You know you need it. You know your state or jurisdiction mandates that you have it. You want to protect your shiny, new vehicle. But, you're perpetually confused about the realities of car insurance: How much to get, what specific coverage to obtain, and any number of other concerns that you may have.
Take a deep breath and admit at least one thing to yourself: Auto insurance is a complex and often confusing subject. There. Feel a bit better? You should. While you needn't become an expert, you should gain enough knowledge so you can shop for the best and most cost effective car insurance coverage available.
You owe it to yourself, your family, and your vehicle to understand the important and sometimes subtle components of auto insurance to make the best choice for you.
Auto insurance tends to be a confusing and complicated issue
Learning a few terms and buzzwords is typically not sufficient to protect yourself properly. If you have a regular insurance adviser, use his/her expertise to the maximum by providing all-important information. Some people assume that the only important data is the make, year, mileage, VIN (Vehicle Identification Number), and present condition of the insured auto.
But, this is only part of the information you or your insurance adviser need to configure the best auto insurance policy for you. Here are some lesser-known, more subtle factors that you should consider before getting your vehicle insured.
Some subtleties you should understand when considering auto insurance
Liability coverage level
Other assets that you own could indirectly be affected by auto incidents. The liability coverage level is a very important component of your car insurance coverage. Liability insurance is typically offered in specified amounts (e.g., $25,000/$50,000, $100,000/$300,000, $250,000/$500,000, etc.).
The first amount usually applies to the amount of liability coverage "per person" while the second amount is the maximum protection "per incident" (accident). The more assets you have (homes, boats, investments, etc.), the higher liability limits you should consider. For example, liability coverage of $100,000/$300,000 might appear to be sufficient for an auto accident.
However, suppose serious injury should occur to another, who is age 30 and earning $75,000 per year. The injured party will be unable to work at their job for at least five years. They face a loss of at least $375,000 just in income from this accident. You may already be $75,000 in the "hole." If you own a home, boat, or other asset, try to guess where the remainder of the loss may come from. You want to avoid the necessity of adding a $75,000 equity loan to your mortgage balance to pay a claim.
The more assets you have, the higher liability insurance limits you should consider.
Uninsured motorist coverage
While most states in the U.S. mandate at least basic liability coverage in required auto insurance policies, some drivers ignore the law. You need to protect yourself from an incident involving another driver who does not have car insurance so you don't incur unwanted and undeserved liability.
Medical payments and bodily injury coverage
You are no doubt aware that the cost of medical treatment has skyrocketed in recent years. As employers try to cut expenses, even drivers covered by health plans may incur an expense of $150 to $350 for an ambulance ride to a hospital and an emergency room "co-pay" of $100 or more BEFORE a medical professional even looks at their injuries. While many companies offer medical payments coverage up to as little as $2,500, you might want to consider a higher limit.
Deductible limits
Increasing deductible amounts is one of the better ways to save money on your car insurance premiums. Yet, you need to consider this component and be honest with yourself.
Many otherwise safe drivers – those who never leave the driveway if they've had a cocktail before dinner, when overly tired, when taking medication, etc. – may still have a propensity for minor "fender benders". Changing from a $250 to a $1,000 deductible will save you major money on your auto insurance, but if you have a tendency to incur a few small incidents in the course of an average year, a high deductible may prove costly.
These are a few important subtleties of auto insurance that you need to consider when getting coverage. Be honest and aware that insurance is designed to protect you and take advantage of its features.