I spend about five minutes every morning looking through the deals on auto insurance. It’s more than just an expense for me. It’s my insurance policy. I know that insurance is a necessary part of life, so I take the time to shop for the best possible deal.
I’ve learned a lot about insurance over the years, so I figure it’s my turn to share some of my knowledge. Buying auto insurance can be confusing. There are so many factors to consider, and it can be difficult to know where to start. But before you make a decision, there are a few questions you should ask.
Here are my 8 questions to ask before you buy auto insurance. Please feel free to share this post and comment below with any questions you have about auto insurance.
What is auto insurance?
Auto insurance is the simplest term to understand. It’s coverage you can buy for your car. But there are different types of insurance coverage, so before you can compare insurers, you need to know exactly what you need.
Most people get coverage for their car by buying a comprehensive policy, which is designed to protect the car against collision, theft, bodily injury and damage caused by damage to other vehicles.
You can also buy optional personal or liability coverage to cover you if you cause an accident. That’s the kind of coverage you’ll pay for as part of your comprehensive insurance. The price will depend on factors including your state and where you live.
What is your budget?
If you’re only saving a little by keeping a car in the driveway rather than buying a new one, don’t get carried away with buying high-priced coverage. You can also save on homeowners insurance and some other policies by using the automobile in a rental.
In fact, a 2017 study showed that drivers with rental insurance in their policy can save a total of $535.8 million over the average five-year period. In other words, this policy may save you hundreds of dollars in premiums in a short period of time.
Find other alternatives. How do you want to get to work? Do you want to use public transit or will you consider driving a shared vehicle, such as a car-share or an Uber or Lyft driver? Regardless of how you get there, look at the terms and conditions of your insurance policies.
What kind of vehicle do you drive?
Even with today’s more fuel-efficient cars, if you drive a standard gas-powered vehicle with an electric motor or even a hybrid, you’ll pay an extra premium.
Just like an SUV or a minivan, these types of vehicles may be slightly more expensive than smaller, more economical cars. Do you drive a lot? Can you afford to be uninsured, and if not, how far would you be willing to drive in order to avoid paying your car insurance premium?
Would you like to “spend the night” in your car if you are in an accident? Any car accident, whether minor or serious, is a money maker for your auto insurance carrier, so just how much do you trust your car insurance company to compensate you in case you are in an accident, you are in need of medical attention, or you need to get your car towed?
Who will be driving the vehicle?
This is a primary consideration in determining what kind of policy you’ll choose. If you’re buying a personal vehicle for your daily commute, your coverage needs are quite different from if you’re planning to buy a used vehicle that will be used for more than 75 miles a week and driven for most of the year.
But either way, you’ll need to consider how your vehicle is being used, whether you’re driving regularly for work and whether there is a passenger or other passengers in the vehicle.
The different types of coverage you get for your vehicle depend on the type of use and the price you’re willing to pay. General liability coverage is a must if you’re the owner of a vehicle that has been in an accident or is damaged or stolen.
What are the security features on your vehicle?
You want to make sure your new vehicle comes with high-tech features that can protect you when accidents happen. But if your vehicle has a keyless entry system or is a convertible, you can’t lock it from the inside, which means thieves can easily get in.
What does the insurer offer in medical coverage? Some car insurers offer good medical coverage. These are usually free at-home visits, free prescription drug refills and discounts on other doctor visits, emergency room visits and hospital stays.
If your auto policy does not include coverage for these services, you should consider purchasing it. What is the difference between a collision and comprehensive policy? Collision coverage pays for damages to your car caused by a collision or when an uninsured or untraced vehicle hits your car.
Is the vehicle used primarily for business purposes?
What kind of car insurance do you have for business use? Do you have a separate policy to cover commercial driving? Are you using the vehicle to transport people or cargo? Are you driving for business or for pleasure?
Are you driving to the grocery store or the dry cleaner? Is there a “business” license or corporate registration that you’ll need? Is your company selling cars? Do you drive to work every day? What kind of driving records does your company have?
Are you driving to pick up and drop off passengers? Can you give specific examples of where you would use your vehicle? Can you name a specific customer or “host”? Are you under 18? Are you a minor? What kind of medical benefits do you have? How much will you need? Do you have medical insurance? What is the cost?
What is your claim history?
Just like your credit, your driving record is an important part of your auto insurance policy. It shows a history of safe driving behaviour, and indicates how often you file claims or accidents. A strong driving record is obviously beneficial, as is a history of speeding, inattentive driving, or careless driving.
But this also affects your premiums, as a record of claims will increase your policy’s premium. How long do you plan to drive the vehicle? Your policy will also be affected by the number of kilometres you drive the vehicle in a year.
You can go as far as eight or even ten years without a claim without endangering your rate and aftercare benefit. However, the longer you are on the road, the higher the price you pay for insurance.
What is your geographical area?
What is the climate in your state? What is your driving record? How often do you travel to neighboring states? Are you working to pay off your loan? Auto Insurance can be a crucial part of your financial budget and a way to help protect your personal assets.
If you’re shopping for a new car or considering taking out a loan for the first time, it’s best to know what you’re getting into.
The size and weight of your vehicle influence your insurance coverage. For example, some types of vehicles, like motorcycles and compact cars, are considered trucks and therefore pay more in insurance premiums.
Insurance is one of the most important investments you can make, but if you don’t have a clear understanding of how coverage is defined and what kinds of coverage you really need, you could be setting yourself up for serious trouble down the line.
It’s important to do your homework, be vigilant, and not overlook certain aspects. It’s also smart to educate yourself on the types of coverage that are typically best for you before you dive in, and to avoid paying for policies that aren’t in line with your needs.
The tips listed above are a great place to start, so get educated, take the time to compare auto insurance policies and avoid overpaying. You’ll be glad you did.