Auto Insurance 101 Explained
I bet you're scared of the number that pops up when you search for auto insurance online. - $10,000! - $40,000! Now that's intimidating. Don't let your fears run wild; car insurance isn't as complicated as it may seem. Most people have no idea how to shop for car insurance and what questions they should be asking themselves before they find "the best deal." Like a lot of other things in life, there is a right way and a wrong way to shop for auto insurance. This post will show you everything you need to know about shopping for car insurance so that you can hit the road running with confidence.
Shopping for auto insurance can be, well, like driving a car - you have to know what you're doing. If you haven't ever driven a car before, can you imagine getting into an automobile and just driving around? You need structure and a plan. This is no different with auto insurance. Did you know that when you are shopping for car insurance, the insurance company will try to charge you the highest possible rate? They want to keep profits high and sales low. You are going up against some pretty formidable competition when it comes to auto insurance companies. You need to know how to shop and what questions you should be asking.
Auto insurance is like a typical grocery store. You pick out the items you want, put them in your cart, and check out at the register. It's fast and easy when you know how. A common misconception of shopping for auto insurance is that you just pick the company with the cheapest rate every time – no matter what other categories are considered. While price is important and will factor into your decision, it isn't everything. Yes, some companies will try to lure you in with cheap car insurance quotes only to change it later (or not write a policy altogether). This is why it's important to know how to shop for auto insurance.
Start by establishing a budget when shopping for auto insurance. You should know exactly how much you have to spend on auto insurance every month. Figure out what the minimum monthly payment is, what the average monthly payment is, and what your ideal monthly payment would be if you could only spend $300 per month. If necessary, you can spend more or less than $300 per month but you must have an estimate of where this money is being spent each month. Once you have that figured out, set a maximum ceiling for your car insurance bill every year. For example, this year – no matter what – you will not spend more than $X amount on auto insurance.
This is the first step when shopping for car insurance. You need to figure out how much you want to spend every month. Now that your budget is established, it's time to figure out what type of coverage you need. There are five main vehicles: liability only auto insurance, comprehensive and collision auto insurance, uninsured motorist, medical payments coverage, and personal injury protection (PIP). Your budget will be the guiding factor on which one you purchase. Most people under 25 years old should get liability only auto coverage or uninsured motorist property damage (UMPD) coverage with a $500 deductible. It will usually be cheaper if you get the UMPD coverage instead of liability only. If you plan on driving often and live in an urban area, comprehensive and collision coverage may be a better option. If your car is worth less than $1,000, uninsured motorist coverage (UM) may be your best bet. Your budget and your preferences will make the decision easier.
When comparing auto insurance companies, it's important to take the time to understand what their policies actually do for you . Get an estimate from three or more companies to compare prices. After you purchase one company's policy, contact them to make sure they are living up to their promises and that their claims payments are consistent with their policy's brochure. If you're having a problem with your auto insurance company, contact the insurance commissioner for your state to make sure they are complying with the law. You should always be on top of what's happening with your policy, how it's being handled, etc.
If you were to ask ten people how you should shop for auto insurance, you would probably get ten different answers. Some people would tell you to just get the cheapest rates available and some would tell you not to even look at prices when making your decision. This is a classic case of doing something wrong and hoping for the best . You need structure when shopping for car insurance and a plan if you want to save money on an expensive product like auto insurance. Legislatures in all 50 states have made these rules for shopping for car insurance, so if you decide to make changes, take the time to understand why and what others are doing.
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