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Inside this Article
Understanding Your
Auto Insurance Needs
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Just because your
state requires a minimum amount of insurance
doesn't mean that's exactly what you should purchase.
In fact, most motorists purchase more coverage than
their state requires so that they are covered for a
variety of problems -- not simply a fender bender.
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In
order to better determine your auto insurance
needs, consider these five guidelines:
Car
Insurance - Know Your State Laws
Remember that
forty-seven states require that you purchase liability
insurance. Liability insurance is what
pays for bodily injury and property damage that you
cause another driver. Fifteen states including
Florida, Maryland, Michigan, Massachusetts, New York
and New Jersey also require that you buy Personal
Injury Protection (PIP). This coverage pays for your
medical expenses and lost wages in the event of an
auto accident. Your insurance minimum will most
likely be determined by state law, but many people are
encouraged to purchase more than is required.
Car
Insurance Know Your Options
There are a lot of car
insurance options; but knowing what you most
likely will need is the key to making sure you are
appropriately covered. Do you want coverage for a
rental car if your car is damaged? Do you want an
extended warranty to pay for parts and labor if your
car breaks down? If your car is leased, you will
probably need gap insurance which pays for the
difference between what your insurer pays and what you
owe on your lease if the car is completely totaled.
Car
Insurance - Know How Much Money You Want to Spend
If you know your state
laws and have examined your personal needs, now you
can put together the different pieces of auto
insurance coverage in one total policy. The first
piece of the policy is almost always liability insurance.
If you only have minimum liability coverage and you
injure someone, their attorney can go after your
personal assets. So, you need to know your assets and
what you can afford to lose in the event of an
accident. Many insurers feel that minimum liability is
a gamble. In fact, that is why it is often only a
little more money for more protection. After all, if
you do get into an accident, it is much better for the
insurance company to be responsible than for
you to be personally responsible. Remember to run
through various scenarios such as if I totaled someone
else's car, will my insurance cover it? How
much will I have to pay out of my own pocket? The
answers to these types of questions will determine
what coverage makes you feel most confident should an
accident happen.
Car
Insurance - Know Your Vehicle
If your car was
totaled, would you be able to afford to replace it? If
not, you will want comprehensive and collision
coverage. The decision to buy this coverage is
usually based on the value of your car. Guidelines
usually suggest that if your car is worth less than
$2,000, it won't be worth it to buy comprehensive and
collision. If you own a $50,000 car though, it would
most certainly be worth it to pay an extra $200
annually or so to insure that your car will be
replaced if you get in a serious accident.
Car
Insurance - Know
About Your Other Insurance
Many people don't
realize that other types of insurance including
health insurance and homeowners insurance
may pay for damages due to an auto accident.
For instance, if you
have comprehensive health coverage, you probably won't
need more than the minimum required Personal Injury
Protection (PIP).
Make sure you know
what insurance coverage you already have so
that you don't purchase unnecessary coverage. The best
way to figure out your own auto insurance needs
is to examine potential policies and know how much you
are willing to gamble.
For instance, it may
not be worth it to you to purchase collision
insurance if your car is not incredibly valuable
and would therefore cost less to fix than to keep
insured.
Auto insurance
is simply about how much you are willing to pay out of
your own pocket versus how much you want the insurance
company to cover. Once you decide this, you're all
set to purchase your auto insurance policy.
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