Do You Know the Auto Insurance Basics?

If you drive, you know how crazy it gets out there. Accidents happen, fenders get bent, people get hurt. Or you're innocently parked in your driveway and a tree limb crashes through your windshield. When disaster strikes, auto insurance is there to protect you.

Why buy auto insurance?

1.) Auto insurance protects you against the financial risk associated with personal injuries and property damage caused by auto accidents, theft, vandalism, or natural disasters.

2.) All states require you to purchase at least a minimum amount of liability coverage. Other types of auto insurance coverage may be optional or required, depending on state regulations.

3.) If you have a car loan outstanding, you'll generally be required by the lender to purchase at least a minimum amount of auto insurance.
Liability coverage
You'll be required by state law to purchase a minimum amount of some or all of the following types of liability coverage:

* Bodily injury liability: Protects your assets if you are held liable for an auto accident in which other people are injured or killed.
* Property damage liability: Covers repairing or replacing the autos or other property of other people.
* Uninsured/underinsured motorist coverage: Unless you live in a "no-fault" state (where your own insurance will cover your losses), this coverage insures you against losses caused by other drivers with little (underinsured) or no (uninsured) auto insurance.

To adequately protect yourself, you may want to purchase much more than the minimum amount of coverage required in your state.

Collision, other-than-collision, and medical payments coverages
Although these types of coverage are optional in most states, it often makes sense to purchase them, unless you can afford to pay for damages yourself.

* Collision: Pays to repair or replace your car if it's damaged in an accident.
* Comprehensive: Insures your car against damage caused by something other than an auto accident (e.g., theft, fire, flood, vandalism).
* Medical payments or personal injury protection: Covers various medical expenses not covered by your health insurance or your passengers'.

And then the insurance company pays for everything, right?
Wouldn't that be nice? But it's not always true. Here are some things you'll always need to cover yourself:

* Deductibles: The amount of money that you've agreed to pay out of your own pocket before your insurance coverage kicks in.
* Exclusions: Events or situations your policy specifically omits from coverage, such as property damage or personal injury you intentionally cause to others, or damage to your own car due to mechanical failure.
* Costs above limitations: Any expenses for which you're responsible that exceed the caps on the dollar amounts of coverage you're entitled to receive under your policy.

Driving a good bargain
Many factors affect your auto insurance premium, including your age, the state in which you live, the make and model of your car, where your car is garaged, and your driving record. Although you can't do much about some of these factors, here are some things you can do to help lower your premiums:

* Increase your insurance deductible.
* Eliminate optional coverages (e.g., towing and labor, rental insurance) from your auto insurance.
* Eliminate collision and comprehensive coverage if you drive an older car valued at less than $1,000 and could afford to pay for repairs if necessary.
* Ask about available discounts (e.g., low-mileage discounts, discounts for safety or antitheft devices) for your auto insurance.
* Avoid buying a vehicle that is prone to theft or expensive to repair.
* Keep your car in a garage.
* Drive safely to establish a good driving record.

Shop around
It's important to shop around for auto insurance coverage. Insurance premiums for the same coverage on the same car can vary widely among different insurers, even in states that regulate auto insurance rates. A particularly good time to investigate your alternatives is when your current insurance policy is up for renewal, but you can shop and change policies at any time. Get quotes from several reputable companies, but don't let price be your only consideration. Make sure the coverage offered by each insurer meets your needs, and find out whether the insurer has a good track record in the industry (contact your state's department of insurance for more information).

8 Things You Should Know About Auto Insurance

Dealing with the ins and outs of auto insurance can be as tricky and confusing as trying to untie the Gordian knot. Although we can`t help you with the knotty Gordian problem, the following recommendations could help you figure out some of the more complicated points of auto insurance.

• Determine appropriate coverage.

Help control the price you pay, just ask American Insurance Association executive Dave Snyder. For example, Snyder notes that half of your auto insurance bill covers liability and "that has to do with how you are going to use the vehicle, such as for commuting to work and your driving record. If you`ve got a clean driving record, you figure to pay less for insurance than you would if you had a speeding ticket on your record. You can control the other half of your premium which covers damage or loss to your vehicle, comprehensive and collision coverage."

• Shop around for insurance.

"In most states," Snyder reports, "there are hundreds of insurers competing for business, so it`s possible to save hundreds of dollars by obtaining quotes from different auto insurance providers." Picking up on Snyder`s theme is his AIA colleague, Nicole Mahrt. Mahrt urges you to work with your insurance provider to get more than one quote. "It pays you to shop around, especially if you feel you`ve been paying too much."

• Look for insurance discounts.

"Many insurers will give you a discount if you buy two or more types of insurance from them, for example auto and home insurance," confirms John Marchioni, senior vice president of Personal Lines for Selective Insurance, in Branchville, N.J. More cost-saving suggestions from Marchioni: "Ask about discounts for air bags, anti-lock brakes, daytime running lights and anti-theft devices."

• Consider taking a higher deductible.

"You could lower your insurance bill by increasing your deductible," Mahrt says. "But just make sure you can pay the higher deductible if you file a claim."

• Look into "stacking" coverages if you file an insurance claim.

Insurance trade group officer Daniel Kummer explains that stacking uninsured/underinsured motorist coverages means "you can collect from more than one of your auto insurance policies. Most states prohibit this practice, but there are about 19 states that either allow stacking or don't address the issue either through legislation or litigation," according to Kummer, director of personal insurance for the Property Casualty Insurers Association of America. "Be sure to check your auto insurance contract to see if it's allowed. "Be advised that you`ll likely pay a higher insurance premium if you have stacked coverage. "It could be 10% to 30% more depending on the litigious nature of the state in which you reside," says Kummer.

• Check with your insurance provider BEFORE buying a car.

"Your premium is based in part on the car`s sticker price, the cost to repair it, its safety record and the likelihood of theft," answers Selective`s John Marchioni. Remember to avoid shopping by price alone. "You want an agent and a company that answer your questions and handle claims fairly and efficiently," emphasizes Marchioni, senior vice president of Personal Lines for Selective Insurance.

• Notify your auto insurance company as soon as you change companies.

"Be sure to cancel your old policy," suggests PCI`s Dan Kummer. "Do it the same day, but don`t cancel your old policy until you`ve lined up a new contract. That`s important because some states like New York will fine you for the number of days you go without insurance." One last thought from Kummer on the subject: "Most auto insurers specify in your contract that you can terminate your policy any time you want by informing your company in writing about the date you wish that coverage be terminated or you can do that over the phone.

• Pick the insurance payment option that best fits your budget.

"Generally, most companies will give you the ability to pay over time, but that comes at a price," says Kummer. "Your payment could increase a few dollars each time you pay by installment. Insurers can accept payments monthly, quarterly, or every six months, what ever is most convenient for you. Remember, though, that the more you break down your payments, the more the cost adds up."

Tips For Buying a Car

Buying a new car is an exciting experience, though it can be complicated. There`s a lot of choice out there, and it can be intimidating. You want to make sure you`re getting the best deal, and that you end up with the car that`s right for you.

Here are a few ideas and thoughts that might help.

General Trends

Today, fuel efficiency is a major concern. Manufacturers have taken the high gas prices to heart, and are producing models that promise better mileage. Indeed, gas-electric hybrid cars are in high demand, and some auto insurance companies are offering enticing discounts for hybrid cars.

Before You Buy
Think about your needs. Got a big family? Check out the safest vehicles best suited for your clan. Do a lot of driving? You`ll probably want a car that`s comfortable to drive, balanced with reliability and good gas mileage. Think about what you`ll be using your vehicle for, and shop accordingly.

Do some research before you even leave the house. Check the internet for information on safety and reliability on various models. You might have your heart set on a particular manufacturer, but don`t let that distract you from the facts and figures that determine how good their cars really are (or aren`t).

Check your current car`s Blue Book value before you go shopping - you may be surprised to find out that dealers consider your car to be worth much less when it comes to trading it in. Be aware of its true value, and you could save money.

More and more vehicles are coming with technology packages that include GPS systems, satellite radios and more. These can be very tempting, but quite expensive. Many of these features will require monthly fees, so keep that in mind. However, having systems integrated into your vehicle right from the factory is certainly easier than adding them later.

What can you really afford to pay each month for your car? Always have your budget in mind, and consider that your monthly expenses for your car should include gas, maintenance and insurance. Stretching your bank account an extra fifty dollars a month for a nicer model may cost you even more if the gas mileage is worse, while a more reliable car could end up saving you money.

When You`re Shopping
Not only is comparison shopping a great way to find the best auto insurance rates, it could save you thousands of dollars when looking for a car. Compare car prices at different dealerships, or online at various sites (including the manufacturers` own website), and you might be very surprised at the difference.

Consider arranging financing for your car before you visit the dealership. Talk to your bank, or credit union. You might be able to get a better interest rate from a different source, or at least have more control over your repayment schedule. In order to do this, you`ll need to have a very good idea of the car you want and how much it will cost. Bear in mind to include money for any optimal packages you wish to include in the vehicle.

Know what you want - be aware that some sales people will try to steer you to the cars they want to sell. If you end up with a better deal, or different car, and that's alright for you, then good. But don't be strong-armed into a vehicle you don't want. For instance, if you want to buy a SUV, don't be talked into buying a truck.

When taking a car out for a test drive, some dealers might ask to get a photocopy of your license before you go. You may want to consider not doing this. Instead, request that one of their staff accompany you on the test drive, and hang on to your license. Some dealers might take the opportunity to run a credit report on you while you are gone using the information on your license which could this negatively impact your credit score.

If you don't like how you're being treated, or if you have any doubts at all about the salesperson or dealership, just leave. You'll quickly find the dealer that's right for you, and soon after, you'll be driving the car that's right for you, too.