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Eight Steps to Buying Auto Insurance

 2010 Hyundai Genesis

Introduction

The following simple steps will help you determine how much car insurance you need to carry. And it will also help you get the best coverage at the lowest price. If you are confused about any of the terms used here, see Insurance 101 in our web site.


Step 1: Starting Out

When it comes to auto insurance, you want to be adequately covered if you get in an accident but you don't want to pay any more than you have to. Keep telling yourself there is money to be saved. How much? This really depends on the risk that you are willing to take.  If you're currently dumping thousands into your insurance company's coffers because of a few tickets, an accident or a questionable credit rating, shopping your policy against others may be well worth the effort.

Look at it this way - you can convert the money you save into the purchase of something you've always wanted. Hold that goal in your mind.


Step 2: How Much Coverage Do You Need?

To find the right auto insurance, start by figuring out the amount of coverage you need. This varies from state to state. So take a moment to find out what coverage is required where you live. Make a list of the different types of coverage available and then write them down.

Now that you know what is required, you can decide what you need in addition to the basic coverage. Some people are very cautious. They base their lives on worst-case scenarios. Insurance companies love these people. That's because insurance companies know what your chances are of being in an accident are, and how likely it is for your car to be damaged or stolen. The information the insurance company has collected over previous decades is crunched into "actuarial tables" that give insurance adjustors a quick look at the probability of just about any occurrence.

So how much insurance should you buy beyond your state's minimum?

Experts recommend that if you have a lot of assets you should get enough liability coverage to protect them. For instance, if you purchase $50,000 of bodily injury liability coverage but have $100,000 in assets, attorneys could go after your assets in the event of an accident in which you're at fault and the other party's medical bills exceed that $50,000 of coverage.

General recommendations for liability limits are $100,000 bodily injury liability for one person injured in an accident, $300,000 for all people injured in an accident and $50,000 property damage liability (that is, 100/300/50) given that half of the cars on the road are now worth more than $20,000. Here again, though, let your financial situation be your guide. If you have no assets, don't buy excess coverage.

Another issue to address is that the limits of any uninsured and/or underinsured motorist coverage that you purchase cannot exceed the limits of your liability coverage. Such coverage can be valuable, as it will cover lost income if you're out of work for several months after being injured in a major accident.


Step 3: Review Your Driving Record and Current Insurance Policy

Before you begin shopping for insurance you should check the following.  The status of your driving record, your current coverage and the premiums you are paying.

You should know how many tickets you have had recently. But time plays tricks and your memories repress painful incidents. If you can't remember how long that speeding ticket has been on your record, check with your state's DMV. Most insurance companies check your driving record for at least 36 months and many up to five years.  If your record will soon improve, and the points you earned will finally disappear, wait until that happens before you get new quotes. Nothing drives up the price of insurance like a bad driving record.

Also, you should contact your auto insurance company or pull out a recent bill.  Write down the amount of coverage you currently have and what you are paying for it. Take note of the yearly and monthly cost of your insurance since many of your quotes that you get will be given both ways. Now you have a figure in mind to try to beat.


Step 4: Solicit Competitive Quotes

Now that you know what you are looking for, it's time to go shopping. Begin by setting aside about an hour or more for this task. Bring all your records - your current insurance policy, your driver license number, the information of all driver’s in your household, and your vehicle registration.


Step 5: Work the Phones

It’s time to start working the phones.  Have a list and give each agent the same information.  That way you will get a comparable quote from everyone you call. Ask the agent if you have the right coverage’s  for your needs. If you change anything, be sure to call back the other agents you may have gotten a quote from.  When you do get a quote, be sure to confirm the price. Also, ask them to fax or e-mail the quote you just received for your records.


Step 6: Look for Discounts

While getting your quotes, make sure you explore all options relating to discounts. Insurance companies give discounts for a good driving record, favorable credit score, safety equipment (for example, antilock brakes), certain occupations or professional affiliations and more. If you do not ask, you will not receive these discounts.


Step 7: Choosing the Right Insurance Company

You now have most of the information in front of you that you will need to make an informed decision. However, there is something more to consider. You can clearly see which company is least expensive.  But when you need them to cover a claim, what kind of job will they do?  Below are some aids in finding out if your company will take care of you. 

  1. Visit your state’s department of insurance web site and check the complaint ratios of the company that you finally select.
  2. Ask what type of service your friends and relatives have had with this company.
  3. Contact an insurance agent for additional information about the company you finally select.
  4. Inquire about the AM best rating of this company.


Step 8: Cancel Your Old Policy

After you purchase your new insurance policy, you have two more things to do. The first is to cancel coverage with your existing insurance company if your policy has not expired. Second, if your state requires you to carry proof of insurance, make sure you either have it in your wallet or the glove compartment of your car (some experts discourage this, however - if your car is stolen, the thief has everything he needs to prove the vehicle is his).

Now, there's one last thing to do: reward yourself for saving so much money on your car insurance.


Checklist

Determine your state's insurance requirements.

Consider your own financial situation in relation to the required insurance and consider buying more to protect your assets.

Review the status of your driving record do you have any outstanding tickets or points on your driver license?

Check your current coverage to find out how much in premiums you are paying.

Inquire about discounts you might qualify for such as a multiple policy discount.

Evaluate the reliability of the insurance company you're considering by visiting your state's insurance Web site.

If you have chosen a new insurance company, remember to cancel your old policy.

 

  
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