Thinking About Auto Insurance? 6 Tips to Choose The Right Policy

Car Insurance can be very confusing for a lot of buyers. Unfortunately, many car insurance policyholders overpay.

1. Look at Your Income and Assets

These factors will have an impact on the type of coverage best suited for you. If you do not have adequate insurance coverage, you may be sued if you are at fault in an accident and the other driver suffers injury or property damage. Remember, coverage varies by state. Each state has different insurance laws.

Individual states offer assumingly 10/20. This means that it covers a maximum of $10,000 in bodily injury (BI) coverage per person in that car up to a maximum total of $20,000. If, for example, you are at fault in an accident that had three injured people with $5,000 each in medical bills, you are covered, as that equals $15,000. Most states offer 25/50. This is best if you have a lower income and not a lot of assets, as you will be covered up to $25,000 per person in the other vehicle, up to $50,000.

2. Don’t Skimp on Property Damage Coverage

Property Damage Coverage (PD) covers damage to property, whether it is another vehicle or if you were to drive into a house. It’s recommended to have at least $50,000 property damage coverage. If you were to hit a BMW, for example, most BMWs have a value of at least $45,000.

Most states offer a maximum of 25, 50, 100, up to $250,000 in property damage. Property damage coverage is typically the cheapest addition to your premium, so don’t opt for the most affordable coverage when it could cost you much more in the end. Some states require only bodily injury and property damage. Conduct thorough research for a car insurance quote.

3. Explore Uninsured Motorist Options

Uninsured Motorist Bodily Injury Coverage and Uninsured Property Damage (UMBI/UMPD): Uninsured coverage comes into play when the person that hits you does not have coverage. If this were to occur and you did not have full coverage, your vehicle will not be covered. Uninsured is typically very inexpensive in most states.

4. No Health Insurance? Opt for MedPay

MedPay (Medical Payments): This comes into play in any event, whether or not the other party has insurance. If you do not have medical insurance, MedPay is highly recommended. If you are at fault in an accident, your auto policy will not cover your medical expenses. MedPay will cover your medical costs in this case. If you have medical insurance, you do not typically need MedPay.

However, be very careful to review your medical policy. Not all medical insurance policies cover auto accidents. MedPay is generally offered as $5,000 or $10,000. The state of Michigan has unlimited MedPay. If you live in Michigan, check with your agent.

Some states have (PIP) Personal Injury Protection. PIP coverage varies by state. It pays out $10,000 directly to you. PIP typically pays 80% of your medical expenses, up to the set limit. It compensates for work loss or death benefits if someone dies in the accident.

5. Full Coverage is Normally Your Best Bet

Complete Coverage: Includes liability, comprehensive and collision.

  • Comprehensive: Covers any unexpected damages to your vehicle such as vandalism, or damages from acts of nature (i.e. if a tree branch were to fall onto your vehicle).
  • Collision: Covers your vehicle, regardless of who was at fault.

When you are not at fault, the other party’s insurance coverage typically covers your deductible. Avoid full coverage if your vehicle has a very low value. If the cost in three years will cost you more than the value of your car, it may not be worth it to add collision coverage. For example, if you have a 1998 Pontiac Vibe worth $3,500, the additional cost for collision may outweigh the vehicle’s actual value.

  • Liability Coverage

Covers any bodily injury or property damage when you have an accident that is your fault. If you were to hit somebody, your insurance would cover the cost. There are two types of liability coverage: medical and property damage.

Determine how much insurance coverage you need. Maximize your liability coverage. The max generally for liability is $250,000.

6. Raise Your Deductible for Lower Premiums

It is suggested to raise your deductible to $1,000. This will typically save you more money each month on your premium. If you choose to lower your premium by raising your deductible amounts, be sure to have enough funds set aside. That way you’ll have the money available if you need to pay your deductible following an accident.

These tips are just pointers to guide you in your insurance-buying experience.