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Auto Insurance

How to Decide How Much Car Insurance Coverage You Need

By August 15, 2018 No Comments
car value

Car insurance is a contract between you and an insurance company of your choice. Depending on your coverage, it protects you against financial loss in case of natural or man made accidents. The contract stipulates what would happen in the event of theft or an accident.

It clearly explains what costs the company is responsible for and also under what circumstances. In exchange for these services, you are required to pay a premium to the insurance company.

Having vehicle insurance is compulsory therefore it is important to know how much coverage you need. Possession of this knowledge saves you from paying too much for a policy. It also saves you from being under-insured.

Tips To Guide You When Deciding How Much Car Insurance Coverage You Need

Value of your car

The value of a car is the same as its market value. It is the average price a dealer would be willing to pay for it. If your car is new, you may want to consider paying for extra coverage. This includes policies like comprehensive and collision. Collision covers the cost of damage to your car in case of an accident while comprehensive covers the cost of miscellaneous damages.

The miscellaneous damages are caused by either fire or theft. These two covers are usually sold together and are referred to as physical damage coverage. They are not required by law but they sure come in handy. If your vehicle is old, the extra coverage is unnecessary. Note that cars depreciate quite fast, so you need to do an evaluation of your new one. It will help you decide when to stop paying for extra policies.

Are you paying for another insurance coverage?

When it comes to insurance, there are different types of coverage. Examples include property insurance, fire, social, and life insurance. Varying insurance covers tend to have some similarities. For example, personal effects coverage is similar to a homeowner policy. A vehicle insurance coverage may offer additional policies that are similar to another coverage such as personal injury protection.

You should, therefore,understand the car insurance options you have. Analyze and compare each to other coverage you might be paying for. It will help you avoid spending more money on something you will not benefit from.

Capability to pay for car damages

A deductible is the portion of losses you will have to pay for before the insurance company pays for the rest of the injuries. For example, if your deductible is $400 and repair costs $2100 the insurance will pay $1700. This amount applies typically per claim only. In case of another incident afterward, you will have to spend another $400.

The main consideration to make here is whether your financial position allows you to pay part of your car damages? If yes, how much can you afford to part with? To get a cheaper car insurance coverage, you will have to pay a higher deductible. This is a smart move, but it is only advisable to do so if you can afford to set aside the amount you are committing to pay.

car accident

Presence of assets to protect

An asset is something valuable owned by an entity. It may have some use or generate benefits that are considered worthy. An asset can be a valuable thing or a person. When you have assets to protect, having liability insurance comes in handy. It protects those around you. This includes another driver you might injure.

The cover takes care of their repair and medical bills up to the policy limits. If the damages are, however, higher than what the policy covers you could face hefty legal accusations. The cover can protect you if you pay for enough liability protection. The amount you decide on will dictate how much you will pay in total for car insurance coverage.

Look at government requirements

Different governments have varying legal requirements for car owners and drivers. Some regions require car owners only to have the liability coverage while others require their citizens to have extra coverage. Paying for more than the minimum is advisable as it will adequately protect you. Knowing your region requirements and deciding on how much to add on top will help you plan and know how much car insurance coverage you need.

Consider what your medical insurance covers

Medical insurance is also known as health insurance. It is a coverage that provides payment of benefits as a result of sickness or injury. There are, however, some health covers that are not inclusive of some vehicle-related injuries.

In such a case, you might consider taking a medical payments coverage. It pays for deductibles as well as funeral and rehabilitation costs. This cover is only necessary if you face high health insurance deductibles.

medical insurance

Do you need extras?

Some services are considered as extras. They include rental car coverage, roadside assistance, and sound system coverage. If you find such things to be important, you may want to pay for a policy that covers them. For the audio system, only take a cover for it if it is customized. Also, you do not need to pay for rental coverage if you can always access and take public transportation. The amount you will have to spend on top is small but will add up to your bill.

Look at your budget

There are universal needs, and there are those that are relative. When it comes to car insurance, the needs are relative. They differ from one person to another. Insurance companies also have different packages. Before deciding on the type to purchase, ensure you have options. Study each policy. The names and terms might be the same, but details may vary.

The benefits of studying each policy is that it helps you identify what you need and what you do not. It helps with the elimination process, making it easy for you to select one that suits your needs. In other words, it ensures you stick to your budget.

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