Auto Insurance - FAQ

Q. What type of auto insurance is available for my Camaro (or any other daily driver you own)? I have a daily driver but I'm all confused about the types of auto insurance ... what are my options? Click here for classic car insurance information.

A. Auto insurance will never qualify as "easy to understand" and that increases the chances you could make a costly mistake. The following is true for
most vehicles or what is normally referred to as the daily driver. However, if you are interested in information on car insurance for classic, collector or exotic cars please see our FAQ on classic car insurance. Typical auto insurance can be classified into four different types of coverage: two are mandatory and two are optional. Everybody is required to have Bodily Injury Liability, which provides coverage if you or anyone else is injured, and Property Liability Coverage, in case you damage another car or piece of property. Collision Insurance is an important option for more expensive cars, since it provides coverage no matter who is at fault, as is Comprehensive Coverage, which covers repairs - and replacement - if your car gets damaged in a non-car related mishap. Things like a tree limb falling on the hood or hitting a deer or dog or other animal large enough to cause vehicle damage.

A typical minimum amount of mandatory coverage is often expressed as 30/50/20. This means you have $30,000 worth of bodily injury coverage for each person, with a $50,000 limit per accident, and then $20,000 in coverage for property damage. This coverage is very important. The above may satisfy your state's minimum requirements but you should definitely think about a policy that provides 100/300/50 if you have significant assets. In fact, I would play it extra safe and get 250/500/100 coverage. What you want to avoid is having someone sue you and come after your personal assets to settle an auto insurance claim. If you do not have sufficient coverage you are putting all your finances at risk just to avoid paying a more expensive premium.

If you are buying an expensive car, you should check if your insurer offers Replacement Cost Coverage. Typical coverage only pays you the depreciated value of your car and not what it will cost you to go out and buy the same car again or in some cases pay off your totaled out car. Since cars start depreciating the moment they leave the dealer lot you might want to make sure that at least for the first few years you own your car you won't be caught short if it gets totaled.

In selecting an auto insurance company you should try talking to friends and colleagues to see if they've got any good (or bad) insurance stories. You want to work with a company that has great customer service and is quick to handle your questions and claims. All the coverage in the world isn't going to feel that great if you are waiting days and weeks to get your claim approved and processed. There's no better gauge of how consumer-friendly an insurer is than word of mouth.

Make sure you check with your home insurer. Most home insurers also offer auto insurance discounts of 10 percent or more by combining your home coverage with your auto coverage.

The following is a list of things auto insurance companies consider when figuring the cost of your auto insurance coverage.

1. The better your credit score lower your insurance premium
Your credit record can play a role in the premium you are offered. This is a somewhat controversial and not used by all insurers but you should still be aware of it. Some insurers have figured out that if you have a good credit record you're less likely to make claims. Conversely if you're bad at managing your debt, there's a likelihood you're going to be an expensive driver to cover. A University of Texas study found that drivers with the worst credit scores had auto claim losses that were more than 50 percent higher than the average claim, while the claims of those with the highest credit scores were 25 percent less than the average.

2. The better your driving record the lower your insurance premium
This goes without saying that having a bad driving record can be very costly when getting auto insurance. Contact your DMV to find out exactly what shows on your record. Are old points still showing up, even though you know they have expired? Don't expect your insurer to keep tabs on points that expire; you need to be the one who tells them.

3. Increase your deductible
In most cases there is no sense in having a low deductible. The last thing you want to do is make a lot of small claims. That's a good way to get your premiums raised or have your coverage turned down when you are up for renewal. You can cut 15 to 30 percent or more from your premium by increasing your deductible from $500 to $1,000.

4. Get a low risk auto and not the latest most expensive vehicle
Cars with street cache are going to cost you more to insure just because they are the likeliest targets to be stolen. Currently a Cadillac Escalade is the most "popular" car to steal. Before you buy your next car you might want to check out the Insurance Institute for Highway Safety's ranking of cars with the "Highest Theft Claim Frequency."

5. Young drivers can greatly increase your premiums
Make sure the young drivers in your family are good drivers. Don't just leave it to the Driver's Ed class they took in school. Get in the car with your kids - a lot - and make sure they are confident yet cautious. Your childs first car should not be a new car. You want them driving something safe but at the same time ... used. A new young driver in a new car is going to wreak havoc on your premiums. Also a year before your child is ready to drive, make sure they understand how they can help you with the insurance: a "B" average or better can often get you a reduction of up to 20 percent on their coverage.

6. Being single equals higher premiums
Single men under the age of 30 are auto insurers' nightmares. Interestingly, married men under 30 are less of a risk. So if you get married you should let your insurer know. You may now qualify for a lower premium.

7. Don't carry collision coverage on that old not so perfect vehicle
Once a vehicle gets to the point where you figure you won't be able to get more than a few thousand dollars for it you should drop collision coverage. There is a point where it's just not worth carrying collision coverage on a vehicle that is paid for and/or already completely depreciated out and would not be worth fixing back anyway.

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