* How much coverage do I need?

It is impossible to predict how much you might have to pay in case if you are responsible for a car accident. To calculate the limits of your liability coverage and to make a decision how much insurance coverage you need, ask yourself how much you are willing to pay from your own pocket in case you incur a damage that exceeds the limits of your insurance coverage. If you purchase an auto insurance with higher limits, you are more likely not to have to pay for any caused damages yourself, since your insurance company will cover all costs in case of an accident.

* How much should my comprehensive and collision deductibles be?

If you have higher deductibles, you have lower premium and also will have to pay more yourself in case any loss occurs due to an accident. In order to arrive to a right decision about how low or high your deductibles should be, ask yourself how much you are ready to pay from your own savings in order to lower your premium.

* Do I need any comprehensive or collision coverage at all?

If your car is financed or leased, it can be required by law to carry comprehensive or collision coverage (check the insurance legislation applicable in your state or province). These types of coverage might be dropped and you can save on premiums once the value of your car decreases. Again, before dropping comprehensive or collision coverage, ask yourself if you will be able to afford the total costs of fixing your car or ever replacing it in case of an accident. If not, it would be wise to stay covered.

* How much do I have to pay for my auto insurance?

The price of your insurance depends on the price policy of the auto insurance company, with which you are going to sign a contract, and on a whole range of other factors, such as:

- the number of corevages you purchase (the more you buy, the more discounts you have);

- the amount of deductibles (the higher the amount, the lower the price, because in case of accident you then will have to cover part of the costs yourself);

- the value of the vehicle you drive (the more expensive it is, the more you have to pay for the auto insurance);

- in what area, urban or rural, you drive (urban drivers have to pay more for their auto insurance than those living and driving in smaller towns or in the countryside, because city drivers are in a higher risk of vandalism, accidents, and so forth);

- how skilful you are as a driver and how clean your driving record is (those drivers that have had accidents usually have to pay more for their auto insurance coverage than those who are accident-free); and

- how much you have to drive (as the statistical probability goes up with the increase in a driving time, people who drive a lot usually have to pay more for their insurance than those who drive less).

* How can I reduce the price of my premiums?

The type and reputation of your vehicle brand directly affects the cost of your premiums. The more your vehicle is susceptible to accident, injury, and damage, the more you might have to pay for premiums. On the contrary, if your car if considered safe and reliable, you might have to pay lower rates for your premiums. Also, it is wise to research the market, since some insurers offer discounts for students with good records, for drivers who have not had any accidents, for those who insure more than one vehicle, etc. Another way to save on the cost of your premiums is to reduce your driving mileage - for example, to consider taking a bus to work or joining a van pool.

Phillip D. Wolf

Related:

• Auto Insurance: Frequently Asked Questions (Part 2)