How To Buy Car Insurance Essay, Research Paper
Friday, December 01, 2000
HOW TO BUY CAR INSURANCE
Many people look forward to buying car insurance about as much as having their wisdom teeth pulled by a dentist named Dr. Pain. Today I intend to show you how to take a lot of the sting out of purchasing car insurance by arming yourself with a little knowledge. Many people believe car insurance is a simple as black or white, either you have ?liability? or ?full coverage?. In fact there many important options in between. In becoming informed you will need to know how to research, and what questions to ask. The three key considerations when purchasing car insurance are price, coverage, and company.
The first key consideration when buying car Insurance is price. According to Glenn Hardman at San Diego Insurance, ?There is no one company that has great rates for everyone.? He further stated, ? It really pays to shop, shop and when you?ve had enough shop some more. And if it sounds to good to be true it usually is.? Different companies target different age and risk groups, so while one company has a good price for your friend, they make not have a great price for you. Usually 10-15 quotes will probably give you a good range of prices to choose from.
In this graph, I compared rates from the Facilities and Service Corp V9902.4 a software company that produces rates for insurance companies. The example here is a 22 year old single female with two tickets driving a 94 Honda. As you can see her rate varied between companies by well over a $1000 for the same coverage depending on only the company. A good resource I found was the yellow pages, the listings are localized to your specific area and everyone who is anyone is there both big and small.
The second key consideration when buying car Insurance is coverage. Coverage varies from company to company but the basic components usually remain constant. The first is liability. Liability pays in the event you hit and injure another person or damage there vehicle, and is required by law of every driver in California. The two parts of Liability coverage are Bodily Injury and Property Damage. Both are expressed in thousands of dollars.
Here are the minimum limits as required by the state of california. The first number is the per person limit and second is per accident. This means that if I have an accident with this coverage the insurance company will pay a maximum of $15,000 per person up to a total of $30,000 any number of people per accident for bodily injury. The property damage is the second number and indicates how much the company will pay to fix the other person?s car or property. In this case $5,000. This is not a lot of coverage. If I was to hit a pedestrian in the crosswalk this coverage could run out in a hurry and I would be held liable for anything the insurance didn?t cover. Many people with equity in their homes or with other assets will opt for greater coverage such as 100/300/50 as shown below.
The second is medical payments. Medical payments pay a flat amount per person for anyone injured in your car regardless of fault. They range from between $500 to $5,000. This amount is not meant to absorb the cost of an injury, but to offset immediate out of pocket expenses such as health insurance deductibles.
The third is uninsured and underinsured motorist coverage. This protects you and your passenger in the event you are hit by a driver with no insurance or not enough insurance.
The fourth is comprehensive and collision covers damage to your car. Collision pays to fix your car in the event it is damaged in an accident that is your fault. Comprehensive pays in the event of fire, theft, and vandalism or anything collision does not. A deductible will usually apply and is the amount of money you must first pay and the insurance will pay the rest. Deductibles range from $50 to $5000. The higher the deductible, the lower your cost.
The fifth is towing and rental reimbursement. Towing provides a flat amount of coverage per disablement and rental reimbursement pays a specified amount per day in the event you need to rent a car while yours is being repaired.
The sixth and final coverage is Special Equipment coverage. This covers any special equipment installed or attached to the vehicle not factory or dealer installed. This will usually include rims, stereos and custom accessories.
How much or which coverage is right for you? It?s a personal decision that no one can make for you.
The third key consideration when buying car insurance is the company and agent. When buying insurance the quality of the company should be taken into consideration. One way to evaluate the quality of a company is to inquire about their ?Best? rating. According to the AM Best company web site, Am Best is one of a few an independent companies that assigns a rating to each company. The rating is based on their financial strength, operational performance and ability to meet their obligations. AM Best ratings range from A (superior) to F (in liquidation). In considering the company you will probably rely heavily on the recommendation of an agent. Whenever you buy insurance you will ALWAYS buy it from an agent. In California agents are required to be licensed by the department of insurance. According to the departments web site, Agents must have their licenses posted in full view so that a consumer may readily verify that an agent is fully and properly licensed. Three good qualifying questions to ask the agent are:
1. How long has the Agency been in business?
2. Do they verify a prospective client?s motor vehicle report before selling the policy?
3. Do they have separate sales and customer service departments?
Paula Meeks at Gateway Insurance states that ?Agencies with separate Sales and Service departments tend to insulate their sales people from the service needs of their clients as well as not holding them accountable for agent errors.?
In conclusion if you spend a little time checking out the three key components of buying car insurance price, coverage and company, you can avoid a lot of headaches later especially in the event of an any accident. With a little information and little more leg work, you can eliminate any confusion from this process and be sure you have the right coverage for you.