The world of insurance can be very confusing. I often get asked what the best type of auto insurance is. The quick answer is it depends. Let’s take a look at what you should consider when buying auto insurance.
The deductible is the amount you owe out of pocket if an accident occurred. The insurance company then covers the rest. If you raise your deductible, the amount you pay in premiums each month will lower since you are taking more risk. If you have a decent amount of money saved (a few thousand dollars or more), then getting a policy with a higher deductible is a good idea. For example, if you choose a policy with a $1,000 deductible versus $250, your premiums will be lower. The other thing to consider is the probability of you getting in an accident. If you live in a very high traffic big city, then your chances of getting in an accident are higher than if you live in a rural area. So, here’s my advice: if you have a few thousand dollars in the bank and don’t see a large probability of getting in a wreck, go for the $1,000 deductible. If not, then stick with the $250 or $500 deductible.
Liability versus Collision
This is often the most confusing part about auto insurance. Should you just carry liability or have collision insurance as well. Liability covers another person if you cause an accident. So, if you cause a wreck and it totals someone else’s car and they have to have medical care, your insurance will cover it. Liability coverage on your vehicle is required by state law. Collision insurance, however, is optional. It covers the cost of your own car in the event of a wreck. If you have an expensive car, then it definitely is worth paying the extra for collision costs. If your car is worth $4,000 or less, I wouldn’t recommend collision. If your vehicle is worth much more than that, however, it is definitely worth it. The same guidelines apply to comprehensive coverage. Comprehensive coverage will cover things like wind, fire, or storm damage that doesn’t occur from getting in a wreck. It’s worth considering if you have a medium-priced to expensive vehicle.
Hopefully the above guidelines has taken some of the mysticism out of buying car insurance. Just make an informed decision when you decide on your policy and you will be good to go.
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