Buying Auto Insurance 101
By Paul D Johnson
Buying auto insurance that meets your specific needs and is reasonably priced does not happen by accident. The often overlooked reality is that people do not care what their auto insurance premium is at the time of a claim they simply want to know they are adequately covered. The majority of consumers are focused on one simple detail when buying auto insurance: price. The key to tailoring the ideal auto policy for you is recognizing some simple facts about yourself in advance of a claim. Determining your feelings about risk prior to selecting a specific form of collision coverage, and defining how much of a deductible you could comfortably afford at claim time, are essential to buying auto insurance coverage the right way and at the right price.
If you have a loan on your vehicle, or simply want the insurance company to repair or cash settle any damage resulting from colliding with another vehicle or object, then you will want collision coverage on your auto policy. Selecting the form of collision coverage should be done after asking yourself some key questions that will reveal your philosophy regarding insurance and risk. You must first ask yourself the following: Am I someone who wants to pay as little as possible for auto insurance and is willing to assume the risk of always having to pay a deductible at the time of a collision? Or am I someone who feels that I should not have to pay a deductible if I am not substantially at fault in an accident? Am I willing to pay more for my insurance to have this added benefit?
- If you want to spend as little as possible for collision coverage in all scenarios and are willing to always pay a deductible, then regular collision is right for you. There can be a substantial savings with this option.
- If you feel that you should not have to pay a deductible if you are not substantially at fault, then ask for broadened collision when requesting an auto insurance quote. It is imperative to understand that having broad collision does not waive your deductible if the accident is your fault or you share fault equally.
Save yourself extreme aggravation at claim time by answering these questions in advance of buying auto insurance. After selecting the type of collision coverage that appropriately matches your attitude toward risk, it is then time to establish what deductibles you should choose for your physical damages coverage.
Your budget and the size of your emergency fund should be the primary factors in selecting your comprehensive and collision deductibles. If you had a crystal ball, then it would be simple to select your deductibles. However, since most people can not tell the future, you must decide how much you could comfortably afford to pay out of your pocket if your vehicle was stolen, vandalized, the windshield was cracked, or was damaged suddenly or accidentally in a myriad of other ways. The inverse relationship between your premium and deductibles is this: The higher your deductibles, you will pay less for your auto insurance, but will pay more at the time of a claim. The lower your deductibles, you will pay more for your insurance, but will pay less at the time of a claim. Maximizing the savings on your auto insurance premium will almost always include assuming more financial risk and responsibility.
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