How to Choose the Right Automobile Insurance

Choosing the Right Car Insurance: Auto Insurance Tips

Long before Artificial Intelligence (AI) generated content came to be, I wrote a blog called “Choosing the Right Life Insurance” and surprisingly it turns up on my Google Analytics a lot as a popular page. I’ve written this entirely on my own, no AI assistance, editing or polishing so you may see typographical errors (typos) or grammatical errors.

I’m going to share my favorite Auto Insurance Tips. I’ve been a licensed driver since 1992 and lived in Pennsylvania, New York City, and Tennessee. I drive regularly from Tennessee to New York City as well as Ohio, Georgia, and Alabama. Auto insurance is very important when you drive as much and as far as I do.

Overall I recommend an Independent agent. An independent agent is someone who can research, quote, and compare rates / coverage from different insurance carriers as opposed to representing or being ‘captive’ to a single company. They can also assist in claims and servicing your policy as well as other lines of insurance for your stage of life. Insurance should always be re-evaluated during life changes like marriage, children, graduation, divorce, and other major shifts.

I recommend to consider both premium rates and coverage. Many people just look at the premium rates – like when people shop for a car the tend to look at the monthly payment not the total cost of the car. A bonus tip is to consider the monthly cost of insurance when purchasing a vehicle. Some people research average repair costs, cost of gas for their specific commute based on the car’s performance, and how fast the car depreciates but few people consider the insurance premium which can vary greatly from vehicle to vehicle. Insurance premium rates are what you pay each month for the policy while coverage is what you get for that policy. If I pay a low rate but also have an accident and discover the coverage was not enough or what we might call ‘inadequete’ we may wish we paid more for better coverage. Coverage is just as important as premium.

• My first tip is to choose coverage above the state minimums. Auto insurance is designed to transfer risk from you to the insurance company. Accidents have high payouts due to increasing medical costs, use of lawyers to challenge payouts, and increase in cost of automobile parts for repair as well as labor.  I tend to maximize coverage especially since I see all those commercials saying hiring a lawyer can get you a bigger auto accident payout – that money has to come from somewhere and if your coverage limits are too low, that somewhere is your assets, especially if you do not have money set aside in an emergency fund.
  
• My second tip is to create an emergency fund so you canincrease your deductible. Increasing the deductible lowers your premiums and lets you self-insure for the small stuff.  If you have $1000 in an emergency fund you don’t touch, then you can self-insure for cracked windshields, broken windows, and pot-hole damaged wheels and tires. I’ve always paid cash to fix windows, windshields, and pothole damaged tires. It avoids a claim which I always viewed as a ‘short term loan’ because you’ll make that up in increased premiums over the next 3 years. I view anything under $3000 as self-insure over short term loan because the average increase over 3 years can come close to the amount you pay out of pocket to self insure at the time of a small accident. Think of every self pay as a claim you are not filing. It’s not necessarily your likelihood of getting into an accident as much as your likelihood to file a claim. Affluent people get in accidents all the time but they self insure fixing small damage themselves and their premiums stay the same. Less affluent people don’t get in accidents all the time but when they do they file a claim for the small stuff which makes them a bigger risk to the insurance companies. If you can self insure your entire ride then you can make other adjustments as well such as comprehensive and collision.
  
• My third tip is regarding comprehensive and collision coverage or “comp and collision”. When it comes to comprehensive and collision on vehicles that are paid off or that you own in full, I consider two calculations: The first is replacement vs. premium – if the vehicle replacement is $1500 and I have $1000 in an emergency fund and comp / collision $100 more per year combined, then in 5 years I will have exceeded the payout if the car is totaled. If however I don’t have savings and the replacement is higher, then comp and collision are necessary because it will keep me going. Keeping going is important even if the vehicle isn’t involved in an major accident. The other side is that if comprehensive and collision does not add very much to the premium especially extended out 5 years, it’s a no-brainer to do it.
  
• My Fourth tip is regarding road service to keep you going. I am a firm believer this is one area you can double up in. Many insurance plans have additional coverage for road service and towing but you have to look at any shared costs, towing limits, and incident limits. In addition, affinity groups like AARP join with clubs like the Allstate Motor Club which offers additional coverage. Good Sam is known for Recreational Vehicle (RV) coverage and AAA (Triple-A) offers longer tow distances. Finally, both road hazard coverage on tires during purchase as well as exploring your state’s laws on pothole damage can help keep you going. So when it comes to auto insurance I always choose to include what the insurer has and augment with an outside service, point of sale coverages, and state laws for those bigger-than-life disasters.

Auto insurance requires many considerations. There is a lot of AI content out there designed to sell you a policy or compiled from the insurers themselves but this is my life experience of being a driver as well as paying insurance premiums at different companies since the early 1990’s.