10 Steps to Buying Auto Insurance, Part I

Introduction
The following simple steps will help you determine how much car insurance you need to carry. And it will also help you get the best coverage at the lowest price.

Step 1: Starting Out
When it comes to auto insurance, you want to be adequately covered if you get in an accident but you don’t want to pay any more than you have to. So how can you navigate your way through this murky subject?

Keep telling yourself there is money to be saved. How much? Hundreds, even thousands, per year. For example, quotes (for very basic coverage on two old cars) can range from $500 to $1,000 — a difference of $500 a year. If you’re currently dumping thousands into your insurance company’s coffers because of a couple of tickets, an accident or a questionable credit rating, shopping your policy against others may be well worth the effort.

Look at it this way — you can convert the money you save into the purchase of something you’ve desired for a long time. Hold that goal in your mind.

Step 2: How Much Coverage Do You Need?
To find the right auto insurance, start by figuring out the amount of coverage you need. This varies from state to state. So take a moment to find out what coverage is required where you live. Make a list of the different types of coverage and then return for the next step.

Now that you know what is required, you can decide what you need in addition. Some people are quite cautious. They base their lives on worst-case scenarios. Insurance companies love these people. That’s because insurance companies know what your chances are of being in an accident, and how likely it is for your car to be damaged or stolen. The information the insurance company has collected over previous decades is crunched into «actuarial tables» that give insurance adjustors a quick look at the probability of just about any occurrence.

So how much insurance should you buy beyond your state’s minimum?

Experts recommend that if you have a lot of assets you should get enough liability coverage to protect them. For instance, if you purchase $50,000 of bodily injury liability coverage but have $100,000 in assets, attorneys could go after your treasures in the event of an accident in which you’re at fault and the other party’s medical bills exceed $50,000.

General recommendations for liability limits are $50,000 bodily injury liability for one person injured in an accident, $100,000 for all people injured in an accident and $25,000 property damage liability (that is, 50/100/25) given that half of the cars on the road are worth more than $20,000. Here again, though, let your financial situation be your guide. If you have no assets, don’t buy excess coverage.

Another issue to consider is that the limits of any uninsured and/or underinsured motorist coverage that you purchase cannot exceed the limits of your liability coverage. Such coverage can be valuable, as it will cover lost income if you’re out of work for several months after being injured in a major accident.

Your driving habits may also be a consideration. If your past is filled with crumpled fenders, if you have a lead foot or a long commute on a treacherous winding road, then you should get more comprehensive coverage. Keep in mind that you don’t have to buy collision and comprehensive coverage. If your vehicle is older, if you have a good driving record and if there is a low likelihood that it would be totaled in an accident, but a high likelihood of it being stolen, you could buy comprehensive but not collision.

Step 3: Review Your Driving Record and Current Insurance Policy
Before you begin shopping for insurance you should check the following: the status of your driving record, your current coverage and the premiums you are paying.

You should know how many tickets you have had recently. But time plays tricks and our memories repress painful incidents. If you can’t remember how long that speeding ticket has been on your record, check with your state’s DMV. If your record will soon improve, and the points you earned will finally disappear, wait until that happens before you get quotes. Nothing drives up the price of insurance like a bad driving record.

Also, you should contact your auto insurance company or pull out a recent bill. Jot down the amount of coverage you have and what you are paying for it. Take note of the yearly and monthly cost of your insurance since many of your quotes will be given both ways. Now you have a figure in mind to try to beat.

Step 4: Solicit Competitive Quotes
Now that you have made several practical and philosophical decisions, it’s time to start shopping. Begin by setting aside about an hour for this task. Bring all your records — your current insurance policy, your driver license number and your vehicle registration. Drink plenty of coffee. Have a phone at your elbow. And, of course, power up your computer.

If you go to www.bestinsurancetx.com you can fill out a form and get a competitive quote. If this bores you, just remind yourself how much you will be saving and that you can use the money to buy something nice for yourself. If the entire shopping process takes you two hours to complete and you save $800, you’re effectively earning $400 an hour.

A few things to keep in mind: 1) You may not get instant quotes. You may get an e-mail later, but you will get in touch with a local agent at our office, who will then calculate a quote for you. (A «direct provider,» like Geico, sells an insurance policy to you directly; other companies like State Farm sell insurance through local agents. We’ll discuss the pros and cons of each later.) 2) It’s not easy to get quotes from these sites and you’ll probably find it faster to pick up the phone and call a local agent.

Step 5: Record and Compare Quotes
While you’re researching companies, make notes in a separate computer file or on a piece of paper divided into categories. This will keep you from duplicating your efforts. You should take note of several things:

• Annual and monthly rates for the different types of coverage — make sure to keep the coverage limits the same so that you can make «apples-to-apples» comparisons
• A phone number to call for questions you didn’t get answered
• The insurance company’s payment policy (When is your payment due? What happens if you’re late in making a payment?)
• Discounts offered by the insurance company that pertain to you