How To Keep That Little Frog From Taking All Your Money

Turn on your TV for thirty minutes.  I'll bet you'll see several auto insurance commercials.  I'll also bet those commercials each focus on price competition.  Why?  Auto insurance is expensive, and people hate paying for insurance.  Here is the problem: people generally carry way to little auto insurance.  Personal injury victims sometimes learn very difficult lessons regarding the lack of adequate auto insurance coverage.    

Let's look at some practical ways you may be able to keep your auto insurance reasonable.  First, you should understand some basics regarding how your rates are set.  In North Carolina, you are required to carry a minimum $30,000 of liability coverage.  The minimum liability coverage in South Carolina is $25,000.  In North Carolina, insurance companies utilize your credit files to predict the likely you will file a claim.  While this seems unfair, it's legal.  Thus, your credit is important.  Some insurance companies also utilize other information.  For instance, some companies analyze accident rates in Charlotte (for instance) to set prices for local drivers.  Therefore, a Charlotte driver may pay more than a similarly situated Winston Salem driver.  

How to save a little money, while preserving adequate insurance:

• Report reduced mileage to your insurance company.  It's important to notify your company of updated mileage for your vehicle, particularly if you drive a lot.  You may be able to reduce your premium.  
• Consider dropping collision coverage on an older vehicle.  This is a judgment call.  If you're involved in an accident without collision coverage, you will have to repair / replace your vehicle "out-of-pocket".  However, paying the premium for this coverage on a vehicle worth nominal value may not make sense.  I suggest you look at the amount of the premium devoted to this coverage and discuss this option with your agent.   

What do the terms of your policy actually mean? 

• Bodily Injury Liability - This coverage primarily addresses medical costs for your passengers, other drivers, and their passengers, and pedestrians.  
• Property Damage Liability - This coverage addresses the repair / replacement of other drivers' vehicles and property. 
• Uninsured Coverage - This coverage addresses losses caused by another driver who has no insurance.  In North Carolina, the law currently requires that your policy provide for an amount of uninsured coverage matching your liability coverage.  
• Underinsured Coverage - This coverage addresses losses caused by another driver who has insufficient insurance.  Please note, you must specifically elect to carry this additional coverage.  The lack of underinsured coverage often leads to harsh results for severely injured parties, due to the lack of available insurance.  
• Collision Coverage - This coverage repairs / replaces your car following an accident. 
• Comprehensive Coverage - This coverage protects your vehicle from damage that is not the result of a collision, such as storms, water, vandalism, or theft.  
• Medical Expense Coverage - "Medpay" coverage pays your deductible, copays, and medical expenses arising from an accident that are not covered by insurance.  It's very helpful to have this coverage as these expenses can add up quickly following an accident. 
• Gap Coverage - This coverage is perhaps the least known coverage for my clients.  It protects you from paying the difference between the amount you owe on a car loan and the estimated value following an accident.  

If you've read this post, you may be thinking that I've spent more time explaining coverages than actually explaining how to save money on your auto insurance.  Frankly, you're correct.  If you want to save money on your auto insurance, I suggest you find a reputable agent and discuss your coverage in detail.  You should look for ways to keep your coverage affordable.  You should also review your rates with various carriers every few years to analyze your options.  However, price should not be your sole variable.  

As I noted prior, individuals who sustain serious personal injuries quickly learn the value of adequate auto insurance.  While you may feel like you are getting ripped off when you pay that premium, it's a hard lesson to realize you have inadequate auto insurance to cover your life-alterating injuries.  If you have questions about your coverage, I encourage you to ask questions to your agent or a reputable personal injury attorney.  You need to understand how and why your are spending your money.