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Many
drivers make mistakes when buying auto insurance
simply due to misconceptions. Most drivers simply
get insurance because it is required by law. They
fail to perceive insurance as a form of risk
management. So these drivers only buy the minimum
amount required, at the lowest price possible. Thus,
the first mistake is made.
The first mistake most people make when buying auto
insurance is that they don’t accurately evaluate the
amount of risk they need covered. These drivers
either buy too little or inconsistent amounts of
liability insurance coverage. Many drivers do not
take into consideration just how vulnerable they may
be to lawsuits due to car accidents.
Suability Factors
Some
people are more likely than others to be sued due to
a lack of adequate car insurance if a serious
accident occurs. Basically, anyone who has, or who
potentially may have a high income or valuable
assets has high suability factors. A doctor or
medical student is more likely to get than is a high
school drop-out with a low-paying job. It’s also
true for anyone who has or who potentially may
obtain highly valuable assets, such as an
inheritance or retirement pension. It may not be
fair, but that’s the price you may pay for being
successful in today’s litigious society.
Thus, when you purchase any type of liability
insurance, including auto coverage, you need to
consider your suability factors. You also need to
consider who it is you might injure or kill in an
auto accident. It will cost you more if the person
is a high income earner than if he or she is a
low-income earner. You have to be prepared for the
worse amount of damage you may have to pay for out
of pocket, not the least amount.
You also need to ensure that you carry the same
amount of liability insurance on your car as you
would your home, boat, business, life, or any other
valuable asset. All your insurance policies must be
adequate, consistent, and well-integrated in order
to provide you with the maximum amount of financial
protection. You never know when, where, are whom you
may accidentally injure or kill someone, so you must
be prepared for all possibilities. If your current
income isn’t high, but could be in the future, then
you need to carry the same coverage you would if the
future income was current income.
Other frequently made errors
Some
other frequently made errors people make when
purchasing auto insurance are:
* People purchase split liability limits when they
should purchase a single liability limit. This can
result in paying more out of pocket expenses if the
limits don’t adequately cover each person and the
property damage done. You should choose a single
limit amount that adequately covers all possible
scenarios of legal fees, medical care, and property
damages. It’s better to have a policy that doesn’t
place any limits on what is paid to any one person
involved in the accident. If you can’t get auto
insurance like this, then also purchase an umbrella
liability insurance policy to help avoid this
mistake.
* People fail to adequately provide for their own
personal injuries. It’s best to purchase uninsured
and underinsured motorists coverage to protect
yourself. You need just as much protection as any
other driver or passenger need, yet the other driver
may not be adequately insured to cover your
expenses. However, people frequently either buy
none, just one or the other, or not enough of this
type of reverse liability protection. They don’t
realize that uninsured and underinsure coverage
allows them to be compensated by their own insurance
companies instead of having to wait for the results
of a lawsuit filed against the other driver
* People buy the wrong types of insurance. They
purchase extra amounts of Medical Payments (Med Pay)
and Personal Injury Protection (PIP) instead of
buying major medical and long-term disability
policies. Purchasing major medical and long-term
disability policies would cover medical payments,
personal injury, illnesses, and loss of income from
all sources rather than just from car accidents.
* People frequently choose the wrong deductible for
collision and comprehensive coverage. They either
choose too high or too low of a deductible. It’s a
good idea to use a formula that calculates how long
it would take you to replace the vehicle if couldn’t
drive it anymore. Your expected highest potential
income should be used during this calculation. If it
would take more than five years, then you should use
as high a deductible as you can afford financially
and emotionally. If it’s less than five years, you
may or may not need this type of coverage.
* People do not properly assess the road services
and car rental coverage. They fail to calculate how
frequently they would actually use the services
offered. They also fail to check with other auto
service programs to see if they can get a better
deal. It’s usually best to get a policy or service
that covers a minimum of $30 per day rental fees.
You should also consider the risks you’d be taking
if you are left without any transportation at all.
Summary
The
best way to avoid making common mistakes when buying
auto insurance is to carefully evaluate the risks
you’re taking. Do your best to reduce or eliminate
those risks. Afterwards, ensure you buy the right
amount and right types of insurance. You have made
the right choices if you, your family, your
property, and everyone else and their property are
fully protected from any harm you or the other
driver may cause. |