If you are going to get a car, understanding car insurance basics is vital. Once you know the car insurance basics, you can get the appropriate insurance that fits your needs and budget.
One of the key decisions in deciding what car to buy is assessing how much all the other costs are that come with ownership. The purchase price and/or the car payments are just the most obvious of costs.
The two main other ownership costs to consider are maintenance and insurance. This article will teach you everything you need to know about car insurance basics. The better you understand car insurance, the more money you can save.
Car Insurance And Maintenance Basics
For new cars, maintenance costs are quite minimal, unless you have a lemon. Nobody wants to waste all their time going to and from the dealer. For used cars, maintenance costs are a much bigger issue. They can quickly eat into any savings you’ve made from not buying new.
You can learn more about auto maintenance costs in more detail here. For now, let’s talk about car insurance costs.
I received my semi-annual car insurance premium bill the other day, and I was pleasantly surprised to discover it only costs $285 every 6 months to cover my dear Moose.
However, by not telling you the full details of what $285 gets, it’s hard to understand whether $285 really is good value. Let’s breakdown the line-items to better understand what car insurance options I get for my money.
Car Insurance Basics: Understand Your Options
First of all, you must have car insurance if you drive a car. It’s illegal not to. And if you so happen to cause an accident, you could very well be sued for all you have and go bankrupt.
Don’t be a donkey and not have car insurance! There are a lot of different options to choose from, and for the sake of clarity, let’s go through each one.
Along with the expenses associated with your own damaged vehicle, you can get sued by other motorists or by the passengers in your car. You must decide on appropriate coverage from all angles.
Here’s a look at all the car insurance basics you should be aware about. Select the features that best fit your individual needs.
Protect Your Financial Resources
The wealthier you are, the more important it is to have good car insurance. Here are some things car insurance also covers.
Bodily Injury Liability
If you hurt someone in an auto accident, the insurance company will pay a certain amount. In my case, I elected for $300,000/$500,000 per person/per accident for a cost of $115.
Property Damage Liability
If you damage someone else’s property in an auto accident, the insurance company will pay a certain amount. My insurance company pays $100,000 per accident to property at a cost of $84.
Protect Yourself And Your Passengers
Uninsured Motorists Bodily Injury
If an uninsured or underinsured driver injures you or your passengers, this option kicks in. I elected $300,000/$500,000 per person/per accident for $43.
Covers you or your passengers for any medical expenses. I have $100,000 coverage per person at a cost of $24.06
Wage earner disability benefits, essential services disability benefits, death benefits are blanketed under extended benefits. I pay $5.10 for minor distribution of all three. I have my life insurance and disability insurance from work to cover 100%.
Protect Your Vehicle
Comprehensive covers damage caused by something other than another vehicle such as hail, theft, collision with Bobo the bear. I chose not to get comprehensive coverage because Moose is worth no more than $4,000.
Collision covers damage to your vehicle caused by impact with an object other than an animal. Gray area here, given this is what comprehensive is for. I declined coverage.
Uninsured Motorists Property Damage
If an uninsured driver damages your vehicle, having this option will protect you. If an uninsured motorist damages Moose, I will just ask him to pay for everything.
Towing & Labor
Towing and labor coverage provides emergency roadside assistance. This includes services such as towing, flat tire, jump start, and delivery of gas. This type of service is a life saver!
I’ve run out of gas, had an older car not start before for some reason, blew out a tire, left my lights on, and each time needed roadside assistance. It typically takes no more than 45 minutes to get everything fixed.
I recommend everybody get towing & labor. I pay only $5.88 and I can’t believe it’s not at least $100 every 6 months.
Related: Your Car Insurance Might Not Be Good Enough
Cheap To Me Might Not Be Cheap For You
People often forget that having a nice car doesn’t stop once you pay for it in full. New cars will always come with at least a 3-year, 36,000 mile bumper-to-bumper warranty. So maintenance is not really an issue in the beginning. It’s the insurance costs for expensive cars that really start getting to you.
Moose is almost 12 years old and isn’t worth much more than $4,000. As a result, I don’t have comprehensive or collision since I will just write-off the $4,000 in case of an accident and buy a new car.
If I had a $165,000 Bentley Continental GT, you bet your buns I would have comprehensive and collision! It’s really just a judgement call though, as a Bentley’s insurance will probably run in the $3-4,000 range a year for me.
A $285 car insurance premium every 6 months equates to only $47.5 a month. That’s cheap for me since I’ve paid up to $200 a month for one expensive car that I bought new some 8 years ago. Everything is relative.
There are some grown adults who still free-ride off their parent’s policy to save money. Good for them if they can get mom and dad to pay for it or somehow latch on as a dependent with discounted rates. Meanwhile, there are those who have no assets, and therefore go without auto insurance to save money, even though that’s illegal.
You have to protect yourself from these motorists by getting your own insurance. You just never know. Finally, if you have a wealth of assets which your car insurance policy doesn’t provide enough for, you must get an Umbrella Policy that goes above and beyond your car and home property insurance.
Car Insurance Basics Tip
Shop around to save money on car insurance. It’s worth it!
The best place to get affordable car insurance is with Allstate. With Allstate, you’re in good hands. Getting a quote is free and easy. Make sure you have the best auto insurance possible to protect yourself and your family.
Every year, there are hundreds of thousands of accidents on the road. You need great auto insurance to protect your finances as well.
Eli Richardson says
I’m glad you talked about auto insurance and how it’s mandatory to have it! Recently, my cousin said she’s interested in buying her first car! I’m sure my cousin will need to get an auto insurance plan for her new car, so I’ll be sure to share your tips with her! Thank you for the insight on how we have many auto insurance options that’ll fit our needs!