If you're looking to get cheaper auto insurance rates while at the same time not exposing yourself to too much risk, you have to know what areas you can and can not skimp on.
There are three major areas that you do not want to skimp on when it comes to auto insurance:
#1 Do Not settle for state minimum liability! The coverage is lousy! If you happen to be at fault in a major accident, state minimum liability insurance is usually not going to cover it! The most it would pay any one driver for their injuries is $12,500. The most it would pay if you were to injure multiple drivers is $25,000.
If an injured driver spends even a day or two in the hospital, that's enough right there to exhaust all of your liability coverage. If an injured driver is worse than that and have to spend multiple days in the hospital, ambulance chasing lawyers will come after you if they find out you have assets much higher than your liability coverage.
The good news is that having higher limits of liability coverage usually doesn't cost much more as much as you might think. In fact, doubling your coverage in many cases only raises your by about $5 a month, and quadrupling coverage is usually only about $10 more a month.
#2 Do Not reject or select low levels of Uninsured/Under-insured Motorist Bodily Injury coverage. Again, this coverage is usually inexpensive but it is very important. It is estimated that 1 in every 6 drivers go uninsured. About the same percentage carry only the state minimum or only slightly higher coverage. If some idiot pulls out and hits you, their liability coverage may not cover all of your medical bills either (just like the scenario above only the tables are turned).
#3 Do Not reject Uninsured Motorist Property Damage (UMPD). If you already have collision coverage, then you don't need UMPD because collision coverage applies anyways. But if you don't have collision, then taking UMPD is a no-brainer! It's usually only a dollar a month! This will cover your vehicle if someone without liability coverage hits you, and they are at fault (as long as you can identify them).
So what coverages can I skimp on without being exposed with too much risk?
If you're looking to save money by lowering your coverage on auto insurance, I always feel that it's better to lower the controlled risks. By control, I mean that you can figure out to a specific dollar amount what a certain exposure would cost you if there were an accident.
There are two major ways to lower your rates with controlled risks:
#1 Raising your comprehensive and/or collision deductibles. Carrying higher deductibles on physical damage coverage will save you quite a significant chunk of premium. Of course, this will cost you more out of pocket if there is a claim on your vehicle. But at least you know for certain in terms of the dollar amount of the extra exposure. This is much better than the uncertainty of medical costs involving injuries.
#2 Removing Roadside Assistance and Towing. Some companies offer great coverages and great rates for this type of coverage. However, be aware that not all coverage is the same from one insurance company to the next. Read the terms of these coverages before you buy. Some only cover you a few miles from home while others limit coverage in other ways. I'm not saying having roadside assistance or towing coverage is a bad idea. But you have to pay close attention to exactly what is covered. With many companies, it's not what it's all cracked up to be.
Summary: Sometimes when the economy is down and money is tight, you may find it necessary to make cuts in your budget. When it comes to auto insurance, knowing the right and wrong places to cut corners than make huge differences with risk exposure.
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Dan Lyles is an Independent Insurance Agent serving Ohio, Indiana, Michigan, Pennsylvania, Virginia and West Virginia..