Tips for Purchasing Auto Insurance
Unfortunately, most of us don't think about the details of our automobile insurance policy until we've been involved in a car accident. After an accident, we call our insurance company to report the claim and learn that our coverage is not as good as we thought. Here are some tips to avoid this.
Pick the Right Insurance CompanyBeware of insurance companies with gimmicky advertisements, particularly commercials. They make promises about being a "good neighbor" and in "good hands," or use animals to increase the appeal of their message. I've found that the cleverer the advertisements, the worse the claims handling is for that company. This is not based upon scientific research or surveys. This is simply my experience after helping clients with thousands of insurance claims.
Many insurance companies spend a lot of money to get you to become a customer, then when you go to make a claim, they become your adversary. Talk to your sales agent about the company's claims handling practices: does the company simply plug in your claim to a software that spits out a number or is there a human that determines the outcome? Will I have a dedicated claim adjuster or will I be stuck with a team of adjusters? How does the company compare to other companies in claims payout (premium cost and financial strength to use the industry term)? If I hire an attorney to represent me in a claim, does the insurance company automatically hire an attorney? If so, what firm do you hire in my area? (Side note: The more you can get him to put down in writing, the better it can be for you when you go to make a claim.) These are just some of the questions that you can ask your sales rep before purchasing insurance.
Lower Premiums Are Not Always BetterWe all want to spend less on auto insurance. Most of us don't want to spend money on a benefit that is quite speculative and that we may never need. We'd rather spend money on the car that we can enjoy now, rather than on insurance for something that may happen in the future. Unfortunately, many of us are involved in accident, and we will need to cash-in on our insurance benefits at some point. When that time comes, you will wish that you picked a company that fairly handles and pays your claims. These companies typically charge a little bit higher of a premium. In other words, the saying "you get what you pay for" is true even when purchasing auto insurance.
Don't Forget About Coverage for Bodily InjuryFor auto insurance, most clients are focused on making sure they have enough coverage for property damage and get only the minimum coverage for bodily injury. While it is important to get comprehensive coverage for property damage, it is even more important to get as much as you can afford for bodily injury coverage.
What is bodily injury coverage? Bodily injury coverage, as the name suggests, pays you for personal injuries that you experience in an accident. This includes payment for economic damages (past and future medical bills, past and future lost wages, hiring help, etc.) and general damages (pain and suffering, inconvenience, mental anguish, scarring, disfigurement, loss of enjoyment of life, etc.) If you are hurt in an accident, you may pile up a lot of medical bills. You may be thinking to yourself, "Well, isn't that what my health insurance is for?" Yes, your health insurance will help alleviate some of the debt that is owed to medical providers. However, your health insurance will not pay you for all of your other economic damages, or any of your general damages, which can be very large compared to your medical bills.
Most states require drivers to obtain a minimum amount of coverage for bodily injury. Typically, this amount is between $15,000 and $25,000. Unfortunately, a significant amount of injuries result in damages much higher than $25,000. Consequently, if you are the victim of someone else's fault in an auto accident, and that someone carries only $25,000 or less in bodily injury coverage, you will be out of luck. There is a way to protect yourself if this happens. Read the next section on Underinsured/Uninsured Motorist coverage.
You Need Higher Underinsured/Uninsured Motorist CoverageUnderinsured/Uninsured Motorist (UIM/UM) coverage is the most important part of your auto policy. Your life may depend on (literally) the amount of money you can get under this coverage. UIM/UM coverage is coverage you have under your insurance policy that kicks in when you are injured by someone that doesn't have enough insurance under his or her policy. As a simple illustration, consider the following: John was driving his 2007 Toyota Camry down a highway in Lehi, Utah. Under his insurance policy, John had "full" property damage coverage and the minimum policy limits of $25,000 for bodily injury. He also had $25,000 Underinsured Motorist coverage.
Susan ran a red light in her 2003 Jeep Cherokee and hit John, who was safely driving through the green light. Susan also had $25,000 in bodily injury coverage. In other words, Susan's insurance company would pay no more than $25,000 to John on behalf of Susan.
John tore the rotator cuff in his shoulder as a result of the accident. He incurred over $80,000 in medical bills. He had to take of several weeks of work to recover. He underwent surgery, which was followed by a painful recovery. He missed out on several trips that his family took.
The most John could get from Susan was $25,000; the most he could get from his insurance company was $25,000 in Underinsured Motorist coverage. The $50,000 he received was much less than what his damages were worth.
Although John cannot control how much insurance Susan purchased for bodily injury, he can control how much Underinsured Motorist coverage he purchases. If John had purchased $250,000 in Underinsured Motorist coverage, then he could have gotten up to $300,000 for his injuries. It is critical that you talk to your insurance sales rep about increasing your UIM. It is typically only a few more dollars a month to increase your UIM coverage by $50,000.