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Insurance is an anomaly among commodities; it’s one purchase that we hope we never have to use. But car insurance is a mandated purchase almost everywhere, and with good reason; if your vehicle were to be stolen, vandalized or in an accident, you could be at risk for huge financial burdens if faced with covering the costs on your own.
Shopping for car insurance isn’t rocket science, but getting the best rate possible requires you to understand some basic information. Your rate will be affected by the value of your vehicle as well as any requirements from your state and your lender. Here’s a look at some of the considerations you’ll face when insuring your ride.
The word “deductible” refers to the amount of money you’ll have to pay out of pocket, following an accident, before your insurance kicks in.
So why not always opt for the lowest deductible possible? The lower your deductible, the higher your monthly premium, or out-of-pocket expenses, will be. On the flipside, a higher deductible will lower your monthly payment. When settling on a deductible, pick one that works for your budget. A high deductible can save you money in the short term and might be the smartest choice if you have money saved to cover your deductible in the event of an accident or break-in. If you can afford it, a low-deductible plan will ensure that you won’t have to dig deep into your pockets to pay for auto body work or car repairs resulting from a wreck.
City vehicles are typically subjected to more break-ins, theft and fender benders, and are therefore more expensive to insure than ones in rural areas. In addition, your state’s laws may require you to carry a certain amount of insurance coverage. For example, if you live in California you’re required to carry minimum liability insurance of $15,000 for injury or death to one person, $30,000 for injury or death to more than one person, and $5,000 for property damage. But if you live in New Hampshire, you’re only required to have motor vehicle insurance if you’ve been convicted of certain violations, including DWI and leaving the scene of an accident. Your first step should be to research the insurance requirements in your state by checking with your local motor vehicle office.
The car you drive may translate into pricier coverage. According to a survey by Insure.com, late-model BMWs, Mercedes and Audis are some of the most expensive cars to insure because they cost more to repair. Looking for cars that that won’t require you to purchase more insurance? Consider a Jeep SUV or a Honda Minivan; they’re among the cheapest new cars to insure.
Finding a balance between good coverage and affordable coverage is important. On the one hand, you want to have enough to cover your losses in the event of an accident. On the other hand, the more insurance you opt for will make for a higher monthly premium. Think it over carefully. You may decide that your 15-year-old jalopy isn’t worth the cost of coverage. If you drive a brand new car and are still paying for it, your lender will likely dictate your coverage minimums on the car since it officially belongs to the bank.
Your car insurance policy is comprised of a handful of different categories of coverage. Here’s a list of the most common types and what they mean.
Car insurance companies offer a variety of discounts based on a number of factors:
As always, it pays to comparison-shop before buying. Once you’ve identified the vehicles you’re considering, call several insurance companies, who will be happy to provide you with estimates. In most states, insurance is a mandatory, ongoing cost, so doing your homework could go a long way toward saving you money.
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