At first glance, your insurance deductibles seem fairly self explanatory.  Simply put, when you file a car insurance claim with your company you can expect to receive your benefits minus the deductible.  But is it always that simple?

Let’s begin by taking a closer look at the guidelines you should use to effectively choose your insurance deductibles when buying car insurance.

Particularly with auto insurance, people tend to choose their insurance deductibles solely based on their impact on monthly premiums.  While this makes sense, your insurance deductible should also reflect the “hit” you can take financially should you ever need to file a car insurance claim with your own insurance company.  For example, you might select a $1000 insurance deductible because it saves you $20 a month over a $500 insurance deductible.  Your savings would be $240 per year.

Sounds good.  Right?
Perhaps.  But only if you can afford the $1000 deductible out of pocket.  Ultimately you need to decide if the extra $20 per month is of more benefit to you than having to come up with $1000 should you be involved in an accident where you need to file a claim against your own collision insurance.  Even if you were to bank the extra $240, you would still need to come up with an additional $760 just get your car out of the shop!  Would the $500 option be better for you?  In our example, you’d be $740 of pocket versus the $1000 insurance deductible.  Which is a better choice for you?

Consider why you would need to file a collision insurance claim.  If you regard yourself as a safe driver, you might determine that it is highly unlikely that you will become involved in an at fault accident.  Accordingly, you choose to accept higher insurance deductibles.

Fair enough.  But what if you are struck by an uninsured motorist?  In most states, including Florida, you would be solely dependent on your own collision insurance to get your car repaired.  You could consider suing the at fault driver in court, but if he doesn’t have car insurance, is there a chance he has the money to pay for your damages?  Or worse, yet, assume you are an innocent party struck by a hit and run driver.  Where do you go to get your car fixed?  You go to your own collision insurance – minus your insurance deductible.  Could you afford an additional $1000 hit?

Insurance deductibles also apply to comprehensive insurance.  Suppose your car is stolen and recovered.  Repair costs are appraised at $2500.  Assume you chose a $1000 deductible in order to save another $20 per month.  Can you take the $1000 hit, or would the lesser insurance deductibles prove less painful in the long run?

There are other situations where insurance deductibles are not as obvious as they might seem.  For example, Florida No Fault insurance pays for medical expenses up to $10,000, generally with a $1000 insurance deductible.  Other states offer similar No Fault insurance coverage.  Overall, the application of a deductible in No Fault insurance coverage is fairly straightforward.

The process becomes more complicated when No Fault insurance is paid up to the policy limits (exhausted) necessitating a claim for health insurance benefits.  Because health insurance is considered secondary to No Fault, it will not pay until the No Fault, or PIP, is exhausted.  What’s the relevance?  The health insurance deductible!  It’s going to come right out of your pocket!

When buying car insurance, or any type of insurance for that matter, or even when renewing your own policy, make certain you take all potential scenarios into account when selecting your insurance deductibles.  And beware of assumptions that you will never need the coverage!

Buying car insurance is a major event – or at least it should be!

Think about it.  When you buy the car you’re insuring you compare prices, you check consumer reporting sources, you talk to your mechanic, you take it on a test drive.  Buying the car is a major decision.  So when it comes to buying car insurance for the car, it stands to reason that this purchase should likewise be a major event.

When you buy car insurance, you are purchasing more than just protection for your car, or for other people’s cars.  You’re also purchasing protection for your financial welfare and for your family’s future.  So in terms of dollars and cents, how can you make a car insurance purchase that balances price with protection?

Liability protection has been our constant theme for the simple reason that without adequate liability coverage your financial future can be wiped out with one impact.  For this reason, liability auto insurance should never be considered an option.

So if liability insurance is so important, how can one ever hope to find inexpensive coverage when buying car insurance?

Let’s take a closer look at collision insurance and comprehensive car insurance.

Strictly speaking – at least in terms Florida auto insurance – both of these coverages are optional.  Optional, that is, unless your finance company demands otherwise!  In fact, most all cars that are financed must carry both of these auto insurance coverages.

But let’s assume your car is paid for, or that for whatever reason you are not obligated to a finance company.  Theoretically, this would apply to “older cars”.  Interestingly, a car that is 5 years old could likely be paid for and could still have maintained its value.  That’s because cars do not drop in value as dramatically as they once did.  Whether that is because of higher original sticker prices, or because of higher quality standards, the fact is, that 5, 6, 7 year old car could be worth a lot more than one would think.

The point is, your purchase of collision insurance and comprehensive car insurance needs to be based on the value of that car versus the cost of premium dollars.

Strictly speaking, collision insurance and comprehensive car insurance can cost anywhere from 20% to 50% of your total premium.  For this reason, your decision to purchase – or to delete – these coverages can be a significant decision when buying car insurance.  How best to make that decision?
Think like an insurance company.

In terms or recovery, the value of either of these coverages is based wholly on the value of your car.  And that is precisely how the insurance company will approach your claim – on the value of your car.

For either collision insurance coverage or comprehensive car insurance coverage, your insurance policy will pay either for repairs or for your total loss damages.  In either case, damages that exceed 80% of the value of your car are more than likely going to result in the total loss of your car.  Which brings us to the ultimate question … what is the value of your car?

This is where the insurance company approach comes in.  If you are going to pay for collision insurance and comprehensive car insurance coverages, you must determine two things.  First, the fair value of your car, and second whether or not those premium dollars represent a good return on your investment.

1. Determining the fair value of your car – insurance company style
Use online sources to establish the “blue book” value of your auto.  For best results, utilize more than one source.

Next, check dealer prices, either by online or newspaper searches, or by contacting used car dealers directly.

Now apply the insurance company procedures.  This means objectively evaluating your car’s condition.  Is it really in “excellent” condition?  Does it have body damage?  Is the upholstery worn?  Yes to these or similar questions and you need to deduct value from your base value.

What about mileage?  If your mileage exceeds 15,000 per year, deduct again.

Why all the calculations?  Because this is how an insurance company will evaluate the value of your car should its damages exceed that value.  Generally speaking, the insurance company will determine your value somewhere between the dealer price and the trade-in value.  And, of course, they will deduct generously for condition.

Here’s the point … you can’t possibly hope to arrive at a fair insurance claim settlement unless you have done all of the necessary homework on the genuine value of your vehicle!

2. Evaluate your return on premium dollars
Fair claim settlement or not, are those premium dollars a good investment?  This needs to be of primary concern when buying car insurance.  Here is the best way to evaluate your purchase.

Begin by securing a variety of car insurance quotes that include collision insurance and comprehensive car insurance coverages.

If your car is valued at less than $1000, it is unlikely that collision/comprehensive is a cost effective purchase.  Key point:  bank some of those premium dollars to replace your car.  Even if you can pursue a claim through a negligent driver, at less than $1000, you aren’t likely to find a reliable replacement vehicle.

If the value of your car is less than or equal to 10x the premium rate for collision insurance and comprehensive car insurance coverages, then again, these coverages are probably not cost effective.

One additional key point:  bank some of those premium dollars to replace  your car.  Even if you can pursue a claim through a negligent driver, at values hovering around  $1000, you aren’t likely to find a reliable replacement vehicle without some extra cash.  And, with low values, it is highly unlikely an insurance company will pay for repairs.

Only by taking a proactive, informed approach to buying car insurance can you fully maximize your premium dollars.  Those dollars need to work for you – not for the insurance company.

When buying auto insurance, many consumers only consider cost.  Their motivation is focused almost completely on finding inexpensive auto insurance.  But there are a number of other considerations that must also be considered.

Is there such a thing as inexpensive auto insurance?  Depends, of course, on your definition of “inexpensive”.  But with everything being relative, yes, it is possible to purchase inexpensive auto insurance – even in Florida!

Your success in finding inexpensive car insurance must be based on a solid, informed strategy.  The key is to combine your personal needs with your budget.  Here are some solid car insurance buying tips for you to consider.

1. Take a look at your deductible.  A change from $500 to $100 can significantly change your premium.  Nonetheless, you need to consider what financial impact it would have on your budget if you were suddenly faced with a $1000 repair bill should you be charged with an accident.

Realistically then, as you acquire auto insurance quotes compare the rates with varying deductibles so that you can calculate your potential savings.  If you go for the higher deductible (and the lower rate), consider budgeting some money in your savings account to cover the costs of that deductible.  High deductibles serve no purpose if they are so high that you cannot afford to have your car repaired!

2. Verify and understand all that you are paying for.  You might be paying for coverage that you simply do not need.  But be careful, and consider the alternatives.

For example, if you are driving an old “clunker” is it worth your budget to add collision and comprehensive insurance to your insurance policy?  Remember that you are not entitled to receive more than what your vehicle is worth.  So what you must consider is whether your premiums are greater than your potential settlement value.

3. Revaluate your liability coverage.  While Florida auto insurance has established a $10,000 minimum for property damage liability coverage, if you are paying more your decision must be based on your assets.

And, while bodily injury liability is not mandatory in Florida, again you must consider your assets.

By eliminating bodily injury liability coverage, or dropping property damage liability, you can reduce your insurance rates, but first consider what you have to lose if you are nearly or completely unprotected.

While inexpensive auto insurance is the goal, strive to combine that goal with prudence and common sense.  Again, it all depends on your perception of “inexpensive”!

4. Make certain that you have not overstated your daily mileage!  Left to the insurance company, that daily estimate is likely to be overstated.  If you work 5 miles from home, don’t pay premiums on twice that!  Remember, insurance is based on risk.  The potential risk goes down the fewer miles you drive …  and so do your rates.

5. Consider your policy period.  Insurance companies like to issue 6 month policies because they are free to increase your rates more frequently as your policy renews.  Look for companies that offer 1 year policy periods so that you are locked in for a full year.

6. Inexpensive auto insurance premiums can be affected by the way you pay.  If you can afford it, avoid the expenses of a monthly payment plan.  Some carriers reward you for agreeing to automated payments.  Don’t overlook these options.

7. Bundle your policies.  By combining multiple insurance policies with one carrier (such as homeowners or renters coverage with auto insurance), you are likely to receive discounted rates.

8. Don’t overlook the discounts!  Most drivers are eligible for at least a few discounts (safe driver, good student, etc.).  Make sure you compare all insurance quotes with all applicable discounts.

9. Car alarms and security systems can also reduce your rates.

10. You are what you drive.  If you are serious about finding inexpensive auto insurance, trade the sports car for the family sedan!

When buying car insurance, once of your most important considerations should be the auto insurance discounts offered by insurance companies.

Without question, the most generous of auto insurance discounts is the safe driver discount.  But there are other auto insurance discounts that also rank high on the charts such as  customer loyalty, multiple vehicle discounts, multi-policy discounts, and safety or anti-theft feature discounts.  Let’s take a closer look.

Safe driver discounts can be very generous, especially over time.  Initially, these discounts are generally granted if you have a clean driving record with no tickets or accidents within the past 3-5 years.  The discount can represent  10 to  over 25% savings.  Some companies will increase the safe driver discount even further if, during your term with that company, you continue to exhibit a safe driving record.  And there are other benefits to extended safe driver status.  Some companies will “forgive” an at-fault accident if the extended driving record is otherwise safe.  These savings can be substantial since at-fault accidents can increase rates by up to 30%.

Safe driver auto insurance discounts can also extend to the collision deductible.  As an example, some companies will reduce the deductible up to $100 per year for each year of safe driving.

Customer loyalty discounts can likewise be very generous.  Some companies offer as much as 30% for eligible driver renewals.

Multiple vehicle discounts can shave as much as 20- 25% off basic rates.  Multi policy discounts – combining homeowners or renters insurance, mobile home, or even life insurance with auto insurance – can reduce rates by as much as 20%.

Anti theft device auto insurance discounts vary by location and by the device itself.  Nonetheless, savings can reach 25% on the comprehensive portion of your policy.

Passive restraint system devices can also pass on savings.  These discounts include installation of  restraint systems that work automatically when the doors are closed.  The discounts usually apply to the medical or PIP portions of your policy and can range from 25-40%.

Other common discounts include savings for anti lock brakes, (as high as 5% applied to collision coverage), new car discounts (depending on the model), low mileage discounts, and  up to 15% good student  discounts (B or higher).

State approved defensive driving courses (not court mandated) are often offered as auto insurance discounts.

Military personnel, active, retired, reserve, or National Guard are also eligible for discounts, usually up to a 15% savings.  Occupational groups such as teachers, health professionals, police, and fire fighters can also qualify for additional auto insurance discounts.

Some insurance companies include rating methods with auto insurance discounts,  For example, home ownership, financial responsibility, proof of prior insurance along with prior coverage limits can also add to auto insurance discounts for some carriers.
Last, but certainly not least, some companies will reduce your rates instantly by as much as $50 if you complete your initial application online.  And, if you choose to pay in full, you can save up to an additional 9-10%.

The availability of auto insurance discounts should play a major role in your auto insurance decisions.  It is recommended that you never make a final selection until you have fully examined all appropriate discounts available to you for each particular quote.  In fact, discounts can be so important that they could mean the difference between selecting or not selecting any non-mandatory coverage.

The internet has made it easy to compare car insurance quotes.  But don’t be fooled.  You still need to do your homework when buying car insurance.

Doing your homework means understanding the types of auto insurance that are mandatory, the types of auto insurance you need, and the impact that being either under insured or over insured would have on your financial well being.

There are two ways that you can compare car insurance quotes on the internet:  Insurance brokers/agents, or from the insurance company itself.

Brokers represent numerous different insurance companies.  The quotes are – or should be – free.  Brokers are paid commissions by the insurance companies they represent.

You can find brokers that offer just auto insurance, or brokers who offer a variety of types of insurance.  It is recommended that you submit information for quotes with both for several reasons.  First, you might want to consider a company that offers both auto and homeowners or renters insurance.  Commonly, when you purchase more than one type of policy from a particular insurance company, you are eligible for a discount.  Alternatively, you should compare car insurance quotes with companies that offer only auto insurance.  Despite the discounts offered by the multi-line companies, it is possible that a carrier which specializes in auto coverage might actually offer you better rates.

Many of these broker sites allow you to enter your basic information which returns multiple quotes literally within minutes.  And while this would seem to provide the perfect solution to compare auto insurance quotes, understand that the quotes returned are only as good as the number and diversity of insurance companies that the broker represents.

Accordingly, it is recommended that you find at least several of these online brokers and compare the results.  Make certain that the brokers you are utilizing to compare car insurance quotes represent different insurance companies, that is, multi-line carriers as well as auto insurance carriers.

Individual insurance companies likewise operate their own websites for the purposes of providing consumers with online insurance quotes.  In fact, some of the larger insurance companies do not utilize brokers at all.  You must purchase from them in one of two ways:  either directly online via the company website, or through one of their exclusive agents in your area.

But just because you cannot use broker sites to compare car insurance quotes from these companies, does not mean you should exclude them from your search.  By all means, contact them directly, either online or in person and compare their rates and packages with the other broker represented carriers.
The key is not to make your final decision until you have enough information to make an informed decision.

Gather at least 6 individual quotes, and use these guidelines to compare car insurance quotes on their individual merits.

1. Make certain that the coverages offered are compatible.
2. Check to see what, if any auto insurance discounts have been applied.
3. Is there a potential for combining multi insurance policies under one carrier, hence another discount?
4. And finally, as you compare auto insurance quotes and find that they are nearly identical, check out the companies’ financial stability and customer service ratings with a search of A.M. Best Ratings, J.D. Powers, or Consumer Reports.

Too frequently, consumers tend to ignore insurance limits in order to save money when buying car insurance. While minimizing insurance limits might sound like a great cost-cutting idea when purchasing insurance, the reality is that decision can come back to haunt us.  Here’s some car insurance help you can use to protect yourself.

Let’s begin by defining exactly what is meant by insurance limits.

When you purchase a policy of insurance, you are likewise selecting the limits of that policy.  This is important because an insurance policy is a contract.  The terms of that contract dictate that an insurance company is not obligated to pay for damages over the policy limits.  Only in rare cases of insurance bad faith can an insurer be ordered by a court to pay over the insurance limits.  Never count on that!

What does going over the limits mean?  Assume, for example, that you are found responsible for a serious accident and the injured parties sustain damages $100,000 above your $10,000 Bodily Injury limits, they will not be able to recover the $90,000 difference under your policy.  Worse yet, what if you had no Bodily Injury liability coverage …

Or, assume you cause $50,000 worth of Property Damage yet your insurance limits are only $10,000.  You’re $40,000 short just in damages to the other vehicle!

In either or both cases, you could be sued personally.  Do you have the resources to pay for an attorney and to pay a judgment?

Insurance limits apply to liability coverages, and, in Florida, to No Fault insurance coverage.  Florida No Fault limits are standardized by statute at $10,000.

Liability coverages include Bodily Injury, Property Damage liability, and Uninsured Motorist coverage.  Property Damage liability coverage (PD) is mandated in Florida, for a minimum insurance limit of $10,000.  Bodily Injury (BI) and Uninsured Motorist (UM) are optional.  To purchase UM, one must first select BI.

If you have absolutely no assets, and no dependants, you might want to take the risk (though unwisely) of driving without BI and UM.  For the vast majority of drivers who do have some assets, and who do have other responsibilities, BI and UM should be purchased.  But the question here is, what should those limits be?

Simply put, those insurance limits need to protect you and your assets.  Calculate your assets and your obligations, and then determine the amount of coverage you need.  Do you own a home, a business?  Do you have dependants?  If you were deemed at fault for a devastating auto accident, could you sustain a personal lawsuit for tens of thousands of dollars?

The point is, your auto insurance policy will not pay above your coverage limits.  Even for the Florida PD mandatory coverage of $10,000, how likely are you to sustain liability damages of $10,000 or less?

In the short run, keeping your insurance limits low might save you a few hundred dollars a year.  But are those extra savings worth the permanent financial devastation that you could encounter in the event of complete disaster?