Make wise decisions on auto insurance
Whether you are buying insurance for a new car or for an older second car, there are many choices to make.
Collision insurance: When a vehicle is financed, the lender requires collision insurance. It pays for damage to your vehicle in an auto accident when you are at fault. In a total loss, it pays the fair market value of your car or truck.
Comprehensive insurance: It's similar to collision, but also covers damage to your vehicle by an unknown party or "act of God." Vandalism, flood, hurricane, theft and fire are usually covered, but check the policy for the details.
Liability insurance: If you are at fault in an accident, you could be held liable for medical and repair costs for everyone involved. Liability coverage won't pay for your vehicle, but it can shield you from cost of damage to others.
Some owners of older vehicles choose liability coverage only. Adding comprehensive insurance for a vehicle valued at $3,000 more or less costs little, and could be very helpful if you have to replace the car.
Bodily injury insurance: If people are injured in an accident and you are at fault, this insurance will pay for medical expenses, loss of income, funeral expenses, legal defense fees and more. Consider purchasing the highest limit you can afford.
Property damage liability insurance: It pays for structural damage to homes, storefronts, stationary objects, vehicle repair or replacement costs when the accident was your fault. It can protect assets in the event of a lawsuit resulting from a covered accident. Consider buying the highest limit you can afford.
Insurance agents usually present a comprehensive or collision policy with the addition of bodily injury, liability, and other features insurance listed separately on the bill. The coverages may be limited, but you can raise them.
Gap insurance: When you buy a new car, its fair market value is reduced significantly in the first months you own it. And some long-term finance plans result in the loan being larger than the market value of the vehicle for two or more years. To fill these shortages in coverage, gap insurance can help.
To save on insurance costs, increase the deductible amount. There is a 20 percent savings when the deductible is raised from $200 to $500 and greater savings if it is raised to $1,000.