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Tuesday, January 11, 2011

Car Insurance Guide

If you have any questions at all about what to do in order to get the right car insurance policy, how to keep your premiums as low as possible or what to do if you're involved in an accident and need to make a claim, our car insurance guide is a great place to start.

Here we're dedicated to driving down the cost of your motor insurance, and we've covered some of the most common questions and concerns encountered by our customers in the following pages.

An introduction to car insurance

Of all the financial products, car insurance is one of the most common. The reason for this is simple: to drive a vehicle on the road legally it needs to be insured, and with 26 million cars on our roads, that's a huge number of people insuring a vast number of vehicles.

Most of these people are given the chance to review their policies each year, allowing them to switch to a different company should they desire based on price, and the quality of service provided.
Many people simply allow their policy to renew itself each year when it expires, potentially losing money by not shopping around for a more competitive quote or only changing insurer when rising car insurance prices become particularly noticeable.
Unfortunately, the reverse is also true on occasion: Many people take out extremely cheap car insurance, only to find out that the policy isn't as comprehensive as they initially thought - and these people often don't find out about this until they make a claim, by which time it's too late.

The first thing anybody considering a new car insurance policy should do is shop around. Remember the cheapest car insurance policy may not necessary be the right option for you!

Knowing the ins and outs of how car insurance policies work could save you even more money, as well as making sure you are receiving the correct services and level of protection from your insurer. This guide will help you to do just that, as well as answering some common questions about insuring a car.

These questions range from the factors that affect your premium, how you can make your premiums cheaper, and what to do in the case that you need to make a claim on your policy.

Coverage you must have

Bodily injury liability. Should you cause an accident, the "liability" part of your insurance coverage pays the medical, rehabilitation, and, if necessary, funeral bills of your passengers, the other driver, his or her passengers, and any pedestrians involved. It also covers pain and suffering awards as well as legal costs.

Buy coverage that will pay at least $100,000 per person and $300,000 per accident. If you have sizable assets, consider increasing those limits to $250,000 per person and $500,000 per accident. Such added coverage will raise your premium at least 10 percent. We recommend that people with a high net worth have a separate "umbrella" policy to insure against a lawsuit seeking an amount beyond their auto policy's limits. You may need to buy higher insurance limits to qualify for an umbrella policy.

Property damage. This coverage pays to repair or replace another person's vehicle or other property damaged by your car. States typically require only $10,000 to $25,000. We suggest buying coverage of $100,000.

Uninsured and underinsured motorist coverage. This covers medical bills, rehabilitation, and funeral costs, as well as losses for pain and suffering for you or the passengers in your car when an accident is caused by a hit-and-run driver or someone who has little or no insurance. Get the same amount of this coverage as you do bodily injury coverage. That way, if someone who has no insurance hits you, your medical costs will be covered.

Coverage you'll probably need

Collision and comprehensive. Collision coverage pays to repair or replace your car no matter who or what caused the accident. Comprehensive pays to repair or replace your car if it's stolen or damaged as a result of a storm or other natural event. Coverage kicks in for the amount above your deductible. Choose the highest deductible you can afford to pay out of pocket--at least $500. Once the cost of this coverage equals 10 percent of your vehicle's book value, you might want to cancel it, since you will collect no more than your vehicle's market worth. Antique vehicles or cars with collector value sometimes are insured through a separate rider; or you may have to find a separate, specialty insurer.

Personal-injury protection. PIP reimburses you for lost wages and in-home care needed as a result of an accident. If you have separate health and disability policies, you can buy just the state-required minimum for PIP. The other policies should cover the balance of your needs.

Medical-payments coverage. Sometimes called med-pay, this covers medical bills for you and your passengers, regardless of who's at fault. When this coverage isn't automatically included in your policy, its costs are minimal. You may not require any if you have good health insurance. To protect passengers who may not have their own health coverage, you may want to carry at least $5,000 of this coverage.

Additional types of coverage

Roadside assistance. This coverage pays to have your vehicle towed. If you already have an auto-club membership or your car's manufacturer provides this service for free, don't buy this extra coverage.

Rental reimbursement. This coverage typically costs $30 per year and pays for a rental car--usually for up to 30 days--if your vehicle is stolen or is in the shop for repairs sustained in an accident. There's usually a cap on the amount you're reimbursed per day and per occurrence.


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