15 Things You Need To Know About Buying Auto Insurance

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This is the first in a multipart “How To Not Suck…” series on insurance. Upcoming installments will cover homeowner’s, life, long-term care, and disability insurance.

Whether you just drove off the dealer’s lot in a shiny new vehicle or you’re puttering down the highway in an old clunker, you must protect yourself, others, and your two/three/four/eighteen-wheeled investment with auto insurance.

Cheap rates are important, but cheap means nothing if your policy won’t cover you if you’re in an accident, or the victim of a wayward grocery cart, or the target of a penny attack.

Here are 15 things you may not know — or that you need to know — about insurance for your wheels.

1. Minimums? What minimums?
Sure, buying the minimum amount of coverage allowed by law (or by your lender) will save you money, but it won’t save you anything in the long run if you ever have a claim. For example, if you choose a high deductible policy, you’ll have cheaper premiums. But that also means you’ll have to fork out more cash before you can make a claim. If you have a huge emergency fund, maybe that works for you, but you could spend more in the long-term. (Take a look at your state’s minimums but seriously consider taking more than the absolute mininum.)

2. Yes, larger deductibles mean a lower premium, but think about what an accident would cost you.
Let’s say you have $5,000 in repairs. A $1,000 deductible means you’ll have to pay out-of-pocket for 20 percent of the costs. If you have a $250 deductible, you’ll only be paying one-twentieth of the costs. You’ll have to weigh that with the difference in premiums for high-deductible policies.

3. There are discounts for everything out there, and that includes your auto insurance.
Many vehicles come with safety features and alarm systems that will lower your premiums (so don’t buy without talking to your insurance agent, and also read more about which cars are the most and least expensive to insure).

You may also save by having a good driving record, taking a defensive driving course and being a customer for a certain number of years. Ask you agent about the discounts for which you might be eligible.

4. In many states, where rates are set by law, cheaper insurance simply means less coverage.
If you live in a state where the rates are pre-set, think twice before taking a less expensive policy because it may not give you what you need. Check the state-by-state requirements, and you can visit your state’s insurance department for more information. And if it’s your thing, learn more about trends in state regulation and insurance rates.

5. Combining policies can save you money…
It’s not just ad-speak; some insurers will knock off up to 15% from both your auto and home policies if you bundle them together. Just make sure both policies provide the right amount of coverage.

6. But it still pays to shop around.
While you can get healthy discounts for being a long-time customer and for having more than one policy with the same insurance company, it still pays to shop around once a year. A study by InsWeb.com found drivers saved more than $300 on policies when they switch. That shows you have to shop around — regularly.

7. Check to see if your insurance will get you a loaner car.
If you have an accident and you need a rental car, you’ll find that having some kind of coverage that gives you an allowance for a rental will long-term be cheaper than paying out the full price for a rental.

8. Don’t lie.
You might save a few bucks by saying you park in a garage instead of on a street, but chances are the savings are very small compared to what could happen in you get caught. If you get found out, you could face higher rates or you may be dropped altogether. Also be honest about listing the drivers who may operate your car.

9. File claims judiciously.
Your insurance is there to protect you, but you could be in for higher rates if you file a claim every time a grocery cart rams your side panel.

10. Do the math on installment payments.
Installment payments for insurance policies are a cash cow for the insurer, and it takes as much as $10 a month out of your pocket. Yes, that’s $120 a year for the luxury of paying for your policy over time. If you can afford it, or if you can plan ahead and save, pay for your policy in one shot, or twice a year, rather than monthly.

11. Some employers cut deals with insurance companies to give their employees discounts.
Ask your boss if your company has any side deals for car insurance. Also call your college and any industry groups to which you belong to see if they offer group discounts to members.

12. If you use your vehicle for work, you may not have the coverage you expect.
You probably purchased a personal policy, but if you’re constantly driving as a salesperson or a pizza delivery person, make sure your policy covers your work use of your vehicle.

13. Red means nothing.
That’s right — having a red car doesn’t mean you’re a bad driver or that you’ll drive irresponsibly — and, contrary to a popular myth, it therefore has nothing to do with the price of your insurance.

14. Thieves don’t care about the price tag.
You might think your wheels are the hottest, but those stolen most often are nabbed because their parts earn a lot for the thief. How often your make and model is stolen can have an impact on your premiums, too. Take a look at the most commonly stolen cars of 2012, the most recently available year.

15. Review, review, review.
As your vehicle gets older, you may not have the same needs as you did when it was bright and shiny off the lot. Consider lowering some of your coverages if your vehicle already has a few dings that you’ve decided you’re willing to live with. If you car is worth $1,000, do you really need collision and comprehensive coverage?

In closing, dear readers, remember why insurance is so important:

We never did find out about Cameron’s dad’s coverage, did we?

Next week, we’ll look at homeowner’s insurance!

Have a topic you’d like to see covered in How To Not Suck? Or maybe you’re an expert who would like to share your insight with Consumerist readers? Send us a note at notsuck@consumerist.com.

You can read Karin Price Mueller’s stories for The Star-Ledger at NJ.com, follow her on Facebook, and on Twitter @kpmueller.

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