CHEAP CAR INSURANCE: LIABILITY OR COMPREHENSIVE?

When it comes to car insurance, one of the biggest decisions to make is whether to purchase liability insurance or spring more bucks for a comprehensive policy. Unfortunately, there is no clear-cut answer to this question. The true answer? “It depends.” There are several factors to consider. But first, let’s work through some of the vocabulary that’s thrown around in the world of car insurance so there’s no confusion.

THE BASICS

  • Liability Insurance- The most basic, and least expensive, type of insurance and is required by law for drivers in most states. This type of insurance will pay for damage to people or property that you cause while driving. Liability insurance will not pay for damage done to you or your vehicle.
  • Liability Insurance- Collision Insurance- Covers damage done to your vehicle during a collision.
  • Liability Insurance- Comprehensive Insurance – Pays for damage caused by non-collision events, such as floods, vandalism, etc.
  • Liability Insurance- Premium – Your insurance bill, or how much you pay the insurance company for your coverage.
  • Liability Insurance- Deductible – The amount of out-of-pocket expenses you will be responsible for in the event of an accident. Typically, policies with a lower deductible have more expensive premiums while cheap car insurance comes with higher deductibles.

WHAT DO YOU DRIVE?

It’s important to decide whether or not you’ll benefit from the extra expense of a comprehensive policy. The age and condition of your vehicle directly determines the cost of your policy, so let’s check out a few different scenarios.

  • If you own a newer, more expensive vehicle, you’ll most likely want to pay the higher premiums for comprehensive coverage. If you owe $40,000 on a car loan and you were hit by an uninsured motorist, no one will pay for your car if you only have liability coverage.
  • If you own an older car that’s paid off and isn’t worth very much, an argument could be made that liability coverage is all you need. For example, if you own an old pickup truck that’s only worth about $2,000, it may not be worth it to pay the extra money each month for a comprehensive policy.

WHAT’S YOUR CASH SITUATION?

  • Your personal financial situation is also an important factor to consider when deciding between liability or comprehensive coverage.
  • If you own the old pickup that’s worth $2,000, do you have enough cash on hand to replace it? If so, a liability policy may be a good option and will save you money on your premiums.
  • If you’re living paycheck to paycheck, it might be worth it to get the comprehensive policy and have peace of mind knowing you’re covered in case something happens. Keep in mind that cheap car insurance usually has the least amount of coverage. Choose a policy that makes you feel comfortable with the financial responsibilities you would have in the event of an accident.

CHEAP CAR INSURANCE FOR TEEN DRIVERS

Having a teen driver in the house is enough to increase any parent’s stress and anxiety. Searching for quality, affordable car insurance for that teen can certainly add to that stress. But there are many ways for parents of teens to save on car insurance without sacrificing on quality coverage.

STATISTICS, NOT STEREOTYPES

Teens have a bad reputation for being bad drivers, and that stereotype is well supported by some pretty staggering statistics.

  • Auto accidents are the number one cause of death for teenagers in the United States.
  • Drivers between the age of 16 and 19 are three times more likely to be involved in a fatal crash than drivers 20 years and older.
  • Auto accidents involving teens cost an estimated $34 billion each year when combining medical expenses, property damage, and other related costs.

For all these reasons, parents can expect their premiums to rise when adding a teen driver to the policy. However, there are some things parents can do to save when their teen begins driving.

CHOOSE THEIR CAR CAREFULLY

One of the most critical factors that will determine your teen’s insurance rate is what type of vehicle he or she will be driving on a regular basis. Insurers will consider the safety of the vehicle as well as how likely that teen is to get a traffic ticket.

  • A car with better safety features such as daytime running lamps, side-impact airbags, and good crash ratings can help lower your premium.
  • Sports cars or vehicles that are historically stolen more often will yield higher rates.
  • Ask your insurance company which factors of vehicle type they consider to be safer to help you choose an appropriate car for your teen.

ENCOURAGE YOUR TEEN TO GET GOOD GRADES

Statistics about teen drivers don’t always have a negative connotation. Teen drivers who excel in school are less likely to get speeding tickets and be in wrecks. By showing your teen is responsible in school, you add to their credibility as a driver and can likely catch a break on premiums.

BUNDLE ALL YOUR POLICIES

Typically, parents can get a discount on their insurance premiums by bundling their policies. This is particularly true when bundling several types of insurance (homeowner’s, personal property, auto insurance, etc.) with one company.

Many customers can get discounts for staying with a company for a number of years. Often times, these bundling and loyalty discounts can help absorb the premium increase you’ll incur by adding your teen driver to your policy so you don’t have to give up your cheap car insurance entirely.

BE SMART, NOT CHEAP

While it may be your goal to focus on finding cheap car insurance for your teen driver, it’s important to not sacrifice quality coverage during the teen driving years. Because teens are more likely to be in an accident, parents should seek quality, comprehensive coverage to protect the family from unexpected financial burdens in the event of an accident.

COMMUTERS AND CHEAP CAR INSURANCE

Having a long commute to work can cost you more than the extra gasoline you’ll use. Commuters need to carefully consider the impact their daily driving habits will have on their car insurance rates.

HOW RATES ARE CALCULATED

When shopping for car insurance, it’s important to understand how insurance companies decide how much your policy premiums will be.

  • While the insurance companies consider a number of variables that will determine your rate, they’re ultimately trying to see how much risk they’re assuming by insuring you and your car.
  • How risky your policy is depends on many factors such as your driving history, how safe your vehicle is, and how expensive your vehicle would be to repair or replace.

But, one factor people don’t often associate with affecting their rates is their daily commute.

WHY COMMUTING MATTERS

Individuals who drive longer distances to and from their place of employment spend more time on the road which means they are more likely to be in an accident or get a traffic ticket. These individuals can expect higher insurance rates because their commute makes them riskier in the eyes of insurance companies.

Your commute into work may raise your risk factor in ways you haven’t thought about. If you work in an urban area and park in an unsecured parking lot every day, your car is more likely to be vandalized or stolen. Even if you live in a safe, suburban neighborhood and park your car in a garage every night, your commute is increasing the risk factor associated with your insurance policy.

HOW MUCH WILL YOUR COMMUTE COST?

While your commute makes you riskier to insure, it doesn’t mean it’s impossible to get cheap car insurance.

  • Each insurance company determines their own guidelines regarding how mileage will affect your premium.
  • It’s important to do your research and compare different insurers to find out how much they’ll charge you for your extra miles.
  • In some cases, your long commute may raise your premiums $20 or more per month, while other commuters may only see a $5 per month increase.

WAYS TO SAVE IF YOU COMMUTE

If you love your job and you don’t want to move from where you currently live, there isn’t much you can do to decrease the distance between home and work. However, there are some things you can do to get cheap insurance despite your daily commute:

  • Shop Around- Comparison shopping can dramatically affect your premium costs because some companies charge more for higher-mileage drivers than others.
  • Use Public Transportation- While this isn’t an option for many drivers, some can significantly decrease their annual mileage by utilizing public transportation at least some of the time.
  • Carpool- If you have coworkers who live near you, consider starting a carpool. This will likely mean cheap car insurance rates for everyone who participates, and, as an added bonus, you’ll all spend less on gas.