The Basics of Insuring Your Car

     You’ve done the legwork, and checked the ads. (Hopefully you also read the previous article at MLF on the basics of buying a car, as well.) Your patient dickering paid off; the perfect car or truck is sitting in your driveway. Hooray – let’s go for a ride!

Hold on there, Bucko. You shouldn’t turn that ignition key until you’ve got insurance. What’s next?

Research Insurance Companies

Do the research. Which insurance companies have the best reputation? Consumer Search gives the top nod to Amica, USAA and State Farm; runners up include American Family Insurance. (Guess the latter’s “Go get it – we’ll protect it” campaign is paying off.) Consumer Reports added NJM and Auto-Owners to the list, based on customers’ overall satisfaction and least complaints.

(Are you saying to yourself, ‘Gee, I haven’t even heard of some of these companies!’ The implication is clear: fancypants commercials and celebrity spokespeople don’t necessarily equal good insurance.)

Analyze Your Driving Records

Analyze your household’s driving records. Have you, or anyone else in your home, racked up traffic tickets, or worse yet, an accident or DUI? (Compound that if you have young drivers, especially males.) All these are going to affect your car insurance rates — and not for the better, either.

Let’s start with a DUI, otherwise known as ‘Driving Under the Influence.’  (Of alcohol, naturally. The lesser offense is DWAI, or ‘Driving While Alcohol Impaired.’) For starters, the driver is not going to go anywhere until their license is reinstated — and this won’t happen until they get an SR-22: e.g., proof of at least the minimum auto coverage your state requires. (An increasing number of counties and states also require a Breathalyzer, otherwise known as an IID, or Ignition Interlock Device. This means that your vechicle won’t start until you blow into the tube to prove you’re sober.)

The good news: keep your record clean, and your insurance rates are going to go down. (The Breathalyzer installation won’t be required after a year or two, either.) The bad news: it’s going to take a while for that to happen.  If your personal record is clean, you can improve insurance costs by excluding problem drivers from your policy. Bear in mind, though, that means they won’t be driving your car — if they do, you don’t have insurance coverage.

How to reduce the insurance premium

Drive a less expensive vehicle

Drive older used vehicles — and pay cash. Once you borrow money for a car, the lender will require full insurance coverage. After all, they don’t want to take the risk that if you get in an accident, there’s no way to recover the rest of the loan. And you certainly don’t want to take the path that some car buyers have — buy the car, then cancel the insurance. Forget to pay, or just blow off  the premiums; either one works. (By the way, your lender will eventually find out – the insurance company notifies them. And they may well call in the loan, or take other drastic actions because of it. That’s how seriously lenders take adequate insurance.) Then total your car in an accident. You then get to continue to make loan payments…all for a vehicle that’s already being crushed in the junkyard.

The moral of the story: if you must get a loan — and most of us do — figure in higher insurance fees from the start. You’ll have to pay them until your loan is paid off.

Solve the problem by paying cash for an older used vehicle you can afford. Then you can:

Reduce Coverage

Insure your vehicle for liability only. Full insurance plans include ‘comp and collision:’ extra coverage for fender benders and more serious accidents. They’re also better for newer vehicles, or any needs you have for additional coverage, especially in case of lawsuits, hospitalizations and such.

Good insurance can also consist of ‘liability only’: you’re covered if you cause an accident, and the other driver gets hurt. Does it cover your car, too? Nope. But it is a good deal cheaper — and if your car was modestly enough priced, you saved enough on the insurance plan to help pay for its replacement. As mentioned previously, though, you cannot do this if you still owe money on your car. The dealer or bank/credit union will insist on full coverage.

Increase Deductible

For lower rates, keep the extras down to a minimum…and jack up your deductible. But don’t skip towing coverage; it’s generally very reasonable. One tow will more than pay for itself, and when you’re stuck on the side of the road after midnight in a strange area, you’ll be grateful to have it. (Trust me — I know.)

 There are other actions you can take for the best auto coverage, including keeping weekly mileage low, your credit sweet, and regularly reviewing your policy. These tips will not only get you on the road to using your vehicle, but keep you going strong for years to come.