Automobile Insurance Explained
I’m sure we’ve all done. We come home from work, open the mailbox and see a letter from our car insurance company. The first thought that usually comes to mind is “oh great, have they increased my premiums?” Although this is very important when it comes to financial planning I would like to suggest that it is not the first thing we should be looking for when it comes to auto insurance.
Is My Coverage Sufficient?
I would suggest the first and most important thing we look for is whether or not we have sufficient coverage for current situation. When most people take out a car insurance policy the only thing they are worried about is getting the lowest rate possible. I too would agree that the ultimate cost of your policy is very important, but I also believe this to be secondary to the amount of coverage on the policy. As you know, to legally drive your car, you are required by law to carry a minimum level of coverage. However, most experts agree that the minimum coverage required by law is insufficient.
What Do the Numbers Mean?
After understanding the importance of sufficient coverage, we next must understand what the coverage numbers mean. There are basically four different components to automobile insurance that must be understood. (click on each part for a detailed explanation)
Automobile Insurance Explained (see above)
Part 1: Liability coverage
Part 2: Medical payment
Part 3: Uninsured/underinsured motorist coverage
Part 4: Comprehensive physical damage coverage
With a sound understanding of the different components of automobile insurance coverage you are now better able to know if you really are getting a “good deal” with your current policy.
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