Car Insurance That Matters Most
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A special money-saving feature in your Collision coverage is called a deductible. People generally don’t like deductibles. They think, “Why am I paying the insurance company a premium if I have to pay a deductible before they will pay me anything?” You must change your way of thinking about deductibles. A deductible is an opportunity to take responsibility for your financial setbacks. That’s because the higher the deductible, the lower your premium. For instance, if you were to raise your deductible from $500 to $1,000, you would see a significant reduction in your premium costs. Some companies allow you to raise your deductible to $2,500 or higher.
But “I can’t afford to pay $1,000 to have my car repaired!” you might say, “That is the reason I have insurance”. It is the wrong reason. You will in fact pay the insurance company much more than $1,000 over time to protect you from what is a financial setback, not a catastrophe.
If you were to take the difference in premium you would save from raising your deductible and invest that money in insuring yourself, it wouldn’t be long before you would have $1,000 set aside. With a $1,000 deductible, the most you would stand to lose in a total loss is $1,000. This is a painful financial setback, yes, but not financially devastating.
Save $2,500 to insure your vehicle, and a $2,500 deductible reduces your premiums even more dramatically. Keep saving until you have enough to match the actual cash value of your vehicle and you can drop your Collision Coverage altogether. You have insured yourself. By the way, it is never wise to owe the bank more than what your car is worth. Insurance companies only pay for the value of a car, not the size of the loan.
Now let’s look at the other kind of car insurance, Liability Coverage. This is the kind that is designed to pay for the expenses that result from physical injuries that occur to any people who are injured because of your driving mistake.
If you are in an accident that is your fault and someone is injured as a result, what kind of expenses might we be talking about? It depends on the extent of the injury and the number of people who are injured. With medical expenses as they are today, how much would it take to pay for the care of someone who was paralyzed in an auto accident? What would the surgical expenses be? Hospitalization? Rehabilitation? How much would it take to pay for the injured person’s loss of work? We’re not talking about thousands anymore. We’re talking about potentially hundreds of thousands. A loss such as this would indeed be a catastrophe.
Unfortunately, Liability Coverage is where people often choose to limit their coverage to their particular state’s minimum requirements. State limits are often presented like this: $25,000 per person, $50,000 per incident, and $10,000 in property damage. That means that in an accident, the most your insurance company would pay would be $25,000 for each person you injured not to exceed a total cost of $50,000. Also, you would be protected for up to $10,000 in damage to the other person’s vehicle. How many days in the hospital would $25,000 cover? Not many. So who pays for the additional hundreds of thousands in medical costs? You do.
What many don’t realize is that the most expensive part of their car insurance policy is their Collision Coverage—the part that protects you the least. Liability Protection is inexpensive, yet provides the most coverage against catastrophic loss. You can increase your coverage to $100,000 per person, $300,000 per incident, and $100,000 for property damage for only a few dollars more per month.
So, to save money right away while increasing your coverage where it really matters, raise your deductible on your Collision Coverage to $1,000 or $2,500. If you don’t yet feel comfortable going that high, do whatever it takes to save $1,000, and when you get there, raise your deductible. I know, I know, easier said than done. But would you rather pay yourself, or forever be paying the insurance company? $1,000 is an achievable goal and it puts you in control of your coverage. If your car is older and paid up, drop the Collision coverage altogether and raise your Liability limits as high as possible.
Congratulations, you have now discovered the cheapest and best car insurance on earth.
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