How to Lower Auto Insurance Cost - Part A

Q. How to determine the right amount of auto insurance coverage and how to get the best deal?

A. In this part, we will discuss how to determine if you have the right amount of auto insurance coverage.

Auto policies offer a wide range of coverage.  Understanding them is the first thing to do.  You can start with your current policy and check the “declaration page”.

1. Liability coverage.  This is the most important part of your policy.  It protects you against lawsuits arising from property damage or bodily injury for which you may be legally responsible due to an auto accident.  Your liability coverage might be written as a single amount, which is the maximum your policy will pay, such as $500,000. Sometimes, coverage is written in split amounts, such as $100,000/$300,000/$50,000.  The first number refers to the maximum coverage for injuries to one person.  The middle figure refers to the maximum coverage available for all those injured in the accident, and the third figure is the maximum that will be paid for property damage to vehicles, structures, etc.  Each state has different minimum amount of required liability coverage, make sure your coverage is significantly more.
2. Medical payment coverage.  This is optional and usually ranges from $1,000 to $10,000 per insured who is injured in an accident.  The insured usually includes a spouse and children of the insured.  In some states it also includes the insured’s non-family-member passengers.  If you already have excellent health insurance, you can drop this coverage, which will save you money.
   
3. Uninsured and underinsured motorist coverage.  It pays for bodily injury and property damage when you or your vehicle is in an accident caused by an uninsured motorist or hit-and-run driver.  This coverage may duplicate your health insurance and/or your collision coverage, but uninsured motorist coverage also can compensate you for “pain and suffering,” which the others do not.
4. Collision and Comprehensive coverage.  It compensates you for damage to your car regardless of who is at fault.  Each portion has a separate deductible.  The higher the deductible, the lower the cost, but the more you must pay out-of-pocket in the event your car is damaged.
5. Some states require you to carry Personal Injury Protection.  Unless it’s mandatory, avoid this feature – and its cost – by maintaining separate and more comprehensive health and disability insurance.

In our next blog post, we will discuss what are the ways to lower your auto insurance costs.