Monday, April 16, 2007

Buying Car Insurance

Finding the perfect car insurance is a matter of shopping around, asking friends and making sure to qualify for every discount available. It is also important to make sure to get the right kind of car insurance.

People who have just purchased a new car or have a car that is not paid for need to opt for an insurance policy rider which covers the replacement costs of the car or pays the car off in full in the event that the car is totaled, this is called GAP insurance.

Most car insurance policies pay the amount the car is worth on the day that it is damaged, the car's Actual Cash Value or ACV, not necessarily the amount that is still owed on it. Many car financiers will offer this type of rider as part of the financing option, but car owners should also determine before signing the financing offer if they can get the same service from their standard insurance company. Generally speaking, going through your regular insurance agency will mean that it costs less.

Persons purchasing car insurance for the first time will also need to determine what type of insurance they need. For a car that is financed, full coverage insurance will be needed. This type of car insurance will pay the amount the car is worth, minus the deductible, after the car had been damaged, no matter who is at fault for the damage.

Liability insurance is the insurance required by most state's to legally operate any motor vehicle. This type of car insurance pays for damage to the other person's car or property that is your fault. It does not cover damage to your own vehicle.

The other important things to consider when discussing car insurance are liability limits and deductibles. For liability insurance, most states have a minimum amount that is required, usually $25,000 or $50,000. Many people decided that this is the amount of insurance that they should have.

The problem with this approach to car insurance is that the liability amount is the maximum amount your insurance company will pay if an accident occurs. If there are more damages than that amount and the accident was your fault, the other people involved in the accident can sue you for the difference.

That means that if they suffered $75,000 in damages between their car, medical bills and other expenses and you only have $25,000 in liability, you could have to pay the other $50,000. And, since almost no new vehicles cost less than $25,000, the chances are pretty good that in a severe accident, the damages could far exceed minimal liability limits.

One way to afford higher car insurance liability limits is to increase your deductible. Most people have their deductible set considerably lower than it needs to be. This is based on the fact that most of the time, you will not have to pay a deductible unless you are at fault in an accident and there is damage to your own car.

So, choosing to go with a deductible of $1,000 instead of $500 could be difficult to deal with if you are at fault in an accident, but it would be a lot easier to afford than the $50,000 you could face if your liability limits are too low. Often, doubling the amount of you deductible will allow you to keep your car insurance premium the same while increasing your coverage.

Once you have determined what your car insurance needs will be, it is important to ask around to find the right company and agent for you. Price should be a consideration, but you should also check into their reputation for handling claims promptly. Some insurance companies also offer discounts for multi-policies held by the same person, so consider having your home or life insurance through the same company as your car insurance.

About the Author

Dennis runs Car Dealer Check which has reviews on Wisconsin Car Dealers including Milwaukee Car Dealers.

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