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
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