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Strategies for Auto InsuranceWhy is Auto Insurance Important?

Almost all American drivers need to purchase auto insurance; so you might be surprised to find that most people do not know much about it. In fact, most of us purchase a policy and pay a monthly car insurance premium for most of our adult lives. And yet, unless we need to make a claim or get a huge rate increase, we never really think about it. The policy that protects one of our biggest assets just fades into the background noise until we need to rely on it.

But a little information can help you save money while getting better coverage. Maybe you should make some time to learn about car insurance, evaluate your own policy, or think about shopping for a new one!

Here's what you should know about car insurance.

If you cannot afford auto insurance, you cannot afford to drive.

Nobody plans on having an auto accident, and every state requires proof of financial responsibility in order to operate a car. For most of us, that proof comes in the form of an auto insurance policy identification card. You cannot assume the other driver's uninsured motorist policy will cover you either. Sure his or her insurance may cover that driver's claim, but then they will come after you for the money. Some states do have government plans with
discount auto insurance in order to help low income drivers buy car insurance, and most drivers do not have to pay that much for the state required minimum liability policy.

An insurer may choose to "total" your car instead of fix it.

Auto_Insurance_TotaledI, myself, have had this unhappy experience. I drove an older car which I kept well maintained. Another driver backed into my side door, and according to the insurer, it would cost more to fix than the car was valued at. They had the option to buy my car at the appraised value rather than fix the car. But the car was worth far more than a list price to me, because I knew I could never replace it for the amount they wanted to settle at. A product called auto gap insurance does cover the gap between an outstanding loan and the list price of car, but that wouldn’t have helped me, because my car had been paid off for years.

You should not always cut your coverage to save a few dollars.

Some insurance professionals will urge to you cancel your collision coverage on an older car, and only keep state required liability insurance. However, if you do have an accident that is judged to be your fault, you will not have an insurer to cover you. Collision coverage, on top of liability insurance, may not cost that much particularly on older vehicles. You need to balance the expense vs. the expense of having to pay to get your car fixed or replaced without insurance. Consider raising your deductible, rather than totally eliminating that coverage, if you need to save some money.

More expensive cars are not always more expensive to insure.

Insurers look at lots of factors when they set auto insurance rates. They consider the safety record of the type of car, how expensive or hard the car is to repair, and many other factors. Many drivers believe that big cars or SUV type cars will be cheaper and safer. But research shows that the design of the car matters more than the tons of steel that went into the construction. Really, you need to research the cost to insure any individual car model you want to purchase.

Insurers offer some surprising auto insurance discounts.

Did you know that many insurers offer discounts on "green" cars? It isn't that hybrid or alternative energy cars are safer. Insurance company statistics show that the type of people who choose to buy more energy efficient cars also tend to make less car accident claims. It is all about the bottom line for auto insurers, but it can also help the environment!

Watch your driving habits.

We all know that drinking alcohol while driving breaks the law and invites accidents. But did you know that some policies, especially under certain circumstances, also restrict driving while doing anything distracting? Even though it is legal to drive while smoking, talking on a cell phone (in some states), or drinking coffee, it may be against the terms of your auto insurance policy, and it may make your claim invalid?

For example, my own teenage son has a learner's permit now, so I must sit in the passenger seat to supervise him when he drives. Of course, being a normal parent, I keep my eyes peeled to the road as I stomp on the imaginary brake on my side of the car! If you do not know where the imaginary brake is, you will find out when your teenager starts to drive.

But while my policy allows me to drink coffee or chat on the cell phone while I drive, I am not allowed to do anything distracting while I supervise him. And of course, since he still drives on a learner's permit, covered by my policy, he cannot do any of those things either.

Understand that some things may be perfectly legal, but not covered under your insurance policy. It is important for you to read your policy so you understand the restrictions.

Take Some Time To Learn About Your Policy and Compare Others on The Market!

Auto_Insurance_CompareDo not assume that all insurance companies will charge the same amount. You may be able to take advantage of auto insurance discounts or company policies from insurers who are friendlier to drivers like you. For example, the current economic recession has caused many people to have lower credit scores than they did a few years ago. Some insurers will not offer their best rates to people with poor credit, even if they are great drivers with a very clean claims history! Another insurer may not consider credit, and will offer those good drivers a discount.

This article was written by Barbara Waltz, an industry expert and one of the founders of a well known insurance blog

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