Auto Insurance Basics
The purpose of auto insurance is to protect the insured financially against damage done to her car and by her car.
The second item (damage done by her car) has a far bigger potential for financial damage, though it’s less common.
These are two really important things to remember when shopping for auto insurance for yourself…but it’s especially important to keep them in mind when shopping for auto insurance for your driving teen or college student.
Here are the basics to keep in mind whenever and for whomever when you shop for auto insurance:
The right agent for you. Never buy any kind of insurance assuming that you’ll never have to make a claim. If that’s your assumption, why have insurance at all?
When shopping for insurance, you really ought to be giving your potential agent a job interview. Some people are comfortable working with a “remote agent” online. Just keep in mind that at the time of a claim, you’ll be working with a similar arrangement – there may be no one on site that you have ever laid eyes on before and they’ll have to take care of the details. You may be fine with that. I’m not, but that’s just me.
One great way to find a good agent is to ask your friends who they use and what they think of her service.
A good agent ought to be able to give you good advice and good service. A lack of either is a good reason to find another one.
The right amount of protection for you. Here’s the meat of the matter. What exactly does automobile insurance cover?
Damage done by your car. This is actually called liability insurance. If you are found legally liable for damage done by your car to someone else’s body or to someone else’s property, you are responsible to pay for it. On the low side, that might be a few hundred bucks. On the high side, that could be a few hundred thousand dollars. I regularly advise clients to have liability coverage (on both their auto and their home) of at least an amount equal to whatever their net worth is.
Damage done to your car. Well this is the part most people think about when they think about auto insurance. “What if my car gets totaled?” Well obviously, the extent of your risk is the cost to replace the car. So, while that may be a lot of money, it’s not nearly as much as your potential financial liability for damages done by your car to someone else or to their property.
As quickly as possible, I want you to have enough money in your savings account to pay for the “first dollars” of any claim that you might experience. If you keep making $300 and $500 claims to your auto insurance company, I’m going to predict that your rates will go up a lot and very soon. Ask your agent to price the difference for you between a lower deductible of say $100 or $200 and a few higher deductibles (maybe $500 even up to $1,000). See if it makes a big difference.
The right price for you. Feel free to shop around for price, but I wouldn’t let price be the big driver of your shopping. It’s a consideration but it’s not the biggest thing.
Call at least three agents, describe your situation and ask them for a written quote. Ask them why they recommended these specific coverages to you. Listen for hints as to their attitude towards service (rather than just sales) and the quality and the thoughtfulness of their advice.
It is easy for someone to claim to be able to save you money by simply offering you less coverage or less service.
Make sure that any savings that you get are not at the cost of service or protection.