Plan Auto Insurance Buy for Best Value, Right Coverage

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Bills.com recommends ways to review car insurance purchase.

With nearly every state requiring motorists to carry at least liability insurance, and in most cases, wise buyers purchasing more than the minimum, understanding insurance needs is crucial when insuring a vehicle, according to Andrew Housser, co-founder and co-CEO of free online consumer portal Bills.com.

Housser suggests a dozen items vehicle owners should consider when choosing insurance:

1. Plan. Consider insurance before choosing a vehicle. "You will save right out of the gate if you opt for a car without a lot of bells and whistles. 'Turbo' features, for instance, often raise premiums because insurers tend to think if you choose turbo, you are most likely to speed," Housser noted. Consider which cars have the highest theft rates; they also cost more to cover. Similarly, parking in a garage can lower premiums.

2. Tune up credit. Pay bills on time and pay overdue debts. Insurers take credit scores into account when determining rates.

3. Liability coverage: Basic liability covers damage to property or injury to other people. It also pays court costs. States set minimum limits. Liability coverage is expressed in three numbers, generally noted in thousands of dollars. The first is liability for one person hurt in an accident. The second number is a maximum for all injuries in one accident. The third covers property damage. So, 25/50/15 covers $25,000 for one person's injuries; $50,000 for all injuries; and $15,000 in property damage.

4. Collision coverage: This insures a vehicle against damage from an accident.

5. Comprehensive coverage: This covers damage to a vehicle from something other than an accident.

6. Medical coverage: This pays medical expenses from an accident. Compare with what is covered by health insurance policies. "If you do not have health insurance, definitely opt for medical insurance on your auto policy," Housser said.

7. Uninsured/underinsured motorist: This coverage pays for damage to a car if an uninsured driver (or someone without enough insurance) causes an accident.

8. Gap coverage: Gap insurance covers the "gap" between the value of a car and the amount of a loan on a car. It offers peace of mind in the first year or two of a new car loan, when the vehicle has depreciated in value, but the loan amount is still high. "In this situation, if you totaled your car, an insurance reimbursement might not be as much as you owe the bank," Housser explained. "Remove this coverage when the loan falls below the vehicle's value."

9. Other coverage: Adding optional coverages increases peace of mind, as well as cost, Housser said. This might include coverage for rental car or roadside assistance (tow or help for flat tires or other problems).

10. Deductibles: This is a great area for savings, Housser said. The deductible is the cost the policy holder is obligated to pay for a repair before the insurer pays its portion. The higher the deductible, the lower the premium. The Insurance Information Institute estimates that by choosing a deductible of $500 on collision coverage instead of a $200, a car owner can save up to 30 percent on premiums.1 "Choose the highest deductible you could afford in the event of an accident," Housser suggested. "Then save the money for the deductible cost in an interest-earning account."

11. Discounts: Ask about discounts. Eligibility for discounts might include age (student or over 50), driver training, car features (air bags, alarm, antilock brakes), or having more than one policy with the insurer. Some insurers give discounts for low mileage, but sometimes infrequent drivers pay more.

12. Business use: Some policies will not cover an accident while it's being driven for business travel. If you use your car for business, ask about your insurer's rules.

"Insurance exists to give all of us peace of mind," Housser said. "With the right policy, you will know you are following the rules of the law, protecting your assets from loss in the event of an accident, and making smart financial choices in the process."

Based in San Mateo, Calif., Bills.com is a free one-stop online portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. The company blogs about consumer finance issues at http://www.bills.com/blog. Since 2002, Bills.com and its partner company, Freedom Financial Network, have served more than 15,000 customers nationwide while managing more than $350 million in consumer debt. The company's co-founders and CEOs, Andrew Housser and Brad Stroh, were named Northern California finalists in Ernst & Young's 2006 Entrepreneur of the Year Awards.

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