Imagine driving to a secluded airport, boarding a Cessna 172, climbing to 9,000 feet, then jumping out with only some thin strings and even thinner cloth to allow you to float back down to earth. Sounds like a pretty risky decision, doesn’t it? How about driving to Rattlesnake Mountain just north of Birmingham, Alabama and going for a long hike? They call it Rattlesnake Mountain for a reason. How risky is that? Of these two scenarios, the riskiest decision is the decision to get into the car. You have a greater chance of dying or being injured in the vehicle on the way, than you do once you engage in the activity.
Every time you get behind the wheel, you are literally taking your life into your hands. The simple act of driving IS the riskiest decision of your life and you probably do it on a daily basis, without giving it a second thought. The reason you probably don’t think much about it is because of your car insurance. We buy insurance to reduce the risk of financial loss should an accident occur, but you risk financial losses and surprises just buying the insurance. Here are some secrets to buying car insurance:
1. There are discounts galore. Make sure you ask your agent what discounts he or she gets (other than employee discounts). Ask for a list of all available discounts and the requirements to get them. There are potential discounts for:
- Students with good grades
- No accident discounts
- Multi-car discounts
- Discounts for multiple policies
- Good credit discounts (yes, they check your credit)
- Discounts if your teenager takes a driver’s ed course
- Discounts if the car has safety features
- Discounts for paying for a full year
- Discounts for higher deductibles
2. Your coverage limit may be too low. Many insurance agents push what’s called “state law minimum” in an effort to write as much business as possible. Insuring yourself to only the state law minimum is probably asking for trouble. Most policies in force today have only a $30,000 to $50,000 limit on property damage from a single accident, so if you’re in an accident with a $40,000 SUV and you only have $30,000 in property damage coverage, who pays the additional $10,000? Answer: YOU. Don’t let a slimy TV attorney take you to court and potentially ruin your life because you were too cheap to get adequate coverage limits. Judgments follow you for a long time. Ask your agent for recommendations, keeping in mind the litigious nature of our society today. I personally carry $500,000 in coverage, but that is my personal choice.
3. Don’t get surprised by the incredibly low value your insurer will place on your vehicle if it’s totaled in an accident. Most insurance companies have their own valuations and no two are exactly the same. Your best bet is to ask. Your insurer will consider how old the car was, its mileage, its condition, and then prorate it some more. It will disgust you, plan on it. Your best defense is to buy gap insurance to cover the difference. Barring that, you do have the option of negotiating with your insurance company or going to mediation or arbitration to settle your dispute.
4. Do not overpay, but price should be secondary to protection. All companies are not the same, coverages are almost never the same even at first glance. Your coverage is usually quoted as a “summary” of proposed protection and the limits are the same, but what goes into the policies may be radically different. One company may pay $30/day for a rental vehicle (should you need one) while your car is being repaired. Another may pay $50. One may cover towing, another doesn’t. One may pay for any shop to repair your car, another makes you jump through hoops and will only let you use one of their “authorized” repair shops. Remember, insurance isn’t a commodity. It is almost impossible to make a good apples to apples comparison without reading the actual policies and you usually don’t get to see these until you’re already committed. Ask questions on the front end. Ask to see a copy of your potential policy. Then read it and make a list of questions, imagining yourself having to file a claim.
5. If you decide to cancel your policy, do it in writing. Don’t just ignore your last bill from your old company if you’re changing insurers. When you don’t pay as agreed, the insurance company can zing your credit report for non-payment. The way they see it, they were providing a service (coverage) and you failed to live up to your end of the bargain (payment). Usually your policy will state it very clearly (you did read the policy, didn’t you), “This policy can be canceled by notifying the company in writing.” Make sure your credit doesn’t get zapped.