How to get more affordable car insurance, liability considerations, and when to drop full coverage

Make sure you're saving on car insurance in the right places.

Affordable auto insurance is a balancing act. Sure, you want to pay as little in premium as possible. However, you also want to make sure you’re covered correctly.

People who are in an accident with inadequate insurance often find themselves in a position which is not that much better than having no insurance.

If you stay with the same company, there are effectively two ways to tweak your policy to get the most affordable auto insurance. For one, lower your liability limits. Second, adjust “full-coverage” or material coverage by raising deductibles or by eliminating material damage coverage entirely.

Other components of auto insurance, such as uninsured and underinsured motorist coverage and medical payments in states that do not have “no-fault” insurance, generally represent a small portion of the total premium. That’s why they usually provide little cost savings if changed.

Liability Changes for Savings

The most basic component present in all auto insurance policies is the liability portion. This is required in most US states. Liability is further divided into three parts, liability for injury/death to one person, liability to injury or death to more than one person, and liability for property damage. Liability coverage is defined by the maximum amount an insurance company will pay in any given claim for each category.

In insurance parlance, liability coverage levels are often defined by a grouping of three numbers: 50/100/50 – that stands for $50,000 for injury or death to one person, $100,000 for injury of death to more than one person, and $50,000 for property damage. In some states, companies also offer a combined single limit liability policy, or CSL. This is liability that covers all three liability scenarios under a single limit, and can therefore be more flexible.

While it’s tempting to get just enough liability insurance to meet the state minimum, that’s generally not a good idea. State mandated liability insurance requirements are often outdated and therefore inadequate for anything except minor accidents.

For example, Idaho requires minimum liability coverage of 25/50/15, a fairly typical amount across the country. Some states require more, others require less.

That’s all fine and good until you’re found at fault totaling a $45,000 Mercedes. That $15,000 property damage limit isn’t going to cut it, and you face the possibility of being sued for the difference. Accordingly many insurance agents recommend liability limits no lower than 50/100/50, or $100,000 CSL if available.

Full-Coverage Changes To Save

The other main component of auto insurance is known as material damage or “full coverage.” This pays for repairs to your own car if you’re found at fault, or if you’re involved in a single car accident. If you’re making car payments, your bank or lienholder will require you to keep this coverage.

Here’s an industry secret: most lienholders don’t care what deductibles you carry, and there’s where your wiggle room is.

Material damage coverage consists of two deductibles, a collision deductible which applies to accidents, and a comprehensive deductible which covers non-accident related mishaps such as theft, vandalism damage caused by hitting animals.

These deductibles are generally available in amounts from zero to $1,000. The comprehensive deductible is usually (but not necessarily) lower than the collision deductible. When determining your deductibles to get the most affordable auto insurance, go with the highest number you’re comfortable with.

Once the car is paid off, no state requires material damage coverage. That means that you can legally drop full coverage. While this single act can make give you more affordable auto insurance, it shouldn’t be taken lightly. Ask yourself this question, “If this car is stolen or seriously damaged in an accident, will I be OK walking away from it?” If your honest answer is yes, then drop material damage.

Your right to cancel auto insurance, how to handle switching companies, and canceling when you no longer need coverage.

Do you just tear up the policy when you don't want it anymore?

What happens when you cancel your car insurance?

It’s easy to cancel coverage. You can simply stop paying, but the cancellation is not instantaneous. When canceling insurance, it’s important to inform your insurance company of the exact date you want to cancel. Otherwise you may wind up paying for insurance you’re not using.

Your Right to Cancel Auto Insurance

Although some agents may try to imply otherwise, the fact is you have the right to cancel your auto insurance at any time for any reason…or for no reason at all. While changing companies at renewal can be an easier process for both you and the company, you do not have to wait until renewal to do so.

That said, there are a few things to consider if you rewrite your coverage.

First, your new insurance company will likely require a down payment to start your new policy. While there can be savings in the long-run changing companies, the upfront costs may result in a higher cost in the short-run. Be prepared for some additional charges when changing companies.

How to Handle Switching Companies

Secondly, ask your new insurance company to send a cancellation to your old company on your behalf. This prevents you from having to make that awkward call to the old company. A cancellation can be done with a simple note faxed to the old company from the new.

It can also be done with an “Acord Cancel” form. This is a standard industry form that most companies and agents are familiar with. Your new company will be happy to oblige, and your old company is required to honor the request. Agents much prefer sending cancellations than receiving them.

Getting a Refund

Also remember the chances of getting a refund back from your old company are pretty good. Most insurance companies design their payments so that you’re consistently paying for coverage not just for today but for a certain period into the future, generally around four to six weeks.

This is intended to keep your coverage from lapsing in the event of an inadvertent short or late payment. Further, insurance companies are required to refund any premium applied for unused time directly to you – called a “return of unearned premium.” As a result you may get a check back from them (or at least a smaller bill) a few weeks after you cancel.

When You Just Cancel Your Policy

For the very same reason, it is important to inform your insurance company if you’re canceling coverage due to selling a vehicle or otherwise not driving it anymore. Remember, it’s not illegal to own a car without insurance. Rather, it’s illegal to drive a car without insurance.

If you simply stop paying for insurance the coverage will eventually be canceled, but not until four to six weeks after the fact. Informing your insurance company of the exact date you’re not using a car anymore prevents you from paying for a month or more of needless coverage.

Why auto insurance is cheaper for women and how companies rate different groups of drivers

Will she really pay less money for car insurance than her brother?

Like it or not, women are charged different rates for car insurance than men.

That said, throw any negative preconceptions you may have about women drivers out the window. All things being equal, car insurance for women is less expensive than men.

Why is that?

Statistically speaking women are involved in fewer accidents. Ask any insurance actuary – the person responsible for setting premium rates.

Why Premiums Are Different for Women

Though it sounds like insurance companies are discriminating against men, rest assured they are not. Companies favor or punish different groups based on cold, hard statistics alone.

Here’s how it works:

Every insurance company employs at least one actuary. This is a person with a mathematics background who analyzes losses incurred by that company. They also determine if any particular group of drivers are causing more or fewer claims than others. The company then bases its premiums based on the actuary’s study.

It is important to note that insurance companies only consider their own loss experience when compiling these numbers – with only a passing interest in what their competitors are doing. What’s more, different companies place a different emphasis on different outcomes.

For the most part pretty much every company comes to the same basic conclusions: drivers under 25, as well as drivers over 74, cause a disproportionate amount of claims. In addition, women cause fewer claims then men. Thus, car insurance for women is cheaper than car insurance for men – though the rates don’t vary wildly.

The Gender Gap In Rates

The gender gap in insurance is most apparent at the high school ages. While insurance for a teenage girl is still expensive, it’s not as expensive as it is for her brother or boyfriend.

However, by the time she turns 25 rate differences between her and her male counterparts tend to level off. By the 50s rate differences between men and women are often negligible, but even at that age there are still differences in the woman’s favor.

Insurance is fundamentally a business of statistics. While by definition these statistics drive the business and prefer some groups over others, no reputable company will prefer or discredit anyone based on anything else.

When it comes to car insurance for women, the buying and servicing process should be absolutely no different for them than it is for men. If it is, you should probably take your business elsewhere.

How bike insurance is similar to a car policy, why there’s a difference in premium, and when to carry full-coverage

Why you need a special policy to cover a cool ride.

Bike insurance has hit the big time. Only a few short years ago, insurance companies were squeamish about insuring Harley-Davidsons and Kawasakis. They’re now stepping over each other to add motorcycles to their policy rolls.

It has finally dawned on many of these companies that motorcycle insurance makes sense for both them and the rider. However, there are a few unique things to consider when writing a bike insurance policy.

Is it Similar To A Car Policy?

On the surface, motorcycle insurance operates in much the same way as automobile insurance. State minimum liability limits for motorcycles are the same as for cars. Motorcycles can also be insured for collision and comprehensive coverage.

However, on the whole bike insurance is considerably cheaper than car insurance. Indeed many companies are now advertising $100/year policies, an amount that can easily be a monthly payment for auto insurance. That said, as with automobiles it’s not always the best idea just to go for the lowest possible price when it comes to bike insurance.

Why Liability Coverage is Less Expensive for Bikes

A motorcycle is smaller than a car. The damage it’s likely to cause to other people’s property is less. For this reason, individuals with bike insurance can get away with lower liability limits than those who drive cars, but it is still not recommended to go just with state minimums.

Remember state required liability limits for property damage are outdated and quite low. Limits for bodily injury can be lower than for automobiles as well, but one shouldn’t skimp on those either for much the same reasons. While there’s no need to go crazy with liability limits, it is always a good idea to have limits high enough to cover the worst-case scenario.

Covering Injuries on Your Bike Policy

The real risk involved with motorcycle accidents is to the motorcyclist himself. For obvious reasons, regardless of fault, a motorcycle driver is much more likely to be seriously injured in an accident than an automobile driver.

It’s important to cover yourself, either with a good health insurance plan or with a generous medical payments on your bike insurance policy, preferably both.

Material Damage on Bike Insurance

Full coverage for bike insurance works the same way as it does for auto insurance. However, full coverage on motorcycles costs less because motorcycles usually cost less than cars.

That said, assuming there are no lienholders the question regarding full coverage for motorcycle insurance remains the same. If the bike stolen or seriously damaged, will it hurt you financially? If your answer is ‘yes’, you should probably keep full coverage.

How van insurance is different from normal auto insurance, getting the extras covered, and how RV insurance may make more sense

Good, cheap van coverage is easier than you think.

Getting cheap van insurance is very similar to getting cheap car insurance. After all, a personal van policy is no different from a personal auto policy – but that’s different from commercial van insurance.

If you’re trying to keep your premiums low, treat it the same way you would normal car insurance. For inexpensive van insurance, you’ll want to go with the lowest liability limits and highest full coverage deductibles to limit costs. Just make sure you’re getting adequate coverage in the process.

Shopping around doesn’t hurt either. Different companies look at different things when calculating premiums so rates can vary dramatically.

However, there are other things one should consider when insuring a van. There are a lot of extras generally not found in the run-of-the-mill sedan. Cheap van insurance isn’t just about getting the best price.

Additional Coverage for Van Extras

But a standard auto policy won’t always cover a van’s extra stuff. Vans often come with extra items – these items can usually cover with an ‘inland marine’ rider. The term ‘inland marine’ is a quaint 19^th Century throwback, originally referring to insurance for items transported along canals. Today it refers to coverage for items not covered by the standard auto insurance.

Extra items on vans include third-party installed car stereos and other valuable aftermarket items. Agents or brokers may forget to tell you that if an item is not factory installed, it may not be covered on a standard automobile policy for theft or vandalism. The inland marine rider fills that gap by covering those items separately.

In addition, most inland marine coverage is based on stated value. In other words you tell the agent how much it is worth and it’s covered for that amount less any deductible – though that amount may diminish over time due to depreciation. Bear in mind, this coverage isn’t just for vans. Any vehicle with aftermarket upgrades installed would benefit from inland marine coverage.

RV Insurance for Really Big ‘Vans’

The cheapest van insurance may not be “van insurance” at all. If your van qualifies, you may want to consider insuring it as a recreational vehicle instead of as a personal automobile.

In addition to liability and material damage coverage, RV insurance often comes with extras such as coverage for personal property, liability coverage at vacation sites, emergency expense coverage (such as for a hotel room if the RV breaks down), and other enhanced benefits not found in a typical personal auto policy.

Check with your agent or broker to see if your van qualifies for RV insurance.