Buying Car Insurance

If you're willing to spend a little time buying car insurance, you can save hundreds of dollars a year and get the coverages you need for protection if you have a car accident.

1. Determine Which Coverages and What Amounts to Buy

Begin the process of buying car insurance by reviewing the coverages that you have now, if you have insurance. Take out your insurance policy and look at the "Declarations Page," which professionals in this industry call the "Dec Page." This is usually a loose page that is inserted into the preprinted insurance policy form. It lists the coverages that you have (and, often, the amount that you pay for each coverage).

Next, familiarize yourself with the different car insurance coverages that are offered to see if there are other coverages that you should consider buying.

Let's take a look at the most common coverages . . .

Liability Insurance

Need it? Of course you should buy liability coverage. It's required by virtually every state, but, even if it isn't required, get it.

You want liability insurance to protect your ass-ets if you cause an accident. If you think about it, you also want it to make sure that someone that you hurt by carelessness is fairly and adequately compensated. That's only fair.

How much? First, check the minimum amount of insurance required in your state. You should get at least that much. Actually, you should probably get higher liability coverage than the minimum.

IMO, if your family income is $75,000 or more and you own a home, you should purchase the highest liability limit that is offered, probably 250/500 or a 300 single limit policy to cover bodily injury. For property damage, get at least $25,000 in coverage. So the full liability coverage that I recommend when you are buying car insurance is 250/500/25, or 300/25.

Forget what these numbers mean? So-called "split limit" policies are expessed something like this: 25/50/10. The first number is the per person limit of personal injury liabilty coverage that you have. The second number is the per accident limit for personal injury. The last number is the amount of property damage liability coverage that you have.

In this example, the most your insurance company would pay to any one person that you injure is $25,000. If more than one person is injured, your company won't pay any more than $50,000 to all of the injured persons.

The other way that limits are expressed is as a "single limit." If the single limit is $300,000, your company will pay up to that amount per accident, with no per person limit.

If your income is lower, purchase enough coverage to protect the assets that you own. Remember that any damages that you have to pay which aren't covered by insurance come out of your pocket.

No matter what your situation, I don't think you should purchase less than 50/100/25 liability insurance coverage when buying car insurance.

Personal Injury Protection (PIP)

Need it? If you live in a no-fault insurance state, this coverage is required.

If it is offered in your state as an optional coverage, get it!

How much? When buying car insurance, purchase as much as you can get of this coverage. It is relatively inexpensive and can be invaluable if you have a car accident.

Car accident liability claims can take months or years to resolve. PIP no-fault coverage is paid to you sooner and can keep you going while you are recovering from your injuries and resolving legal claims.

Uninsured Motorist (UM) and Underinsured Motorist (UIM)

Need it? I strongly recommend that you purchase these coverages when buying car insurance. If you are injured by a driver with no insurance or a driver with very low limits of coverage, these coverages will protect you.

Based on my experience as a car accident lawyer for more than 25 years, PIP coverage and UM/UIM coverages are invaluable and well worth the cost. Unfortunately, I have seen many cases where clients, when buying car insurance and not understanding these coverages or how important they are, failed to purchase them or purchased only token amounts. When they were seriously injured by an uninsured driver or a poorly insured driver, it was too late to go back and get the coverage that they should have had all along.

How much? When buying car insurance, get the highest UM/UIM limit that your insurance company will give you and you can afford.

The highest limit of UM/UIM coverage that insurance companies will sell you is the same limit as you liability coverage. That's another good reason to purchase as much liability coverage as you need and can afford when buying car insurance . . . so you can purchase that much UM/UIM insurance.

Medical Payments Insurance (Med-Pay)

Need it? If you have good health insurance and it covers you and those who usually ride in your car with you, you may not need Med-Pay insurance when buying car insurance, or may only need a small amount.

How much? Let your circumstances and your budget be your guide.

Collision

Need it? If you have an older vehicle, you may not want to pay the cost of collision coverage when buying car insurance, on the theory that the car isn't worth enough to justify the expense of the insurance. But remember that you will have to pay out of your pocket to repair your vehicle if you cause an accident or are in a one car accident.

If your vehicle is being financed, the finance company will require you to have collision insurance to protect its interests if the vehicle is damaged or destroyed. Once the loan is paid, you have the option of eliminating this coverage.

How much? Actually, the question is what amount of deductible should you choose? This coverage automatically pays up to the actual cash value (ADV) of your vehicle, or in some cases, up to the replacement value (RCV).

If you are a safe driver, when buying car insurance, choose the highest Collision deductible that you are comfortable with. The higher the deductible, the lower the premium you will be charged. But don't forget that you must pay the amount of the deductible out of your pocket.

Comprehensive

Need it? If you have an older vehicle, you may not want to pay the cost of comprehensive coverage when buying car insurance, on the theory that the vehicle isn't worth the cost of the insurance. But remember that you will have to pay out of your pocket to repair your vehicle if it is damaged or destroyed through fire, theft or vandalism.

If your vehicle is being financed, the finance company will require you to have comprehensive insurance to protect is interests if the vehicle is damaged or destroyed by one of the causes that Comprehensive Insurance covers. Once the loan is paid, you have the option of eliminating this coverage.

How much? Here, also, the question is not how much coverage you should buy, but how high a deductible you should choose. The higher the deductible, the lower the premium, but you have to pay the deductible out of pocket if your car is damaged or destroyed.

Towing

Need it? If you are a member of a road service company, such as AAA, you don?t need this coverage. If you aren't, this is a convenience that you will have to decide whether you want to pay for.

How much? You probably won't have a choice. Companies tend to offer one version of this coverage which has a limit on the amount that they will pay per occurrence.

Rental Reimbursement

Need it? If you have multiple cars, so that you would have transportation if your car is in the shop being repaired, you might not need this coverage.

How much? Here, also, you won't be given much choice, if any

2. Get Multiple Quotes

As you go through the process of soliciting multiple quotes, use any of these 17 tips for saving on car insurance that apply to you and your situation.

I recommend that you start your search by getting multiple quotes online. It will probably take about 15 minutes to fill out the online forms that you must submit to get quotes. Some of the online companies will give you a quote on the spot. Others will have an insurance agent contact you soon and give you a quote.

A favorite of mine for getting online quotes is Esurance. Click here to learn more about Esurance easy online car insurance

Alternatively, if you prefer getting quotes from local agents who can answer your questions, I recommend InsureMe. Click here to learn more about InsureMe. InsureMe can also give you quotes on other types of insurance. One way to save money is to get different types of insurance . . . such as auto and home . . . from one company.

After you've gotten online quotes, contact any other insurance company that you want to consider by telephone. All insurance companies have toll-free numbers that you can call for this purpose.

As you go through this process, save the information that you get as a separate file on your computer, or write it all down in the same place and in the same format so that you can . . .

3. Compare the Quotes

Of course, you should consider each insurance company's price quote. But also the specific coverages that each company is offering . . . and the policies of each company on such things as payments and payment plans . . . and the reputation of the insurance company.

A good way to learn about the reputation of the insurance company is to check the J.D. Power Consumer Satisfaction Surveys.

You can learn more about an insurance company's financial strength at A.M. Best or at Standard and Poor's, however you must pay for these reports.

I also like to consider whether the company has a consumer friendly website where I can pay my premiums and track claims.

When comparing the coverages that are offered, these are 2 provisions that you do NOT want in your policy . . .

Agreement to Arbitrate. Some insurance companies require you to waive your right to sue them and, instead to submit your complaints to arbitration. I don't favor this provision because, sometimes, a lawsuit or the threat of a lawsuit is exactly what you need to get satisfaction.

Aftermarket parts. Some insurance companies include a provision allowing them to repair your car with aftermarket parts. You don't want these. You want OEM parts. To learn more about the difference, click here.

4. Choose

Choose the option that gives you the best mix of coverages, price, rating of insurance company and consumer friendly policies and procedures.

5. Read Your New Policy

When you receive your policy, read through it.

I know you probably won't do this, but at least look at the Declarations Page to make sure you have gotten the coverages you wanted at the price that you were quoted.

Your insurance company will also send you proof of insurance which you should carry in your wallet or in your vehicle. I keep mine in my vehicle, but some security experts recommend against keeping it there because if your car is stolen, and the registration and proof of insurance cards are in the vehicle, the thief will have all of the information needed to show that he owns the car. (For Seinfeld fans, I'm trying to avoid a George Costanza sized wallet.)

6. Cancel Your Old Policy

Once you have your new policy and have gone through it, cancel your old insurance policy.

Click here to go from this discussion of buying car insurance to a general discussion of car insurance.