Understanding Property and Casualty – Auto Insurance
How much Vehicle insurance should I have?
If you own an old vehicle, it doesn’t make sense to have full coverage. The insurance company is only going to cover the cost of repair and if that repair is more than the value of your vehicle, they are going to want your vehicle in exchange for that coverage. The insurance company has the right to take the vehicle and salvage it to recoup some of their losses. You can refuse payment if you want to keep the vehicle, but you are better off without collision that pays for damages to your vehicle when you are at fault and purchase liability only, the damage to someone else’s property when you are at fault.
Don’t use the same rationale for liability coverage, that you do for collision and buy the minimum because it’s not worth it. You do not want to find yourself in a situation of being sued because you were underinsured. Years ago, my husband an accident in which a vehicle had come on to the main road turning into my husband’s truck. They weren’t 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 they were sued.
If your liability does not cover the damages 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 collision 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.
There are also several add-ons you can purchase like roadside assistance or purchase a AAA membership. Most people forgo this. I have roadside assistance because my car is my office and I have locked myself out of my vehicle and had to be jumped started, flat tire. I also wanted it because I had teenage drivers and I wanted them to be safe.
Umbrella insurance is also available for vehicle. What convinced me to purchase umbrella insurance was when my oldest daughter was in a serious car accident when she was fifteen. The person driving was underinsured. They were all 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, and the girls were asleep. The dad nodded off and my daughter remembers waking up in a ditch on a deserted road in Fallon, Nevada, in the middle of the night. She had lost her phone and couldn’t 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 and nobody would stop for her. Eventually somebody did stop. A group of young guys with piercings and tattoos everywhere. These guys were awesome, they called for help and called the family members to let them know what was happening, assured us that they would stay with the girls until help came, and they knew they were safe. These guys also called the following day to check on the girls. What sweethearts.
The youngest needed to be airlifted and eventually all the girls had to be transferred to Reno.
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 and an uncle of mine had me on his policy also, so I stacked the insurance to get more coverage.
Factors that can increase or decrease auto insurance
I think we all know that buying a sports car will increase our insurance premiums as well as obeying all the laws and taking a defensive driving class will lower our premiums, but did you also know that some vehicles are higher to insurance 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 cash rather than make payments. A vehicle is a depreciable item as we discussed before. If you can’t pay cash, 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 instance, a salesperson that uses their vehicle for work and it’s their office.
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 have access to the least expensive rates.