How Much Car Insurance Do You Really Need?

Ah, car insurance - you can't stand paying for it every month; you can't get away with not having it. And really, it would be unwise (read: incredibly stupid) not to have insurance. Okay, we don't mean to be belligerent here; perhaps you have a perfectly valid reason for not having auto insurance coverage, although we personally can't think of any. But who are we to get all self-righteous on you?

Let's focus instead on remedying the situation. If you're like many people, your first priority is to get the bare minimum requirements down. We'll start with that, and work from there. Most states require that you have liability insurance. This covers your arse when you're at fault in an accident. (Remember all those near misses in parking lots and while changing lanes on the freeway when you were blabbing on the cell phone, trying to change the CD, or pushing the slobbering dog/significant other out of your face? Well, your luck won't hold out forever, honey.) If you live in New Hampshire, South Carolina, Virginia or Wisconsin, you aren't required by law (yet) to have liability coverage. For the rest of us, the mandatory coverage varies according to state. In the chart below, minimum liability limits are read as follows (in thousands of dollars): bodily injury liability for one person in an accident/bodily injury liability for all people injured in an accident/property damage liability for one accident. So, for Alabama, the minimum requirements are $20,000 of bodily injury liability for one person, $40,000 bodily injury liability for all people and $10,000 property damage liability.

Personal Injury Protection (PIP), or Medical Payments (MedPay) in some states, pays for your own medical expenses, any lost wages and whatever other costs may arise when you're injured in an accident. It usually pays about 80 percent of your losses, and it also pays a death benefit. PIP is required in Colorado, Delaware, Florida, Hawaii, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon and Utah.

Some states also require you to purchase car insurance that will cover your own medical expenses, pain and suffering losses and, in some states, car damage in the event that the other motorist is at fault and is either uninsured or underinsured. See the chart below to find out if this applies to you.

State	Liability limits (in thousands of dollars)	Uninsured/Underinsured motorist coverage required?
Alabama	20/40/10	No
Alaska	50/100/25	No
Arizona	15/30/10	No
Arkansas	25/50/25	No
California	15/30/5	No
Colorado	25/50/15	No
Connecticut	20/40/10	Yes
Delaware	15/30/5	No
D.C.	25/50/10	Yes
Florida	10/20/10	No
Georgia	25/50/25	No
Hawaii	20/40/10	No
Idaho	25/50/15	No
Illinois	20/40/15	Yes
Indiana	25/50/10	No
Iowa	20/40/15	No
Kansas	25/50/10	Yes
Kentucky	25/50/10	No
Louisiana	10/20/10	No
Maine	50/100/25	Yes
Maryland	20/40/15	Yes
Massachusetts	20/40/5	Yes
Michigan	20/40/10	No
Minnesota	30/60/10	Yes
Mississippi	25/50/25	No
Missouri	25/50/10	Yes
Montana	25/50/10	No
Nebraska	25/50/25	No
Nevada	15/30/10	No
New Hampshire	Not required 25/50/25	Yes
New Jersey	15/30/5	Yes
New Mexico	25/50/10	No
New York	25/50/10	Yes
North Carolina	30/60/25	No
North Dakota	25/50/25	Yes
Ohio	12.5/25/7.5	No
Oklahoma	25/50/25	No
Oregon	25/50/10	Yes
Pennsylvania	15/30/5	No
Rhode Island	25/50/25	Yes
South Carolina	Not required 15/30/10	Yes
South Dakota	25/50/25	Yes
Tennessee	25/50/10	No
Texas	20/40/15	No
Utah	25/50/15	No
Vermont	25/50/10	Yes
Virginia	Not required 25/50/20	Yes
Washington	25/50/10	No
West Virginia	20/40/10	Yes
Wisconsin	Not required 25/50/10	Yes
Wyoming	25/50/20	No

Even though each state has minimum (or no) requirements for bodily injury liability, it is probably in your best interest to purchase higher limits. If someone else is injured and you're at fault, the minimum liability coverage may not cover their medical expenses, in which case their attorney will most likely come after your assets. It is generally recommended (by insurance companies - who else?) that you purchase 100/300 limits of bodily injury liability. On the other hand, if your personal assets don't amount to much (you don't own a home, struggle from paycheck to paycheck, violins are wailing), you don't have a whole lot for them to bother about, so the minimum requirements might actually suit you, not to mention save you some much-needed cash.

Besides bodily injury liability, personal injury protection, property damage liability and uninsured/underinsured motorist coverage, you have collision and comprehensive auto insurance coverage to consider. Collision covers damage to the policyholder's car resulting from running into anything, be it another car, a fire hydrant, a light post, whatever. Comprehensive coverage takes care of your car in the case of theft, fire, falling objects, missiles, explosion, earthquake, flood, riot and civil commotion, among other things (like what? Alien invasion, we guess).

Comprehensive and collision coverage are required on most lease contracts, and are essential if you own an expensive car. If you're driving an old POS, on the other hand, and the cost of the sum of your premium and your deductible nearly or in fact exceed the worth of your vehicle, you might want to consider doing without this coverage.

Before you purchase any type of auto insurance coverage, be sure to study your other insurance policies so you don't end up paying for something you don't need. If you have a decent health insurance plan, you might get away with purchasing the bare minimum personal injury protection coverage, or none at all. However, you might end up paying a co-pay and deductible that wouldn't apply with PIP or MedPay. Uninsured or underinsured motorist coverage might also be a wise buy, even if you have full medical coverage, because they can pay for your pain and suffering damages. If you belong to an organization that offers roadside assistance, you don't need to purchase that through your insurer, natch. Same goes for mechanical breakdown insurance if you own a newly financed or leased vehicle which is still covered under warranty.

Hey, we're all resentful about having to shell out a bunch of cash every month for something we may never need, but what're ya gonna do? The fact is that car insurance will most likely come to your rescue at some point, so it's imperative to purchase a worthwhile policy. Know what you must have and know what you should have and just pay the man, alright?

Top 10 Ways To Lower Your Car Insurance Bill

If you're shopping for car insurance, you know there are certain crucial factors influencing your rate that are out of your hands. Such factors include your age, gender and record of prior claims.

Despite this, there's a lot you can do to score a lower rate, and your choices bear more power than you might think. Here are 10 tips guaranteed to help you get the best rate possible on your auto insurance.

1. Get more than one rate quote before you commit. "Company prices are very different, and it pays to shop around. You can easily wind up paying double from one company to the next," says J. Robert Hunter, director of insurance with the Consumer Federation of America, a national watchdog group.
   
   Want to get a sense of who the low-priced carriers are? The National Association of Insurance Carriers offers a map on its Web site that lists each state's regulators. Click on your state and you're taken to the state's Department of Insurance Web site. Its consumer buying guide compares insurance premiums across a range of companies. You'll also learn how many complaints each company has logged. Surprisingly, you don't have to sacrifice service quality to score a low premium. "A lot of the lower-priced companies have the best service rates," says Hunter.
   
   There are a host of independent Web sites, like CarInsurance.com, that allow you to comparison-shop by offering online price quotes. These sites can be incredibly useful. However, Hunter warns that these services — which earn their keep by charging carriers a commission on each sale — occasionally fail to include the insurance companies with the lowest rates, since these low-cost carriers are unwilling to pay commissions.



2. Evaluate insurance costs before you buy your vehicle. The year, make and model of your vehicle can have a profound impact on your insurance rate. All else being equal, new, expensive or sporty cars will cost more to insure than older, cheaper and more utilitarian vehicles. But you could find a substantial discrepancy even when comparing the cost to insure similar cars. So if you've got a few models on your shortlist, contact your carrier to see what rate each vehicle commands. Doing so could ultimately net you a windfall in savings when the time comes to pay your premium.



3. Go high on deductibles. If you're willing to give a little with your deductible, you can wind up saving big on your rates. "If you go from a $250 to a $1,000 deductible, you can save between 25 and 40 percent on your policy," says Hunter. You can then set aside a portion of these funds to cover your costs in the event of a claim.



4. Nix collision and/or comprehensive coverage on older cars. If your older car has comp and collision coverage, you might find yourself paying more in insurance than the car is worth. "Take your comp and collision premium and add it up, then multiply it by 10. If your car is worth less than that, don't buy the coverage," says Hunter. If you're worried about being left overexposed, consider this: The typical policyholder makes a claim only once every 11 years, and reports a total loss only once every 50 years.



5. Mind your credit score. An increasing number of carriers are considering credit scores when making rate calculations. "Your credit score can be very important in determining your rate," says Hunter. "You can wind up paying up to 50 percent more if you have a bad credit score." Keep your credit score in tip-top shape by paying bills in a timely manner and by regularly checking that there are no items on your history that do not belong to you.



6. Ask about low-mileage discounts. Many carriers offer discounts to policyholders whose annual mileage is lower than the norm. Maybe you have a short commute. Or maybe your participation in the office vanpool results in fewer hours spent in your daily driver. Whatever the case, your low mileage can score you a reduced rate with some companies, so be sure to inquire about available discounts.



7. Ask about group insurance discounts. Oftentimes, insurance companies offer discounts to policyholders who are members of certain organizations or professions, such as veterans, engineers or teachers. Request a list of these groups from your carrier to see if you qualify — you might be pleasantly surprised.



8. Ask about all other discounts. Some carriers offer discounts to policyholders whose vehicles bear certain safety features, like anti-theft devices or motorized seatbelts. Others give reduced rates to senior citizens, and to students whose grades meet certain requirements. "Many carriers offer discounts. Ask for them when you're shopping," says Hunter.
   
   However, Hunter offers one caveat: "Some of the companies that offer the highest discounts have the highest rates, so don't get too focused on discounts. Some high-priced companies offer high discounts, but at the end of the day you're still paying more."



9. Avoid lapses in coverage. Even a brief lapse in coverage can disqualify you from receiving discounts. "They use lapses in coverage to increase your premium," says Hunter. Pay your insurance bills on time. And if you're switching carriers, make sure not to quit your previous carrier until the new coverage takes effect.



10. Think twice about paying in installments. Most carriers charge an administration fee to pay in installments. One carrier surveyed levied a $10 charge per installment to those who opted to break up their bill. The solution? Pay your premium up front, if at all possible.
    
    Of course, this charge is more significant for those with small premiums. If you've got a king-sized premium and feel you'd get a better rate of return by investing your funds elsewhere instead of paying up front, then the installment route will probably best suit your needs.

Car Insurance for Teenage Drivers

The statistics about teenage drivers aren't good. According to the Insurance Institute for Highway Safety (IIHS), 16-year-olds get into accidents almost six times more often than drivers between the age of 30 and 59. No wonder car insurance premiums are so high for this age group.

However, not all car insurance companies take the same dim view of young drivers. And some discounts are available to help you cut costs. Remember, the higher the risk, the higher the cost of insurance premiums. Let this be your guiding principle as you shop for insurance.

Here are 10 suggestions to help lower premiums and keep your teenager's license free of violations:

1. Help your teen learn the laws and follow them to the letter. By far, the best way to lower car insurance costs for teens is for them to keep their driving record clean. Make safe driving a family project. In some states, restrictions apply to new drivers. Parents should know what the laws are and insist that their sons and daughters follow them.

2. Set a good example. Do you break the speed limit and tailgate? Do you yell at other drivers when you're behind the wheel? If you do these things, how can you expect your children to act differently? Start watching your own driving long before they get their license and you'll have a much easier time convincing them to be safe drivers. Remember, actions speak louder than words.

3. Put your teenager on your policy. Rather than setting up an independent policy for your teen driver, put them on your auto insurance policy as an additional driver. In this way, all the discounts applied to your policies will be passed on to them.

4. Pay your teenager to get good grades. Here's a creative tip — find out how much you save if your teenager gets a good grade point average and pass it on to them. Usually, having a 3.0 or higher GPA will reduce your car insurance premium by 10 percent. Figure out exactly how much this saves you and give that money to your teenager. This accomplishes two things. First, it provides a direct reward for academic performance. Secondly, it motivates them to continue getting good grades.

5. Enroll them in driver education courses. Discounts are available for teens who take recognized driving classes. But call your car insurance company to find out which schools are covered before paying big bucks.

6. Steer clear of sports cars. Don't try to live vicariously through your teenager by giving them the hot car you couldn't get in high school. Getting your teenager a safe car to drive, with the latest safety equipment, will lower your premiums. Not only will you save money on car insurance, but fast driving will be less of a temptation.

7. Get their support. Don't assume that your teenager wants to vacuum clean your wallet. Ask them for help cutting costs and point out that you will share in the savings (see rule #4). Tell them how much car insurance costs and show them how this fits into the family budget. If nothing else, you will score points for treating them as adults.

8. Talk to your kids about drugs and alcohol. This is a tough subject to broach with teenagers, who think they have everything under control. But the consequences of saying nothing can be catastrophic. Take the time to lay down some guidelines in this important area.

9. Take traffic school to beat tickets. Once a ticket is on your teen's license, it takes months to get the violation removed. Instead, encourage them to take traffic school if the judge allows it. A day spent thinking about the consequences of unsafe driving can bring rewards for years to come.

10. Ride with your teenager. Your teenager was a safe driver last year when he or she got a license. But what's happened since then? Let your son or daughter take the wheel while you sit back and relax in the passenger seat. If you see them doing something that breaks rules or seems unsafe, point this out in a diplomatic way. If they are doing a good job driving, praise them for their efforts.

If you follow the above suggestions, you will find that you can make it through the teenage years safely — and without paying an arm and a leg for car insurance. It just takes cooperation and understanding from both sides of the generation gap.