Before setting out to insure your automobile there are two questions drivers should answer prior to buying an insurance policy.
“How much is the car worth and how much coverage is really needed?
Answering the first question is as easy as looking up what the car is selling for in the local newspaper’s classified ads or online at the National Automobile Dealers Association (NADA) or the Kelley’s Blue Book.
Knowing how much the car is worth will help drivers guarantee they aren’t paying more for car insurance than what they have to.
The second question is going to require a bit more contemplation.
“How much coverage is really needed?”
If your car is leased or financed, the financing agreement may require drivers to have full coverage on the vehicle so the question doesn’t really apply and drivers with relatively new cars may also want to have full coverage to protect their recent investment.
However for drivers pushing an older or used car let’s look at each individually before making a decision.
- Liability – Liability coverage is the mandatory minimum coverage required by almost all the states and the minimum amount of coverage varies between the states. Liability covers drivers if they are sued for property damage or personal injury claims when they cause an accident.
- Full-coverage –Whereas liability is the minimum required, full coverage is the maximum auto insurance package a driver can get. In addition to liability coverage, full coverage also includes collision and comprehensive coverage. Collision coverage pays a driver for damages to their own car in an accident, while comprehensive pays for damages to a driver’s vehicle for non-accident damages. Think hail damage, for example.
No matter which one you decide upon make sure that you do not buy more coverage than is actually necessary for your automobile.
A good rule of thumb is not to buy full coverage for a vehicle unless it is worth more than $2000.
However if a driver feels it is necessary to have more than the minimum coverage, they can customize their personal insurance package to incorporate some elements of full coverage if they feel it is necessary.