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Car Insurance Guide: What To Cover, What To Save

When it comes to buying car insurance, everyone wants to get a good deal. An unavoidable necessity, car insurance can be costly or you can help pare down the expense by taking advantage of discounts and shopping around.

There are, however, some absolute requirements in terms of what to cover. When it comes to what to save, you have some flexibility and some options.

What to cover

The big five are liability, collision, comprehensive, uninsured/underinsured and medical expense coverage.

  • Liability insurance requirements. Every state has minimum liability requirements that drivers in that state need to comply with and the amounts vary from state to state. In California, for example, the law requires minimum liability coverage of $15,000 for injury/death of one person, $30,000 for injury/death of more than one person, and $5,000 for property damage, listed as 15/30/5. In Washington State, the minimum requirements are 25/50/10.Note that if you buy or lease a new vehicle, the bank or leasing company will require that you carry certain amounts of liability insurance, typically a maximum of$300,000 per occurrence. Liability insurance covers medical bills and the property of others if you are at-fault in an auto accident.
  • Collision. When you are in an accident, collision coverage pays for the cost of repairs to your vehicle. Make sure to ask whether this coverage applies if you are at-fault in the accident. If your vehicle is not worth very much, you may consider lowering this coverage--but maintaining other coverage is required.
  • Comprehensive. Damage to your vehicle can occur from something other than a collision. Comprehensive coverage pays for damage caused by vandalism, theft, fire, objects falling on your vehicle, glass breakage, animal damage and other events. For the same reasons as with collision coverage, you may consider lowering this coverage over time.
  • Uninsured/underinsured motorist. If you are hit by a driver without insurance or who is underinsured, this coverage helps cover bodily injuries to you and your passengers and, in many states, may also cover property damage.
  • Medical expenses. This coverage helps pay for medical bills for you and your passengers, regardless of who was found to be at-fault in an accident.

What to Save

Some car insurance options you may wish to forgo, or cut down on the amount of coverage.

  • Increasing deductibles. If you have a new or newer vehicle, collision insurance is a must. But you can help shave the total cost of the policy by increasing the deductible to $1,000 from a lesser amount, say $500 or $250. Likewise, you can increase the deductible on comprehensive to save money. If your vehicle is 10-15 years old, you may consider dropping collision and comprehensive coverage.  
  • Eliminate rental car replacement. Suppose you have an accident and your car will be in for repairs for a week. Rental car replacement picks up the daily rental cost. If you have another vehicle or means of transportation, or if your car is new and courtesy cars are provided as part of your warranty, consider eliminating rental car replacement on your policy.
  • Roadside assistance/towing.  This coverage provides help when you are stranded due to a flat tire, dead battery, engine failure, or locking yourself out of the vehicle. You may, however, have such coverage elsewhere, as in from AAA, or through a safety and convenience service from the auto manufacturer, in which case you can drop this coverage from your policy and save a bit more.
  • Loss of income. If you have disability insurance where you work, you can leave this coverage off your auto insurance policy. Loss of income coverage helps pay for living expenses if you are injured in a car accident and have to miss work.

Other ways to save

Make use of all available discounts. This is a big one where you can save a lot of money on your annual auto insurance premium. A recent survey by InsuranceQuotes found that about two out of five drivers either don’t receive a discount from their car insurance company or aren’t aware they’re getting a price break.

Typical discounts include:

  • Insuring multiple cars with the same insurer.
  • Bundling - having more than one policy with the same insurer, as in auto, homeowners, life.
  • Safe driver – remaining accident-free for a specified period of time, typically about three years.
  • Low annual mileage – driving less than average policyholders each year, generally under 10,000 miles.
  • Safety devices – having certain safety devices installed or as factory equipment, as in anti-theft devices, airbags, anti-lock brakes
  • Defensive driver – taking a course (offered by AAA and AARP, for example)
  • Good student – maintaining a B average in school
  • Longevity – being with the auto insurer for a certain period of time, 3-5 years
  • Pay in full – paying total premium at one time, instead of making installment payments.

It’s also smart to comparison shop auto insurance coverage annually, before your current policy expires. Just be sure that the coverage quoted is the same across insurers. Not every low-cost insurance policy is going to be right for your needs and available discounts vary widely, so it pays to shop around. You might find a better deal, or determine your best bet is sticking with your current insurer.


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