If you want the perfect car insurance policy, you’ve got to take an active role in the buying process. Specifically, you’ve got to channel your inner-detective and ask your insurance agent these 8 questions:
1. “How much coverage do I need?”
Here in California, state law requires you to have at least $5,000 worth of property damage liability insurance, $15,000 worth of bodily injury liability insurance to cover the injury or death of one person in a crash, and $30,000 worth of bodily injury liability insurance to cover the injury or death of more than one person in a crash.
But if you only opt for the minimum coverage, you could wind up in big trouble!
For starters, none of that coverage would pay for YOUR injuries or damages in a crash. And, because medical bills and body shop bills can easily skyrocket, those limits aren’t very high. If you seriously injured someone, their bills would likely be much higher than $15,000 — meaning you’d personally be on the hook for the balance if the other person decided to sue you.
Bottom line — if you don’t want to take on all of that risk, you need to buy more coverage.
2. “How are my monthly premiums calculated?”
Every insurance company works a little differently, but here in California, state law says that the biggest factors they can take into account when calculating your rates are your driving safety record, the number of miles you drive every year, and the number of years you’ve been driving. After that, they’ll look at your age, your marital status, and where you live. Together, these things will show just how risky you are to insure. The riskier you are, the more you’ll pay in premiums.
Luckily, though, if you’ve been driving for at least three years and you don’t have more than one violation point on your license, you’ll qualify for California’s Good Driver Discount, which will save you 20% on your premiums!
3. “Are comprehensive and collision coverage really necessary?”
Collision coverage pays for damage to your car after you cause an accident. (If the accident was the other driver’s fault, your damage will be covered through his liability insurance.) On the surface, this sounds like great coverage to have. However, if your car is older — and, thus, isn’t worth a whole lot — you may actually spend more in premiums or on the deductible than you would to just fix the damage yourself!
Comprehensive coverage pays you for damage that wasn’t caused in a crash. Damage from things like fires, hailstorms, and even theft all fall under your comprehensive coverage. Again, if you have an older car, this coverage may not be cost-effective.
Keep in mind that regardless of age or condition, if you are financing or making payments on a vehicle, the bank or lien holder will most likely require you to carry some form of comprehensive and collision coverage.
4. “Should I get a 6-month or a 12-month insurance policy?”
Like the name suggests, a 6-month policy will be renewed every six months — meaning your insurance company will take a fresh look at your driving habits every six months and decide how much to charge you in premiums. Obviously, having them evaluate you more frequently is riskier to your wallet. However, if you’re about to have points on your license expire, you’ll see your premiums go down in six months, rather than having to wait an entire year.
5. “Will I be covered if a friend borrows my car?”
It depends. California car insurance policies typically follow the vehicle, meaning you can have coverage even if you’re not behind the wheel. If your friend only borrows the car once in a blue moon — and, thus, doesn’t count as a “regular user” — you should have coverage.
However, California policies are allowed to drop your coverage limits if someone was borrowing your car when it was involved in an accident. So, you may not have as big of a safety net as you thought you did when you handed over the keys!
And, remember, every policy comes with a list of exclusions — meaning there are situations and even people that aren’t covered. If your friend is listed as an excluded driver, your policy won’t kick in if he has an accident in your car.
6. “Have you actually run my driving record yet?”
We’ve already discussed how insurance companies determine your premium payments. However, if your agent hasn’t actually run your driving record yet — and, instead, comes up with a quote based off of the answers you gave him to some basic questions — you may get an expensive surprise when your policy kicks in!
7. “How will the insurance company determine the value of my car?”
This is important to know, because if your car is ever damaged, totaled, or stolen, you’ll want to know how much money you’re entitled to. Most insurance companies calculate the actual cash value of your car — or, what it was worth on the day it was damaged. To do that, they’ll look at the make and model, the original purchase price, the mileage, and the wear and tear on it.
That’s a big different from the replacement value — or, what it would cost you to go out and buy a similar car if yours was totaled or stolen. Some policies will actually come with replacement value coverage, so before you sign on the dotted line, find out what your specific policy says. That way, you won’t end up with any surprises if the worst happens!
8. “Am I covered if I drive to Mexico for the weekend?”
No! Anyone who drives in Mexico is required to have at least $20,000 in Mexico Liability Insurance. You’ll have to show proof of this insurance at border crossings, checkpoints, and traffic stops. Luckily, though, you can buy this coverage in the U.S., so if you plan on going south of the border anytime soon, talk to your agent.
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