the loss, or drain your retirement account either. Most states require just enough to possibly cover the other driver’s car repair and loss resulting from missing work or medical expenses, past that, you are on your own.

The other coverage which is comprehensive (if you damage your car) and collision (if you are in a collision in your car) will come with a deductible amount. Lets say you are driving a car worth $30,000, you could take a $1,000 deductible on both, and were something to happen, on a repair of $12,000 you would only pay $1,000. On the other hand if the car you are driving is worth $1,500, you definitely would not want $1,000 deductible, it would be more like $250. Even then, you will then want to look at how much that portion of the coverage is costing. Does the cost of the premium justify itself in the case you total your car? Remember, the insurance company will estimate the value of that car at around $1,000 and you pay a deductible of $250, you wind up with $750 replacing the car. Is the premium justified?

There is a huge difference in purchasing cheap state minimum requirement insurance and buying full coverage insurance. As I said, the state minimums will usually pay to repair the other person’s vehicle and pay medical expenses if you cause the accident. Having full coverage means that in any accident the other driver’s expenses and car are guaranteed to be covered as well as your expenses and repairs resulting from the accident.

Between those two ends of the spectrum is a middle ground too. This will require that you realistically look at your own situation, not only to repair your car, but when it comes to your liability. You will be able to try different liability coverage, medical coverage, and deductibles if you shop on line. This may require a little time, but will be well worth it to know that the insurance policy you have is sufficient to protect you but will not cost you an arm and a leg.

Insurance and Insurance coverage are not that complicated once you figure out what is what. Before shopping, go on line and find out what the liability portion covers, and the comprehensive and collision. Find out for yourself what uninsured motorist coverage is and what it covers. Look up what the medical expenses portion of a policy covers. Take time to look up what cars cost less to insure and what the expensive ones are.

Now that you have passed “car insurance for dummies”, choose the coverage types and amounts you want, go on line, and compare, compare, compare. Then, and only then, should you buy.


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