Understanding Auto Insurance

How much Car Insurance should I have?

It doesn’t make sense to buy full coverage if you have an old vehicle.

  • If you get into an accident and you are at fault, and the repair costs more than the value of your vehicle, they are going to take your vehicle in exchange for that coverage.
  • If the cost of the repair is more than the value of your vehicle, the insurance company has the right to possess the vehicle and salvage it to recoup some of their losses.
  • If you want to keep the vehicle, refuse the payment for your vehicle. It would be best to buy liability only, this will cover the damage to someone else’s property when you are at fault.
  • If you have a brand-new vehicle you will want to have full coverage. You want to make sure your vehicle is covered for repairs as well as the other vehicles. You do not want to find yourself in a situation of being sued because you were underinsured.

Several years ago, my late husband was in an accident when a vehicle came onto the main street hitting his truck. The other vehicle was not insured, and my husband had a brand-new expensive truck.

Coincidently our insurance agent was driving with my husband at the time. We had to use the underinsured part of our insurance and the other driver was sued.

If your liability does not cover the damage or injury you caused, you could be sued, and your wages garnished.

Discuss what would be most suitable for you with an agent. For Personal Injury Protection (PIP) I would recommend the highest amount of coverage.

For newer vehicles having full coverage is a necessity and if you have a loan the lending institution will have minimum requirements.

GAP insurance covers the difference between the car loan and the value of your vehicle. If your vehicle is totaled and there is an outstanding loan on the vehicle, the insurance will cover the balance of the loan.

There are also several add-ons you can purchase like roadside assistance or purchase a AAA membership. Most people forgo this.

I have AAA because my car is my office, I have locked myself out of my vehicle, dead battery, flat tire, or other mechanical problems. Happened more often when my vehicle got older. It is also good when you have teenage drivers, and they are stuck on the side of the road.

Umbrella Insurance

Umbrella insurance protects the insured if the damages are beyond the coverage limits of an existing policy.

For example, if your home or car coverage is $500,000 and the damage to someone other than the insured is more than the $500,000, the umbrella would then cover the difference.

I purchased umbrella insurance when my oldest daughter was in a serious car accident at fifteen years old. The person driving was underinsured.

They were on their way to California for a weekend trip with her friend, her friend’s little sister and cousin. Her friend’s father was driving, the girls were asleep, and the dad nodded off.

The only thing my daughter remembered was waking up in the middle of the night, in a ditch on a deserted road in Fallon, Nevada.

She had lost her phone and could not call me, so she crawled out of the ditch, not knowing that she had several broken bones including a broken back. She remembers being bloody, limping, trying to wave down vehicles. Nobody would stop for her.

Eventually somebody stopped, a group of young guys with piercings and tattoos. These guys called for help and called the family members to let them know what was happening, they assured us that they would stay with the girls until help came and knew they would be safe.

If they weren’t there the youngest would have died.

The youngest needed to be airlifted and eventually all the girls had to be transferred to Reno. These guys also called the following day to check on the girls. We will always be grateful to these young men.

The coverage per person was $100k and per accident it was $300k. The youngest needed most of it and was given $200k that left $100k for the three other girls to split. It wasn’t enough.

I turned to my car insurance for the additional coverage and an uncle of mine had me on his policy, so I stacked the insurance to get more coverage for my daughter.

Factors that can increase or decrease car insurance

If you choose to buy a sports car, be prepared to pay more for insurance. If we drive responsibly, obey the laws, and take a defensive driving class, it will lower our premiums.

But did you also know that some vehicles cost more to insure because they are stolen more often? Check to see which vehicles are on that list.

Also, by having certain safety features you can decrease your premiums. Make sure that what you are paying in monthly car payments does not exceed the savings of those features.

It’s also best to pay for the vehicle outright rather than make payments. A vehicle is a depreciable item as we discussed before. If you can’t pay for it outright, then pay as much as possible so that the monthly payment is not hundreds of dollars a month. It is not a return on your investment unless you can write it off on taxes.

For example, a salesperson that uses their vehicle for work and it’s their office or a contractor needing a truck for work.

With all insurance industries, the best deals usually can be found with independent agents rather than captive agents.

Captive agents can only sell one insurance from the company they work for. Farmers Insurance is an example of a captive agency. The agent can only quote you from Farmers.

Some well-known insurance companies do have access to other insurance companies, but mostly it’s the independent agents selling out of their private office that can sell insurance from several companies.

They can compare rates from different insurance companies and offer you the best deal.