GETTING THE MOST OUT OF YOUR AUTO INSURANCE

Most people understand that auto insurance is necessary to protect oneself and one's assets from liability. In many states, such as Alabama, liability insurance it is required by law. Many people, however, make the mistake satisfying this very important aspect of driving an automobile by purchasing the cheapest coverage possible. That is not a wise approach because when it comes to insurance coverage, one size does not fit all. Spending too little up front can cost big bucks on the back end and endanger your hard earned assets.

It is important to tailor your automobile insurance policy to the needs of you and your family. The following are some examples of how to get the most from your dollar when purchasing automobile insurance:

PURCHASE THE MOST LIABILITY COVERAGE YOU CAN AFFORD IN AN AMOUNT THAT WILL PROTECT YOUR ASSETS

Liability is the insurance that protects you in the event you are involved in an automobile accident and are accused of negligence. When trying to determine how much coverage you need, it is important to keep in mind the fact that if an injured party successfully prosecutes a claim against you for an amount that exceeds the limits of your coverage, the injured party can then use the judgment to seize your real estate or other assets in order to satisfy the amount of the judgment in excess of the insurance limits. For example, if a judgment is obtained against you for $250,000.00 and your liability limits are only $100,000.00, then you are personally responsible to pay the $150,000.00 difference. Clearly, if you do not own any equity in a home, or have no assets, it may not be necessary to carry large amounts of insurance due to the fact that you have fewer assets to protect. Therefore, considering the amount of assets you need to protect is very important in making a decision with respect to how much liability coverage you may need in the event of an automobile accident.

Most insurance companies will write liability coverage up to at least $500,000.00. If you need additional coverage above that, most will provide an umbrella liability policy in the amount of one or two million dollars or even more depending upon your situation. Many people carry as little as $20,000.00 to $50,000.00 in liability coverage. If you were to injure someone who has to spend a week or more in the hospital, just the medical bills may use up all of the insurance leaving you personally exposed for the rest of the claim.

PURCHASE AS MUCH SUPPLEMENTAL UN-INSURED/UNDER-INSURED MOTORIST (UM/UIM) COVERAGE AS YOU CAN AFFORD

Would you want to insure others for more than you insure yourself and your family? Of course not! But this is exactly what many people routinely do when they do not fully understand UM/UIM coverage.

Un-Insured/Under-Insured Motorist (UM/UIM) coverage is the coverage that protects you in the event you are involved in an accident with a motorist who is at fault but does not have any insurance, or does not have enough insurance to satisfy your injuries and damages. If you stop and think about it, this is extremely important insurance. If you are a safe driver, the odds are that if you are involved in an automobile accident, it will be someone else's fault.

Furthermore, if someone else is reckless enough to cause a serious accident, statistical data indicates that this person may either not have insurance or not be able to afford very much coverage due to a questionable driving history. In an event such as this, when you cannot recover from the person who injured you, all you have to fall back on is your Un-Insured or Under-Insured Motorist coverage. Many people only carry the minimum amount of Un-Insured/Under-Insured Motorist coverage of $20,000.00. Often, that same driver will carry liability insurance protecting other drivers in the amount of $100,000.00 or more.

Un-Insured/Under-Insured Motorist coverage is considered so important that in many states, such as in Alabama, the law requires the agent to have the customer sign a waiver of Un-Insured Motorist coverage if the customer does not want it. If the agent fails to get the waiver and the customer is later involved in an accident where he would have benefited from UM/UIM coverage, the insurance company must cover up him up to the minimum of $20,000.00. If you are a safe driver, you will find that it is a fairly small annual investment to increase your UM/UIM coverage from $20,000.00 up to a $100,000.00 policy. This is because the rates are calculated on your driving record, not some unknown future reckless driver.

MAINTAIN HIGH DEDUCTIBLES ON YOUR PHYSICAL DAMAGE COVERAGE

If you have followed the previous advice and carry higher liability coverage as well as supplemental UM/UIM coverage, then clearly that means a higher premium. One good way to help pay for this is to carry a higher deductible on your collision and comprehensive coverage. This brings the price of the premiums down.

CONTEMPLATE DROPPING PHYSICAL DAMAGE COVERAGE ON OLDER VEHICLES

This is a decision that will have to be carefully made by each individual. Usually an insurance company will charge less for collision and comprehensive on older vehicles. Still, when a vehicle gets to be around seven years old, one should consider whether to continue to carry the physical damage insurance. You should take a look at the value of the vehicle, its condition, how much it's driven and the amount you are paying for the coverage. After applying a cost-benefit analysis, it may be clear that the coverage is not worth what you could feasibly collect in the event of a partial or total loss. Many times, you would be better off carrying higher liability coverage on an older vehicle and offset that by dropping the physical damage coverage.

USE AN AGENT WITH WHOM YOU FEEL COMFORTABLE

Be very careful in selecting your insurance company and the agent that handles your policies. It is very important to have a company that is responsive to your needs and an agent that very carefully and thoroughly explains to you the different coverage issues. If you know someone who has had the misfortune to be involved in a car wreck, ask them how well their insurance company responded. Attorneys are also a good resource in that they deal with insurance companies on a daily basis. Once you have an automobile accident and are in the unfortunate position of possibly being sued, it is too late to make a change when you find out that your insurance is inadequate.