How Much Car Insurance Should You Buy?

How much insurance should you buy? Any insurance agent worthy of their salt will tell you that you should buy as much as you can afford. While this is a good rule of thumb, it's about as useful as a stock broker's tip to buy low and sell high. It might be sound logic but it doesn't get you any closer to an educated decision. There are a few filters that need consideration in order to make that educated decision. First, what is the state required minimum coverage where you live? Second, what does the minimum cover? Third, what other coverage is available and can you afford it? And fourthly, what are you protecting?

What do the minimums cover?

Now that you know what your state requires, what are you actually covered for once you purchase the minimum? Using the coverage definitions that follow, find the types of coverage required and see what your state says is the accepted minimum.

Coverage Definitions

Bodily Injury Liability
Covers other people's bodily injuries or death for which you are responsible. It also provides for a legal defense if another party in the accident files a lawsuit against you. Claims for bodily injury may be for such things as medical bills, loss of income or pain and suffering. In the event of a serious accident, you want enough insurance to cover a judgment against you in a lawsuit, without jeopardizing your personal assets. Bodily injury liability covers injury to people, not your vehicle. Therefore, it's a good idea to have the same level of coverage for all of your cars. Bodily Injury Liability does NOT cover you or other people on your policy. Coverage is limited to the terms and conditions contained in the policy.

Comprehensive Physical Damage Coverage
Covers your vehicle, and sometimes other vehicles you may be driving for losses resulting from incidents other than collision. For example, comprehensive insurance covers damage to your car if it is stolen; or damaged by flood, fire, or animals. Pays to fix your vehicle less the deductible you choose. To keep your premiums low, select as high a deductible as you feel comfortable paying out of pocket. Coverage is limited to the terms and conditions contained in the policy.

Collision Coverage
Covers damage to your car when your car hits, or is hit by, another vehicle, or other object. Pays to fix your vehicle less the deductible you choose. To keep your premiums low, select as large a deductible as you feel comfortable paying out of pocket. For older cars, consider dropping this coverage, since coverage is normally limited to the cash value of your car. Coverage is limited to the terms and conditions contained in the policy.

Medical Payments
Covers medical expenses to you and your passengers injured in an accident. There may also be coverage if as a pedestrian a vehicle injures you. Does NOT matter who is at fault. Coverage is limited to the terms and conditions contained in the policy.

Uninsured Motorist Coverage
Covers bodily injuries to you and your passengers when the other person has no insurance or not enough insurance in a crash that is not your fault. In some states, there is also uninsured motorist coverage for damage to your vehicle. Given the large number of uninsured motorists, this is very important coverage to have, even in states with no-fault insurance. Coverage is limited to the terms and conditions contained in the policy

Personal Injury Protection Coverage
Covers within the specified limits, the medical, hospital and funeral expenses of the insured, others in his vehicles and pedestrians struck by him. The basic coverage for the insured's own injuries on a first-party basis, without regard to fault. It is only available in certain states.

Property Damage Liability
Covers you if your car damages someone else's property. Usually it is their car, but it could be a fence, a house or any other property damaged in an accident. It also provides you with legal defense if another party files a lawsuit against you. It is a good idea to purchase enough of this insurance to cover the amount of damage your car might do to another vehicle or object. Coverage is limited to the terms and conditions contained in the policy.

Rental Car Reimbursement
Covers renting a car if your car isn't drivable or while your car is being repaired because of a covered accident.

What else is available and can you afford it?

Did you come across a coverage and think, "I need that but it isn't required by state law" when you were reviewing the coverage definitions? Chances are you did. Can your budget afford the additional expense of these protections? Or maybe more to the point; can you afford NOT to have these additional protections? At CarInsurance.com it's easy to get multiple quotes all with a click of your mouse. And during the quoting process, it's simple to add or remove coverage to see how additional coverage will affect your budget.

What are you protecting?

What assets need to be protected from being plucked away if you cause injury or damage?
A) Your car itself. If this is a significant asset, or at least the bank you owe money to thinks so, then you will need comprehensive and collision.
B) Your net worth. Do you have an enormous net worth to protect. If so, either get it out of your name and into a trust or buy all the insurance you can. If you have little or nothing to protect, then you can get by with less and still be financially responsible.

However, after you determine how much protection to get, always ask how much more it is for the next level higher. Very often, you can get significantly more coverage for very little cost.

Car insurance isn't flashy. There is no "wow" factor and the opposite gender isn't going to be impressed by the size of your policy. But not having enough can be the difference between financial stability and financial ruin. For what its worth, CarInsurance.com finds financial stability incredibly appealing.

How To Slash Your Car Insurance Costs Up To 54% In 10 Easy Steps - Part 1

How much do you pay for Car Insurance every year?

Eight hundred dollars a year? One thousand? Two thousand?

Whatever the amount you're paying now, you can slash that amount by more than 50% by simply following a few simple strategies.

Can you cut your car insurance costs by investing only 30 seconds of your time? No, that can't be done.

But if you're willing to spend 30 minutes today, this week, or next, I'll show you how to save up to $6,000 on your Car Insurance over the next 10 years.

Okay, here we go. Grab your Car Insurance declarations page (the page in your policy that details all the coverage’s you're paying for) and follow along. Make sure you take some notes. If you don't have your policy, or can't find it, call your car insurance company and get one - they'll send it to you pronto.

STRATEGY 1 - Make sure you're getting all applicable discounts for your vehicles safety features, such as:

- Front, Side or Head Curtain Air Bags;
- Automatic Seat Belts;
- Anti-Theft Alarms or Tracking;
- ABS or Traction Control....and many more.

Think about the safety features you have....and write them down.

STRATEGY 2 - Review & Change Deductibles For Comp & Collision.

Most Car Insurance Policies have two deductibles - one for "collision" (you hit someone or someone hits you) and one for "Comprehensive" (all other damage or loss).

For both of these, have at least a $500 deductible - preferably a $1000 deductible.

Here's why - If you are currently paying a $100 - $250 deductible, you'll save up to 40% per year on your monthly premiums by moving it to $500. That means if you're currently spending $1,000 a year on insurance, you're going to get to keep $400 every year. If you jump to a $1,000 deductible, you could keep almost $600 extra a year in your pocket.

I can hear some of you saying, "Wow, a $1,000 deductible. That's a lot of money." Yes, it is.

So is paying $1,000 a year with that $100 deductible....versus $400 a year with a $1,000 deductible.

The odds are in your favor - go with the $1,000 deductible.

STRATEGY 3 - Review & Change Property Damage Liability.

Have you ever seen a $100,000 mailbox? Car Insurance Companies must have. Here's why....

Property damage is not damage done to an automobile but rather "property" like a mailbox or a utility pole. So, why in the world would you need $100,000 dollars of coverage?

In most cases, almost 100% of all property damage claims can be taken care of with only $50,000 of coverage. So take a look at your policy to find out what you're currently paying for. And if you have little or no Net Worth, drop your coverage even lower - to $25,000 or your States minimum. You can find your States minimum by doing a Google search for "car insurance state minimums."

Here's what to look for on your policy - Many will have your liability coverage's listed like so - 50/100/100 - The first two numbers refer to bodily injury liability coverage. The 1st number is the dollar figure covered per person. The 2nd is the dollar figure per accident.

The 3rd number is the "Property Damage Liability." That's what you need to change. What does yours say?

STRATEGY 4 - Review & Change Bodily Injury Liability.

Although Bodily Injury Liability Coverage is a must, almost all of us end-up overpaying for the coverage we need. This type of coverage specifically covers:

- Any and all occupants of an automobile, whether it's yours or someone else's;
- Any and all occupants of another vehicle;
- And Pedestrians

Your only goal with this type of coverage is to have just enough protection to protect what is yours....in other words, your assets. And in order to protect your assets, you need to figure out what your Net Worth is - here's a well known site for calculating your net worth - www.kiplinger.com/personalfinance/tools/networth.html?

A great way to slash your premiums is to have no more in bodily injury liability than what your net worth is. Here's a common example of the coverage most people have - If your net worth is only $20,000 and you have $100,000 in coverage, you're throwing money away.

And if you have little, or negative net worth, just get the required State minimums. You'll need this info to get the lowest car insurance rates. Again, you can get see your state minimums by Googling "car insurance state minimums."

Here's what to look for when trying to figure out how much coverage you have now. As I said earlier, most Policies today have your liability coverage's listed like so - 50/100/100 - The first two numbers (whatever they might be) refer to bodily injury liability coverage. In this example, there is $50,000 in coverage per person and $100,000 per accident.

What does your policy say? Are you paying more than your net worth? If so, change it.

STRATEGY 5 - Review & Change Uninsured/Underinsured Motorist Coverage.

The uninsured/underinsured motorist coverage is a fantastic deal for car insurance companies....and a lousy one for you. This premium alone can increase your auto insurance by a couple hundred dollars a year.

Most folks think that uninsured/underinsured coverage is there to get your car repaired if it is hit by someone without insurance....or someone with lousy insurance.

Wrong.

Any damage done to your car is already covered - by the premium you're already paying for collision.

First things first....check your policy if your paying for uninsured/underinsured coverage now. If you are, Google "uninsured motorist state requirements" to see if your State requires it.

If it's not required by your State, cancel it.

If the State you live in does require uninsured/underinsured coverage, make sure you have the absolute minimum required. These minimums are not advertised, change every couple of years and are very difficult to find. So, here's how you handle this.

Do a Google search for your State Department of Insurance, go to the "Contact Us" page, find a phone number, then call and ask what the minimums are.

Don't try looking for it. Finding the minimums listed is almost impossible on most State Web Sites - they've buried it so deep you'll never find it. Just call your State Department of Insurance.

I know it's a bit of a hassle to get the info yourself. Yet relying on the Insurance Companies to give you the correct information isn't very wise.

Next – Part 2 of “How To Slash Your Car Insurance Costs Up To 54% In 10 Easy Steps”