Auto Insurance Buyer's Guide

Ask most drivers about car insurance and they'll respond one of two ways:

1. "I have it because I have to have it."
2. "I don't know what any of it means, except that it's expensive and I really don't want to use it."

Most people's understanding of the importance of auto insurance gets lost in one or both of the above.

While learning about the intricacies of auto insurance does not rank high on most people's agenda, understanding the basic concepts of car insurance coverage and its purpose will help you prepare for unexpected losses and may save you a few bucks in the process. Spend a couple moments reviewing this auto insurance buyer's guide.

THE BASICS
Following are simple descriptions of the five main parts of auto insurance and how each plays a role in your protection:

1. Liability - Bodily Injury and Property Damage (BI/PD)
   This coverage provides protection if you are at-fault in an accident that causes injury to a person(s) or damage to property. Property damage includes physical damage to other vehicles as well as other property, such as a sign, mailbox, etc. Most states require a minimum limit of BI/PD coverage. Higher limits are usually available and always recommended - consider the worst case scenario. If you are in an at-fault accident and total a very expensive car yet have low liability limits on your insurance, you'll be responsible to pay out-of- pocket for the damage to the car.
   
   
2. Collision Coverage
   This coverage pays for damage to your car caused by an at-fault collision. This could be a collision with another vehicle or other property, such as a light pole or sign. This coverage includes a deductible and may be required by a lender for a financed vehicle. This insurance also applies to hit and runs and uninsured motorist coverage but keep in mind you'll have to pay your deductible to repair your car in either case.
   
   
3. Comprehensive - (Also referred to as Other-Than-Collision or "OTC")
   This coverage pays for damage to your car for reasons other than a collision. This includes theft, fire, vandalism, windstorm, etc. This coverage includes a deductible. Collision coverage and Other-Than-Collision coverage are collectively known as "Physical Damage" coverage. This coverage may be required by a lender for a financed vehicle.
   
   
4. Uninsured Motorist Coverage (UM)
   In a perfect world, everyone would have high limits of auto insurance and this coverage would be unnecessary. Unfortunately, this is not the case. UM coverage kicks in if you are in an accident with an uninsured driver. Limits are similar to limits of liability and some states require at least a minimum limit of UM.
   
   
5. Medical Payments Coverage
   This coverage pays reasonable medical expenses incurred by you or a passenger(s) in an accident. The limit is per person and is usually a dollar amount (e.g. $5,000). Different states have different specifics on this coverage so talk to an insurance agent in your area.

Following an accident these five coverages work together to get you back to where you were before the accident. Some of the five may be mandatory, depending on where you live. Others, while not required, should be carefully considered since their contribution to your claim may be essential.

THE 'WHO' FACTOR
There are several considerations that have an impact on your auto insurance needs. The most important consideration is: Who will need to be covered by my auto insurance policy?

The answer to this question forms the basis of the type of policy you will need. Consider:

1. Who in your household may drive your car?
2. Who in your household may drive any other car?
3. Is it possible that others not in your household will drive your car?
4. What about the other driver(s) and their passengers involved in the accident?

Our cars are important, but not as important as people. The first step is making sure your coverage applies to everyone who may need it. Higher liability limits, Uninsured Motorist and Medical Payments coverages are especially important-they help people.

WHAT ABOUT YOUR CAR?
Most people would agree that the loss of an auto would cause a major burden on their daily activity. Without Collision or Comprehensive coverage you would be solely responsible for replacing the damaged vehicle.

Deciding to purchase one or both of these coverages boils down to a simple consideration: If you were involved in an accident and lost the use of your vehicle would you be able to pay out-of-pocket for a replacement?

A majority of people cannot afford to buy another car if theirs is unusable following an accident. If this majority includes you, Collision and Comprehensive coverage are essential to your auto insurance policy. Having these coverages will provide you the funds to repair or replace your damaged car. Consider asking your agent about additional coverage's including gap coverage, rental car and towing, and glass to fully understand what you need.

WHAT DRIVES COST?
No pun intended! Auto insurance premiums are derived from a number of factors. These factors include, but are not limited, to:

1. Your driving record and those of others in your household.
2. Type of vehicle(s).
3. Where the vehicle(s) is driven and garaged/parked.
4. Annual mileage driven.
5. Your credit score.
6. Age and marital status of driver(s).
7. Coverage limits chosen and deductibles.
8. Claims history.

Some factors may be beyond your control. Others, if addressed properly, can lower your premium.

HOW CAN I SAVE MONEY?
You can save money on your auto insurance. Here are some of the common ways drivers can lower their auto insurance premium:

1. Take a defensive driving course. In some areas, this course can save you as much as 10 percent off your auto premium.
2. Look for other discounts through groups or associations that you are a member.
3. Ask about discounts for good students or college-age students away from home.
4. Closely monitor your credit report. Check it frequently for errors that may cause your score to go down and auto premiums to go up.
5. Tell your insurance company when you've been accident- and/or citation-free for three years or more.
6. Raise your deductibles to as high as you can afford out-of-pocket in the event of an accident. Higher deductibles can lower your premium, sometimes significantly.
7. Consider purchasing auto insurance from the same company that provides your homeowners insurance, if possible. Many companies offer multi-policy discounts.

Now that you have a better understanding of how your auto insurance works you can more confidently select a policy that will address yours and your family's situation and control your costs as best as possible for your situation. Get out there and apply what you've learned!

Learn how easy and convenient shopping for auto insurance can be. Get your free auto insurance quotes today!