A young professional’s guide to car insurance

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There are a few things that cost a lot of money for people like you and I. These things include: mortgage (or rent), car payments, and car insurance, among other things. In this article, I will try to be as comprehensive as I can about what to look for in auto insurance and what you can do to save money. In another article, I will cover what to do in an auto accident using this new car insurance that you are going to get.

Car insurance is a very important thing to me because in 2006, I got involved in a pretty bad wreck on the freeway. Currently, I am dealing with physical therapy treatments and appointments to the physical medicine and rehab docs wherever I go. I ended being sandwiched between a dodge ram and a ford expedition when the ram…”rammed” me from my behind.

The way that I went about learning more about auto insurance was by reading my policy cover to cover. Basically the laws regarding auto insurance varies from state to state, but as you all know, it is important to have that registration and insurance card with you when you get pulled over for a speeding ticket doing 86 on a 65 mph zone. At the very least, most states require you to have third party coverage so you can cover damages to the other party if you are at fault. Yet there are so many uninsured motorists out there right? If you are from Louisiana, you know exactly what I mean.

The reason why some states like Louisiana charge so much for car insurance is because there are so many uninsured motorists on the road! I paid over four thousand dollars for auto insurance in new orleans a year–> until I moved to minneapolis and cut that bill by 50 percent.

When you sign up for car insurance…you will have a usual breakdown of charges. The breakdown for my insurance coverage now is:

1. Liability
2. Collision
3. Comprehensive
4. Uninsured/ Underinsured coverage
5. Car towing insurance- or roadside assistance coverage
6. rental vehicle

Liability = this is what you are covered for if you are legally responsible to pay due to an accident. Remember, if you are not at fault, the other insurance company covers you (unless they are underinsured or uninsured). You have a choice of 1. combined single limit or 2. split limit. Split limit usually has more coverage because they break it down per person or per accident. it can be as low as state miniumum (10K-20K) to 100,000 per person to as high as 250,000 per person. There is also a limit per accident of 300K for most policies. People with more assets cover to 500K.

Property damage = this covers the other person’s car can be as low as 10K but I have 100K because you see how many luxury cars are on the road? what about if you hit multiple cars?

Collision = this is what covers your car when you get into an accident. This one has a deductible, or the amount that you pay before this coverage is used. If you damage your car, you pay your 500 or 1000 dollar deductible and your insurance covers the rest. If you have a beater, sometimes people forego this coverage.

Comprehensive = this means everything other than collision also with a deductible. This includes fire, theft, vandalism, weather, hitting a deer. But it doesn’t cover if caused by nuclear war, check your policy as some may not cover you if you get your car flooded too.

Personal injury protection = PIP = this covers lost wages, in home care due to an accident. check if the liability coverage covers this. Also you may not need it if you have good medical insurance and disability insurance.

Medical payments coverage = this covers medical bills for your passengers especially if they don’t have health insurance. consumer reports recommends 5K at least.

Uninsured/Underinsured = this is what covers you if someone hits you and they don’t have insurance or enough to cover you.

Rental = this covers you while your car gets fixed. I have mine at 50 dollars a day with a high max. a 25 dollar coverage does not go to far and this part of your coverage cost little compared to comprehensive and collision.

Car towing = this I don’t have because i have a relatively new car and my car warranty covers towing. Also it makes sense to get a separate towing card because using this service may increase your insurance rates. Also if you get into an accident, your towing is covered whether or not you have this coverage. This is for non accident related tows.

what is no fault? = it is where insured are limited in their ability to sue other drivers unless injuries are severe. It is a type of tort and limited tort options provide for legal action only for bodily injury and not for property damage. The states with no fault include florida, michigan, new jersey, new york, pennsylvania, hawaii, kansas, kentucky, mass, minnesota, north dakota, utah. The goal of no fault is to try to reduce insurance premiums by reducing the amount or ability to sue other parties due to accidents.

Ultimately, the price of your insurance premium is largely dependent on things that are out of your control. Some of the things that are under your control can raise premiums too. There are a few things that dictate the cost of your insurance:

1. have a good driving record - any tickets in the past, any accidents in the past, any large number of claims in the past all affect your rate negatively. If you are clean for a certain amount of years (this varies by carriers - anywhere from 3-5 years free and clear record) you will actually get some kind of bonus.
2. have continued insurance coverage for many years without gaps - meaning some carriers give you a thumbs up if you had continuous coverage and carried insurance for a while. I’m currently with allstate and they have a discount for me b/c i’ve carried insurance for 5 years continuously. If you had a break in coverage, you might get charged more.
3. maintain a good credit report - kiplinger magazine recently wrote an interesting article about how insurance companies are focusing on credit report more for insurance rates. Keep a good credit score and it will only help you in the long run.
4. if you haven’t bought a car, check insurance premiums for that specific car before you buy - this is a really big deal because I was driving a subaru WRX in the first 3 years of medical school and i get dinged because its considered a sports car. Not only that, newer cars have higher premiums. Also, rates are affected by how likely your car is to being stolen. The national insurance crime bureau issued the most stolen cars for 2005 that you should check out. I’m not sure how that is figured out, my issue being that the most popular vehicles are on the road more per capita therefore being that there are more of that type of vehicle, it would therefore be stolen more often in absolute values. I’m not sure if they do it in absolute values or percentages of total vehicles of that type which would skew the results greatly.
5. buy only the coverage you need
6. check for specific discounts that might be available - the thing that I don’t like about progressive’s ad that they will check rate of 3 other companies is that if you check it out yourself by calling those individual companies yourself, the quote will be vastly different because you may qualify for various specific discounts.
   1. if you are a medical student - take advantage of the good student discount
   2. if you belong to the AMSA - Geico has a discount for that - this goes for any other professional organizations or groups or associations that you may be affiliated with.
   3. if you have an antitheft device, it will lower your premiums- this is especially true if you have a passive alarm system which means you do nothing and the alarm will activate itself
   4. if you have ABS brakes, it will help
   5. take a defensive drivers course - some insurance companies allow you to take the course online. I will take a course too and it will cut my insurance premium by just over 100 dollars a year and it will be good for 3 years!
7. Buy multiple policies from the same insurance company - you will get a discount from some companies if you have home insurance or renters insurance or other insurance packages or multiple cars with them.
8. there’s a big difference between a cheap insurance policy and an inexpensive insurance policy - some companies just plain suck. But take in mind that everything we do in life or business…people are involved in business to make money. Insurance companies are nice to you when they sell you the policy. The key difference b/w a good company and a bad company is what happens when you get into an accident.

BOTTOM LINE: don’t try to find the cheapest policies and try to find the policy that has the best value. No frills companies like esurance has great rates but don’t have the customer service like other companies with agents in the neighborhood like allstate and statefarm. Everyone has bad experiences with every insurance company though if you do get into an accident.

Collision and comprehensive tends to be the most expensive aspect of your coverage so it may make sense to raise the deductible especially if you are a “safe” driver and tend to get into accidents only when other people hit you.

check various companies whenever you move because different companies have varying prices where you move so that Geico might be more expensive that allstate in one state and progressive may be cheaper in other states.

If you are a medical resident, consider thinking about getting better than average coverage because your high income in the future might make you vulnerable to lawsuits. There’s also an option for an umbrella insurance that give additional coverage of 1-2 million dollars if not more for not more than a couple hundred dollars extra per year.

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