By law in most states, you cannot drive without auto insurance. You can, however, drive without reading or understanding your auto insurance policy. As with many insurance-related matters, this is not a problem until it's a problem. But by then it's too late.
Therefore, it's a good idea to look through your auto insurance policy. Here are a few quick tips for making sure that you get more than a headache out of that experience.
Auto Insurance Is Personal: Verify Your Information
Your address, for instance, can affect your rates in a major way. If you buy insurance in Death Valley and then move to Los Angeles it could impact your ability to file a claim. Make sure that personal information on your policy is current and correct.
Understanding Your Auto Insurance Policy: Get Out Your Highlighter
Reading your entire auto insurance policy front-to-back is ideal, but we don't live in an ideal world. At least take a highlighter to the documents and zap these key numbers and terms:
1. Comprehensive vs. Collision Car Insurance
Collision insurance covers damage to your vehicle in the unfortunate event of an accident. Comprehensive insurance covers damage from causes other than an accident, such as vandalism or falling objects. It also covers the loss of your vehicle if it is stolen.
2. Auto Insurance Deductible
An insurance deductible is your out-of-pocket expense when you file an insurance claim. Above this amount, the insurance company pays. Up to that amount, you pay. If you request a higher deductible, you can get a lower premium. Know this number.
3. Uninsured Motorist Coverage
People driving without insurance are often the ones who cause accidents. Hit and run, uninsured, and underinsured motorists could leave you financially vulnerable following an expensive accident. This coverage takes care of you if theirs doesn't, and even covers you if a car hits you when you are a pedestrian.
4. Auto Insurance Discounts
Different insurance companies offer varying discounts. Here are 5 ways you may be able to wangle some savings:
? Statistically, engineers have fewer accidents. Some insurers give people with bachelor's degrees in engineering or scientific fields (such as biochemistry, mathematics, or mechanical engineering) a break--10 to 30 percent with a good driving record.
? Teachers, farmers, and those in other low-risk occupations get a nice discount with several insurers.
? Military personnel, despite being in a group that statistically gets more tickets, get 2-15 percent discounts on auto insurance in many states.
? Seniors with good driving records can score an AARP discount of up to $300 with some companies.
? Grads of approved safety courses, like the one offered by the National Safety Council, can save up to 10% on auto insurance.
5. Liability Insurance Coverage
Liability insurance is required in most states and pays for property damage and bodily injury when you cause an accident. Generally, coverage is described by something that looks like this: 35/75/$35. These amounts correspond to coverage limits: $35,000 bodily injury liability per person in one accident/ $75,000 bodily injury liability per accident (all people involved)/ $35,000 property damage liability. Some states have "no fault" auto insurance laws, which state that your insurance must pay for injuries to you and your passengers regardless of who caused the accident.
6. Roadside Assistance and Car Insurance:
Many companies offer roadside assistance, especially when they are running special promotions. And few clients read that part of their policies. Keep in mind that just because it's offered doesn't mean it's free. Know ahead of time what kind of assistance you can expect to get and what you can expect to pay.
Many people are perfectly happy with their auto insurance policy because they have no idea what's in it. That's fine until something happens. Then everyone starts poring through the paperwork in a panic. An accident is stressful enough. Have your stuff highlighted.
Andrew Freiburghouse is a writer and businessman. As a partner at Los Angeles tax preparation firm Pronto Income Tax of California, Inc., Andrew has served thousands of clients both face to face and over the telephone. Currently, Andrew lives in Brooklyn, NY, and is in the process of starting up his own tax practice.
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