You might find out that the great discount rate you got for your auto insurance wasn’t such a great deal after you get into your first accident. Knowing what’s covered and what’s not, and what will happen after an accident, will help you from buying a policy that costs you far more than you saved with a lower premium.
Shopping for car insurance requires asking smart questions.
What’s the Minimum Coverage?
When you buy car insurance, you must buy the minimum coverage your state requires. This includes how much insurance you need to carry for property damage and injuries to others. This is called liability insurance and covers your legal defense and damages awarded by a jury or court.
Can I Get Extra Coverage?
You can add extra coverage if you want to further protect yourself. You might want coverage to pay your bills if you suffer losses from fire, theft, vandalism or weather. If you add more coverage than your state minimum, this protects you in the event that a court, abritrator or jury awards a larger damage than your insurance provides you.
Ask your insurer about collision, comprehensive, personal injury and uninsured or underinsured motorist coverage. If your state doesn’t require you to insure yourself and your passengers, consider a personal injury policy.
What’s Not Covered?
Discount car insurance often doesn’t cover payments for a rental car while your car is being repaired or diminished value, which pays you cash for the loss you’ll take on your car when you try to sell it after an accident.
Ask if the insurer pays for original manufacturer parts when your car is damaged or if it only allows repair shops to use cheaper parts. Shop with full-service and discount insurers to learn what each says about the other.
Who’s Covered by the Policy?
Make sure you know who your insurance covers. You’ll want to know what happens if you are in an accident while you’re driving someone else’s car, what happens if someone borrows your car and gets into an accident, and who pays if you are driving your car for work.
Ask specifically about whether your insurance covers you when renting a car and if you should buy additional insurance from the rental car company.
What Are My Rate Options?
Once you know what type of coverage you want, it’s time to ask about rates. Ask about premiums for different amounts of coverage and with different deductibles. The deductible is the amount of money you pay before the insurance covers the rest. For example, if you have $2,000 worth of damage and a $500 deductible, you pay $500 and the insurance company pays $1,500. The higher your deductible, the lower your rates.
This gamble can pay off if you are a low-risk driver and aren’t likely to get into an expensive accident, but can backfire if you frequently drive in heavy traffic. Ask what will happen to your rates after you make a claim, and after you drive for a year or more with no accident or tickets.
If you have renter’s, homeowner’s or any other type of insurance, ask if you get a discount if you bundle your policies.