HOW MUCH CAR INSURANCE SHOULD I HAVE?
Everything you need to know about auto insurance, how much you should have and the factors that can increase or decrease auto insurance.
Here are some bullet points that can help in understanding your auto insurance:
- If you get into an accident and you are at fault, your insurance pays for your own vehicle only if you have collision coverage. If the repair costs come close to or exceed the value of your vehicle, the insurance company will total the vehicle (each state sets its own cutoff).
- The insurance company also has the right to possess the vehicle and salvage it to recoup some of their losses.
- Liability only is best for older vehicles; this will cover injuries to other people and damage to someone else’s property when you are at fault, but not damage to your own car.
- If you have a brand-new vehicle buy full coverage. You want to make sure your vehicle is covered for repairs as well as the other vehicles.
UNDER INSURANCE
Make sure you are not underinsured. If your liability does not cover the damage or injury you caused, you could be sued, and your wages garnished.
Years ago, my late husband had an accident in his brand-new expensive truck. The other vehicle was not insured.
Coincidently our insurance agent was with my husband at the time. We had to use the uninsured motorist part of our insurance and the other driver was sued.
Another instance happened when my oldest daughter was in a serious car accident. The person driving was underinsured.
They were on their way to California for a weekend trip with her friend, sibling 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 couldn’t call me because she had lost her phone. With several broken bones including a broken back, she crawled out of the ditch; All she remembered was being bloody, limping, trying to wave down vehicles.
After several vehicles passed, finally a group of young guys with piercings and tattoos stopped to help. They called for help and called the family members, and they stayed with the girls until help arrived. The following day they called to ask how the girls were doing.
If they weren’t there the youngest would have died.
The youngest was airlifted and eventually all the girls had to be transferred to Reno.
For this accident, the coverage per person was $100k and per accident it was $300k. The youngest was given $200k and the other $100k was split between the three other girls. The hospital costs exceed the coverage. It wasn’t enough.
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.
Umbrella insurance can also protect you from claims of defamation, slander, and libel, including the attorney’s fees. You have this protection worldwide.
INSURANCE ADD-ONS
In Massachusetts, Personal Injury Protection (PIP) is required and pays up to $8,000; if you want more medical protection, consider adding Medical Payments coverage.
Full coverage for new vehicles is a necessity. 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 you owe more than it’s worth, GAP insurance will cover what’s left on the loan after your auto insurance pays, but not late fees, missed payments or extended warranties added to the loan.
There are also add-ons you can purchase like roadside assistance or purchase an AAA membership. AAA helps with being locked out of a vehicle, dead battery, flat tire or other mechanical problems.
It is also good when you have teenage drivers, and they are stuck on the side of the road.
FACTORS THAT CAN INCREASE OR DECREASE CAR INSURANCE
Everything you need to know about auto insurance, how much you should have and the factors that can increase or decrease auto insurance. Rates are affected by the vehicle you choose to buy. If you choose to buy a sports car, be prepared to pay more for insurance. Taking a defensive driving class, obeying the laws, and driving responsibly will lower your premiums.
Vehicles that are stolen more often also cost more to insure. Check to see which vehicles are on that list.
Also, having certain safety features 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 buy a vehicle outright. A vehicle is a depreciable item as we discussed before. If you can’t pay for it outright, then pay as much as possible towards the purchase of the vehicle to keep your payments as low as possible. It is not a return on your investment unless you can write it off on taxes.
For example, a self-employed salesperson who uses their vehicle as their office or a contractor who needs a truck for their business; employees generally can’t write off their car on their federal taxes.
Understanding everything you need to know about auto insurance will be important when comparing insurance companies, 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.
Independent insurance agencies can sell insurance from several companies. They are able to make a comparison of the many options that are available for you.