When looking for car insurance, most people want to find the cheapest car insurance possible. They figure that they are never going to have an accident and if they do, the insurance they have will pick up the tab with no problems. But is getting really cheap car insurance always the best way to go?
The first thing many people do to cut costs on their insurance is to drop coverage like rental and towing insurance. While this can save a few dollars on your premium is it really worth it? The cost of this coverage is usually quite cheap, only a few dollars per month. Towing will pay for taking your car to the repair shop after an accident or breakdown and rental coverage will pay up to some limit per day and for perhaps 30 days if you need alternate transportation while your car is being repaired. If you consider that a towing charge may be $50 to $100 dollars and the cost of a rental car may be $30 or more per day, the cost of the insurance coverage may be worth it. It is certainly something to consider. However if you have membership in an auto club, you may already be covered.
The next place many people try to cut costs is to eliminate collision and comprehensive coverage. If you have a leased car or your car is being financed these types of coverage are mandatory, but if your car is paid off, you can drop this coverage. But is it a good thing for you? Collision pays to fix your car when it hits or is hit by another car. Comprehensive coverage pays if your car is stolen or damaged by a flood, fire or storm. Dropping these coverage types can certainly save you some big money, but if you live in an area where your car may be stolen, if there are lots of hail storms or flooding, you may want to keep the insurance. If you have an accident with an uninsured motorist, something that happens all too often these days, not having collision coverage means you will have to fix your car yourself. If you are OK with these risks, by all means, drop the collision and comprehensive.
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The final way many people try to cut costs on insurance is to have low limits on their liability/property damage coverage. For example some people may have only $100,000 of total coverage. Because liability pays for things like lawsuits, medical bills and loss of income, the bills can add up fast. A seemingly minor accident may result in tens of thousands of dollars in medical bills and legal fees. If you do not have adequate coverage, you might end up paying for some of these expenses out of your own pocket. Skimping on liability insurance could be the most damaging of all to your finances. While the previously mentioned coverage types are largely optional, liability is not and it is best to get the most coverage you can afford so that you don’t end up broke paying for someone else’s medical bills and attorney.
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