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7 Deadly Sins of Buying Car Insurance PDF Print E-mail
Articles - Commercial Auto Insurance
Article Index
7 Deadly Sins of Buying Car Insurance
What are the Various Options for These Different Coverages?
What are You Using Your Vehicle for?
Do you need it?
What if You Damage Another Vehicle When You're Renting a Car?
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Page 1 of 5

What you'll discover in this report:

Sin #1 Insider secrets about how insurance companies price your insurance Sin #2 How not to get ripped off when you do buy protection

Sin #3 How much to buy...how much not to buy

Sin #4 Little known facts about the six different kinds of insurance in a standard auto policy

Sin #5 Who's really covered...who's not!

Sin #6 How do you get the most for your money? 11 ways to SAVE MONEY on your car insurance...

Sin #7 Straight answers to the nagging questions about Rental Car Insurance

There are several ways you can purchase insurance for your car(s). You can buy it over the Internet at literally hundreds of different web sites. You can call an 800 number and buy it over the phone directly from a contractors insurance auto company. You can call a contractors insurance agent. In some cases, you can buy it at your bank or credit union.

It's not surprising you can buy it so many ways. After all, there are hundreds of contractors insurance companies that sell auto coverage in your area. How do these companies differentiate themselves? Some brag about their superior service when you have a claim. Some tout how easy it is to buy from them. But, often, contractors insurance auto companies try to compete on price. Just as if you were buying a plane ticket, a radio or soda pop.

* Tip. Some people believe contractors auto insurance is just a commodity. It's not. You're not buying a soda. You're protecting your financial well being...and the choices you make could affect you for the rest of your life.

But before explaining how complex contractors auto insurance products are, let's talk about price. It's pretty complex, too.

INSURANCE!

No Insurance Company Has the Lowest Price for Everyone

* Note. No contractors auto insurance company — no matter what it says in its ads — offers the lowest price for every driver in every location. There are companies that are often among the lowest. And there are companies that are usually among the highest. But no company is the lowest for everybody.

* Tip. Also, be aware that prices fluctuate. Sometimes companies "buy the market" with low prices to gain new consumers...then their prices gradually — or not so gradually — sneak up. They also have to change prices based on their profitability, losses and other factors. Every company has a slightly different appetite for the risks it wants to take on. Some insurers want only very good drivers who have no tickets and no accidents. Some companies, believe it or not, actually want bad drivers. In fact, these companies specialize in insuring people with lousy driving records.

Some companies target drivers who live in certain areas. There are insurers that really like to do business in big cities, and there are others that would prefer to stay away from highly populated areas.

* Tip. Remember that sometimes "you get what you pay for." The cheapest option may not provide you or your family with the best protection. The saying goes, "you don't need insurance until you have a claim." When you do have a claim — something that goes wrong — that's a terrible time to discover you don't have adequate protection!

If you think contractors auto insurance is a commodity, consider this:

A person with a good driving record will pay three, five, even 10 times less than a driver with a couple of tickets, an accident or who has been cited for and convicted of driving under the influence. A person who lives in a major city — say Los Angeles, Chicago, Houston or Denver — will pay three, four, even five times more than someone who lives in a rural area or small town, even though the two have the same driving records.

* Example. The last two paragraphs are average differences. Auto insurers are all over the map on prices in a given area. Say you live in Everywhere, U.S.A. (don't we all). Say you have a good driving record. One contractors auto insurance company might charge you $500 a year for a policy that provides almost every coverage available. Another insurer might charge you $1,500.

As you can see, it can pay to shop around. Just be sure:
  • You really understand the different coverages in your policy, or,
  • You have a contractors insurance agent you really trust who can examine
coverages and prices for you. Auto insurance: How Much Should You Buy?

So far, we've been talking about "contractors auto insurance" as if it were, well, a commodity. The fact is, you can buy a lot of auto insurance, or a little. Most states, more than 40, require you to have auto insurance.

But they don't require you to have much. In states that have so-called mandatory auto insurance laws, all you are required to buy is a little bit of liability coverage. This is so you can pay for some of the damage your car does to other cars and other people not in your car.

How much are you required to buy? In most states with mandatory auto insurance laws, the minimum needed is liability that provides 1) $25,000 for any person involved in an accident with you, 2) a maximum of $50,000 for all persons in the accident, and 3) $10,000 for damage to the other vehicle(s) involved. That's not much. In fact, it's next to nothing.

* Tip. The minimum amount of insurance required by most states is not much. Seriously consider getting more protection in order to protect your financial health.

* Note. Notice that mandatory auto contractors insurance laws do not require you to buy coverage for your own car. Or coverage for your injuries. Or coverage if you are hit by someone who doesn't have insurance.

If you buy just the minimum coverage required by law, you are leaving your assets at considerable risk. Your car, obviously. And your home, if you are at fault in an accident that causes serious injuries to the other parties.

And how far do you think $10,000 will go if you total somebody's Lexus? Not far enough! Little Known Fact: There Are Six Distinct Coverages in an Auto Policy The auto insurance "commodity" is actually a product with six distinct coverages: Let's look at them here.
  1. Bodily Injury Liability — It pays the medical and other expenses of those people injured or even killed in accidents you cause. This is required by most states, usually with a minimum coverage of $25,000 for any person involved in an accident with you and no more than $50,000 for all the persons in the accident.
  2. Property Damage Liability — It covers the damage your car causes to property. Usually, that's the other car or cars involved in the accident, but it also covers damage you do to any object you hit. Garages, buildings, lampposts, fences, whatever. This is also required in most states, usually with a minimum coverage of $10,000.
  3. Collision — This is for damage done to your car when it collides with other vehicles (your fault) or other objects (again, your fault).
  4. Comprehensive — This covers damage to your car that results from something other than a collision with another vehicle. As examples, damage caused by vandals or a wind-blown tree hitting your car. It also includes coverage for theft.
  5. Medical Payments — It pays medical, and even funeral, expenses for you as well as members of your family and passengers in your car if it is involved in a collision, regardless of who caused the accident. It also covers you as a pedestrian if a vehicle hits you.
  6. Uninsured/Underinsured Motorist — This pays for injuries to you and, in some policies, damage to your car if you are hit by a driver who doesn't have insurance — or by someone who doesn't have enough insurance to cover your losses. In most states, more than 10% of motorists don't have any insurance. In some states, as many as three out of 10 drivers don't have coverage.

    Many of those who do have insurance don't have enough to cover the damages and injuries that would result in a major collision. If you don't have this coverage, which is often referred to as UM/UIM, you are taking a risk. UM/UIM also provides coverage for any injuries you suffer if you are hit while walking or riding a bicycle by a driver with inadequate or no insurance.

There are Even More Coverages Available...

There are additional coverages you can buy. You can purchase towing coverage, which will pay the costs if your car needs to be transported after an accident. If you're a member of an auto club, you don't need this coverage. You can buy rental reimbursement, which will pay for a rental car you use while your vehicle is being repaired. (If the accident was not your fault, the cost of the rental car is automatically picked up by the other person's insurance company.)
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