12 Steps to Buying Auto Insurance

The purpose of buying insurance is to transfer the risk from us (the consumer) to the insuring agency. In case of auto insurance, it is quite tricky, as it’s a balance between being adequately covered vs. paying a high premium. Here are 12 steps to follow to buy auto insurance:

     1) Learn the terms associated with an auto policy

An auto policy contains several terms critical to your coverage and monthly premium. As a consumer, it is critical to understand those. A synopsis of all the terms can befound at Mayanah Financial Coaching’s Blog.

            2) Identify what influences your rates

For a given coverage, insurance premiums can vary wildly depending on the following 13 factors:

·         Geographic location

·         Gender

·         Age

·         Marital Status

·         Driving Records

·         Driving Experience

·         Vehicle Type

·         Vehicle Use

·         Annual Miles Driven

·         Coverage and Deductibles

·         Claims History

·         Credit History

·         Length of previous insurance coverage

            3) Control the controllable

Based on the above list, some factors like age and location cannot be controlled. However, factors like claims, credit history and coverages can be controlled. Following are the steps to obtain favorable rates

·         Pull your credit report to eliminate scams and incorrect information. You are entitled to a yearly free credit report.

·         Create a list of both at-fault and not-at-fault claims before starting the process. The more the number of at-fault claims, the riskier the provider considers you as a consumer.

·         Continued coverage is critical for favorable rates. If in case, there is a lapse in coverage, please be prepared with the dates and the reason for the lapse.

            4) Check Driving Records

Your driving record defines how safe you are as a driver which affects the rates widely. It is important that your driving records are clean. If you have a major violation like DUI, then your rates can go up 100% or more in some cases. You can also consider the possibility of defensive driving courses to clean up driving records. You can retrieve your driving records at the Department of Public Safety.

            5) Identify the required coverage for you and your family

Required Coverage has two parts – one is mandated by the state and varies from state to state. The second part is based on personal preferences. If coverage is not sufficient in an accident, it can cost you an arm and a leg, and you may also face legal charges if your liability portion is not sufficient to cover the expenses. On the other hand, the best coverage will lead to a huge premium every month. To resolve this challenge, we recommend third party reviews by experts like Mayanah Coaches.

            6) Review your current insurance policy

Identify current coverage and premiums as this will be your baseline in shopping for new rates. If you do not have the policy handy, call the provider and request them to mail you a copy.

            7) Gather quotes from at least 3 providers

Since providers obtain statistical information from different sources, we recommend obtaining quotes from at least 3 providers. If the quotes are not comparable, we recommend to increase the number of quotes. Usually direct sellers like Geico may be cheaper than agency based providers like State Farm or Allstate

            8) Conduct normalized comparison

Since most insurance policies do not use the same coverage criteria, it is important to look at them carefully. We recommend normalizing the data to compare the rates. Mayanah coaches can help you with that.

            9) Identify available discounts

Available discounts vary from provider to provider. However, the best way to identify those is to call them and ask for the applicable discounts. The Department ofMotor Vehicles can provide you a list of common discounts in your area.

            10) Research on providers’ records

           Remember that the purpose of taking an insurance is to have adequate coverage in cases of undesirable events/circumstances. Hence, availability, responsiveness and credibility of insurance companies is very critical. The National Association of Insurance Commissioners can provide details on insurance providers and their records.

             11) Cancel Old policy

Once your new policy is confirmed and in effect, cancel the old one. You need to make sure the coverage of the new one starts before the expiry of the current policy. It is better to pay a day or two of coverage to both providers instead of having a gap in coverage.

            12) Retain and Communicate

Many states require drivers to retain a copy of their insurance in their automobiles. It is also important to send a copy to your lienholder, if you have a lien on your automobile.

We recognize that this process is challenging and we are here to help you at any stage. Please contact Mayanah Coaches at (281) 435-1888 or visit us at www.themayanah.com

Basics of Buying Auto Insurance

Recently we were with a client who was unhappy about the prohibitive cost of auto insurance. 87.4% of US drivers have auto insurance, and most of them share the same sentiments. It is a payment that we make month after month, and it can get frustrating if we have not filed a claim, are a first time auto-owner, or a new driver. Is it worth it? More importantly, many people have no idea what they are buying as coverage.

An insurance is nothing but a transfer of risk. Auto insurance is a contract between you and the insurance company where you pay a fixed amount (called premium), and they cover you for losses as agreed by terms and conditions (called policy). Nerd Wallet reports that the averagedriver overpays by $368 every year. Financial Advisor Magazine reports that Americans overpaid by more than $100B for car insurance in 2016. Are you one of them? If so, you need to know what to include and what not to. 

Here are some terms to become familiar with before shopping for car insurance:

Actual Cash Value: The fair market value of your automobile at the time it was damaged, stolen or destroyed.

Bodily Injury Liability Coverage: Coverage that the insurance pays for automobile accidents that result in bodily injuries to other drivers or pedestrians for which you are legally at fault. This also covers legal defense if you are sued after the accident.

Claim: Formal request made by the insured to the insurance company to cover an incurred loss.

Collision Coverage: Amount paid for damage to your car caused by an impact with another vehicle, or object, or a rollover, after the deductible has been met.

Comprehensive Coverage: Amount paid for damage to your car, after deductible is met, that is caused by hazards other than collision, such as fire, theft, explosion, windstorm, hail, water or contact with an animal.

Deductible: Amount that must be paid out of pocket by the insured, for covered losses, before the insurance company pays a claim.

Depreciation: Financial calculation that insurance companies use to identify the Actual Cash Value of the asset, in the event it is determined to be a total loss.

Exclusions: Items that are specifically denied coverage (ex: normal wear and tear) under the terms of an insurance policy.

Medical Payments Coverage: It is the total amount that the insurance company will pay to cover medical expenses and funeral bills, incurred by you and your passengers, in the event of an accident, regardless of who is at fault.

Personal Injury Protection: It is coverage where your own insurance company pays you and your passengers for medical and funeral expenses in the event of an accident, regardless of who's at fault.

Property Damage Liability Coverage: The amount that covers you, up to the policy limit, for losses that result when you damage or destroy someone else's personal property. This is mandatory for many states.

Uninsured and Underinsured Motorist Coverage: The coverage for injuries you and others suffer when you're involved in an accident with an uninsured driver, or a driver without adequate insurance.

Please refer to Auto Insurance Glossary for more details. It is critical that you understand these terms and conditions to be adequately insured, and to not pay for coverage you don’t need.

Please watch out for the next blog on how and where to buy car insurance.