Understanding Auto Insurance!
While this may seem like a bunch of legal mumbo-jumbo to you it is not! You really need to read and understand this information. I will try to make it all make sense in a prgamatic way.
What type of coverage do you need?
Property Damage Liability (PDL) and Bodily Injury Liability (BI)
The answer to this depends on the state you live in. You want to be sure that you are adequately insured for the state you live. Most states require that you carry "Property Damage Liability" and "Bodily Injury Liability." Some state are what are called "no-fault" states and do not require you to buy liability insurance. If you have any assets (a house, substantial savings) you want to carry an adeqaute amount of liability insurance in case you are the cause of an accident. This is to protect your personal assets.
In an effort of tort reform (limiting frivolous and unnecessary litigation resulting from an accident twelve states are what is termed "no-fault" states. They are...
- New Jersey
- New York
- North Dakota
Three of these states, New Jersey, Pennsylvania, Kentucky, allow the consumer to decide at the time the insurance policy is written whether they want to be insured under the qualitative or quantitative threshold.
A qualitative verbal threshold that states what categories of injuries are considered sufficiently serious to permit a tort (example: death, disability, disfigurement). The advantage of the verbal threshold is that it removes any incentive to inflate damage amounts artificially to meet some preset monetary loss figure. The primary disadvantage is that broad interpretation by the courts of the threshold can lead to over compensation.
A quantitative monetary threshold that sets a specific amount that must be spent on medical bills before a tort is allowed. Disadvantages of this threshold are that it can a)encourage insureds and their medical providers to exaggerate medical costs through over-utilization, and b) can become ineffective over time because of inflationary effects on medical costs.
What all this means is that if you live in one of these states they have tried to make an attempt to limit personal liability in the event that you are determined to be at fault in a auto accident. If you live in a state not on this list you can be sued for any monetary amount. In all reality, the courts are not going to allow a huge monetary claim on a fender bender where no one is seriously injured. All states require minimum amounts required for liability insurance.
What is Personal Injury Protection (PIP)?
This insurance covers medical, funeral, and hospital expenses for you, passengers, and others involved in an accident. It is required in no-fault states.
Uninsured Motorist Bodily Injury (UM) and Underinsured Motorist Bodily Injury (UNDUM)
In this goofy world we live in, most of us live our lives in a responsible manner and we insure ourselves to protect ourselves and others in the event that we do something wrong. Unfortunately not everyone behaves in this manner. You also want to make sure you are insured in case an underinsured driver or and uninsured driver were to plow into you and kill or main you and your loved ones.
But why, you say, you can just sue them. Sure you can sue anyone you want, but if they do not have the means to pay the judgement what is the point? Some states require that you carry this type of insurence. Many do not. It is good to check with your insurance agent to see what type of coverage you have. I will bet many of you do not know :-(.
What is Comprehensive Coverage
Comprehensive insurance covers the cost of your vehicle in the event that it is damaged or stolen. If you are making auto payments or have leased a vehicle the lender is going to require you to carry comprehensive covereage as they own all or part of the vehicle.
Get the highest deductible possible?
With comprehensive coverage you will have what is called a deductable. When you a get a quote you are going to want to get a quote with different deductables. The lower the deductable the higher the cost of the insurance. If you have a $250 deductable this means that whatever the damage is to your vehicle you have to pay the first $250. You can generally save a great deal of money each year by going with a higher deductable.
Often times you can save money on comprehensive insurance by changing your comprehensive coverage after paying off the car. You car will have depreciated quite a bit in value after four to six years. A quick call to your insurance agent can save you some money by cancelling or lowering your comprehensive coverage. Good agents, like ours, will typically do this for you without you even asking.
Where to buy auto insurance?
We have had our auto insurance through Country Companies for close to twenty years now. They have been there when we needed to file a claim. Their prices are good for people with good driving records.
Wherever you decide to get your covereage make sure your decision is not on price alone. Googling "worst auto insurance companies" and "best auto insurance companies" and doing ten to fifteen minutes of research is well worth your time.
Once you have done your home work you are ready to get some quotes. Get at least two or three. You can do this by going through the companies you have narrowed down directly or you can get quotes through companies like esurance or an independent insurance agent.