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Do You Have Too Much Car Insurance?

Do You Have Too Much Car Insurance?

By Joseph Dobrian, September 14, 2015

Many drivers carry more car insurance than they need. While you probably shouldn’t cut your coverage to the legal minimum, you’ll often find that you can do without certain types of coverage.

How do you know if you’re paying for too much car insurance? When you’re analyzing your car insurance policy, start by finding out the minimum amount of insurance your state requires you to carry. Only New Hampshire does not require you to carry auto liability insurance. Liability insurance covers any damage you do to someone else’s property and person, including medical bills.

In general, the richer you are, the more liability insurance you should carry. After all, you have more to protect. If you have a home, a personal fortune, investments, or a collection of art or other valuables, these could be seized if there’s a judgment against you that comes to more than your car insurance coverage. If you’re poor and likely to remain so for a while, you’re less vulnerable to a lawsuit and thus might choose to carry less liability coverage. But in general, don’t scrimp on liability.

In some states, it’s compulsory to carry personal injury protection (which covers medical expenses and loss of income for you and any passengers in your vehicle) and coverage to protect you against uninsured or underinsured motorists who can’t pay your bills if you’re the injured party. Again, in general, the greater your means or earning power, the more coverage you should have.

Other types of car insurance are optional, and you can save considerably on your premium by not carrying them. If your car is financed, you’ll have to carry collision and comprehensive coverage, which protect you from damage your vehicle suffers in an accident, as well as weather damage, theft, and vandalism. However, if your car is paid for, you might want to dispense with comprehensive coverage and just take precautions. If your car is old and no longer worth much, you might drop collision insurance, too.

If your car is financed, you might carry gap coverage, which kicks in if you wreck your car while you’re still paying for it. This makes sense early in the term of the loan, but if you’ve paid off enough of it that you’re willing to run the risk, don’t pay for gap coverage.

Some states require medical payments coverage, which will take care of you and your passengers’ medical bills if you’re at fault in an accident—but if you have health insurance, you might not need further coverage.

Another question to ask yourself: Can you live with a higher deductible—say, $1,000? That could reduce your premium considerably. If you belong to an auto club, like AAA, you can go without roadside-assistance coverage. If you have more than one vehicle, you won’t want to pay for rental car reimbursement, since if you crash one car you still have another.

The best way to avoid paying too much for car insurance? Shop around, and talk with different insurance agents about what you need and how they can sell you the most cost-effective policy. Another great way to save on car insurance is to build a record as a safe driver. That will cut down on premiums as well.
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