Cheap and affordable are two different things. By focusing on affordable coverage that protects your car, assets and loved ones you will be in a much better position.
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Cheap Car Insurance – You Get What You Pay For
The old adage that says we get what we pay for does indeed hold true with car insurance. The insurance company is out to make money, so they simply can’t fully cover every one of their customers, for any possible claim, at a rock-bottom price. They must charge more for things that will cost them more in the event of a claim.
In every state, drivers are required to carry certain minimum amounts of coverage for bodily injury, liability, and property damage. (OK- you can prove financial ability to pay in New Hampshire, but this will cost you a LOT of money up front.) This is expressed in a three-number format representing thousands of dollars. In New York, for example, the minimums are 25/50/10. The cheapest car insurance will usually provide just those minimums and no more.
With the tort-happy culture we live in today, $50,000 in liability coverage can be easily exceeded if you end up in court opposite an experienced personal injury attorney. Should you lose the case, and the plaintiff is awarded a sum larger than what your insurance covers, you will be responsible for the rest.
For younger people, the balance can be paid through a garnishment of wages. But for older people who have built up assets, it’s not beyond the realm of possibility for a court to seize those assets to pay the bill. Cheap car insurance could hurt you if you have any sizable amount of assets.
Most Likely Buyers of Cheap Car Insurance
There probably aren’t many drivers who wouldn’t welcome saving some money on car insurance, but there are some groups of people for whom cheap car insurance is an absolute necessity. The first of these are young males between the ages of 18 and 26.
There are several factors involved in calculating car insurance premiums, but the two main ones that drive the cost higher are:
- The amount of risk the driver poses to the insurance company
- The type of car being insured, and the amount of use it gets
Young American males typically pay the highest car insurance rates because they tend to drive a bit more recklessly than the rest of us. (Sorry guys- but statistics are consistent here.) They also tend to drive vehicles that pose a higher risk; either because they are built or modified for performance, or they are so old they are reaching the point of safety issues. For young males, they need to find cheap car insurance to offset the fact that they are the highest risk for insurers.
Other groups who might need cheap car insurance are those who have had multiple accidents, multiple traffic violations, or have been convicted of DWI. All three groups become a higher risk and demand higher premiums.
Forget the Extras with Cheap Car Insurance
If you absolutely must have, or prefer to have, cheap car insurance, forget the extras. Collision protection is just one example of added coverage that drives up premiums. As the value of both new and used cars continues to climb, collision coverage is not going to get any less expensive. If you have a loan on your car, you may already know this because you must carry collision coverage.
Fire and theft is a policy extra which can vary from vehicle to vehicle. The most desired cars for thieves will carry a higher cost for theft protection. Believe it or not, the ’94-’96 Honda Accords are consistently the most sought after by thieves because there is such a high demand for parts on the black market. Theft insurance on one of these cars, especially in a major metropolitan area, will add significantly to your insurance premium.
The lesson in all of this is to consider carefully what types of coverage and limits you are comfortable with. If you have assets worth protecting, is a more expensive car insurance policy a cost-effective way to keep them protected in the event of a personal injury or liability claim? If you are young, or have a tarnished driving record, are there other ways you can cut expenses in order to have the best possible car insurance?
Your insurance company weighs the risks and benefits before they offer you an annual rate. You should do the same before you accept any offer an insurance company makes.
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