Dear Insurance Adviser, It's time to renew my car insurance policy. Can you give me some advice on how to review my coverage and maybe find some savings? -- Ready to Deal
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Dear Ready, Here are some guiding principles for buying any type of insurance, including car insurance.
Don't risk more than you can afford to lose. Don't risk losing a lot of coverage for a little premium. Remember that the cost of insurance is not only what you pay upfront in premiums but also -- and more importantly -- what you pay out-of-pocket at claim time because you had the wrong coverage. Have a balanced insurance program. Make sure you're well-covered on all the major risk areas: major lawsuits, death, long-term disability, major medical expenses, and major damage or destruction. Work with an insurance agent or agents with a lot of expertise in the type of insurance you need. Experts cost exactly the same as nonexperts. When you shop for insurance, shop for the agent's expertise first. Have your expert agent help you design your coverage specifications and shop all of that for you. Then you can be sure you're shopping for the right coverage.
Applying these principles specifically to your car insurance decision, here are a few tips that may help. Buy lots of liability coverage for people you injure in a car accident -- at least $500,000 worth. And whatever limits you do buy, make sure that they match the liability coverage on your other insurance policies.
Buy lots of protection to compensate you for your own injuries caused by uninsured or underinsured drivers. But don't spend extra money for increased medical payments coverage for your injuries because your health insurance covers medical bills in car accidents. Buying more coverage for medical expenses caused by car accidents primarily benefits your health insurance company. (And they won't even send you a thank you card!)
If you carry collision and comprehensive coverage on your vehicles, opt for high deductibles, but only if they result in price discounts large enough to make it worthwhile to take on the extra risk. Increasing the deductibles to $500 or $1,000 usually pays for at least $200,000 of extra liability coverage.
Don't carry collision and comprehensive car insurance coverage on any vehicle you can afford to conveniently replace (in other words, vehicles worth less than $2,000 or $3,000). Use the savings to afford more major loss coverage.
I hope this information is helpful to you.