Auto Insurance for Used Cars: What should I consider when buying coverage?

Auto insurance is confusing. There, I said it. The combination of different types of coverages as well as the variables that exist in different situations and just about ANYBODY can get confused. It would be so helpful if there were just some kind of ONE SIZE FITS ALL policy that would cover anyone and everyone in every situation but there simply isn’t. The fact is an auto insurance policy can often be as complex a thing to figure out as is the contract of buying the car itself! It would make sense to handle the tailoring of an insurance policy at the time of the purchase of the car but many of us are more interested with pulling our new found love into the driveway than we are with sitting with an insurance agent discussing deductibles. The lack of time spent on customizing the policy is a shame because it is only AFTER a claim occurs when you find out you may, or may NOT have the coverages you need. In addition, you may end up spending hundreds or even thousands of dollars for others you don’t. One particular scenario that falls into this last category is that of an insurance policy designed for a used car purchase.

Auto insurance policies for a used car can vary somewhat from that of a new car purchase. For one thing, used cars cost less, so there is often a need for less coverage, but only in certain areas. Many people make the wrong assumption that just because they are buying a car of lesser value they can skimp on the policy overall. They often don’t see the need in paying high premiums considering how low their actual car payment is. In addition, because many used cars are purchased without the need for a bank loan, a full coverage policy is not always required. This does NOT mean, however, that a full coverage policy may not make sense. Let’s check out the basic coverages of an auto policy and see how each one may pertain to the scenario of a used car.

Liability-Ok, this is the biggie. Liability coverage protects the other party in the event of an accident in which you are found fault. What this means is, this coverage protects your assets! If you are found liable in an accident and you don’t have sufficient liability coverage, then a lawsuit may come after you, your income, and even your home in the worst cases. I don’t care if you have a clunker that cost you $200 this is NOT AN AREA to skimp on coverage. Buy it and buy it big. State minimums are a joke and if your policy is the state minimum in this area, the joke COULD be on you.

Uninsured Motorist-This is the coverage that will cover YOU in the event you are in an accident, and someone else is at fault, BUT, they either don’t have insurance, or the accident was a hit and run. What cover yourself LESS than you would the other person? The rule of thumb here is, mirror your regular liability limits.
Collision-NOW maybe we can save some money. Collision is designed to pay for your vehicle in an accident where you are at fault. If you ARE driving that $200 clunker, then you probably don’t need collision. The less your car is worth, the less effective this coverage is. The goal here is to weigh how much this coverage costs versus how much your vehicle is actually worth. If this coverage costs you $400 every year, and your car is only worth $2000, you might consider not including collision as part of your policy.

Comprehensive-Comprehensive can be pretty effective in many cases actually. It takes care of all those things other than collision. Windshield cracks or breakages, vandalism, hail damage and vehicle theft are all covered by comprehensive. Windshield breaks are common and often help make the decision for folks to go ahead and keep this coverage with a fairly small deductible.

No Fault or Personal Injury Protection-In many states this is called PIP and it is the first line of payment if you are in an accident and are injured. Injuries occur in new cars and used alike so this has no special affectation in the case of a used car. The coverage is usually inexpensive, so max it out if you can afford to.
Car Rental-If your car is in the shop because of a covered claim and you have to have one to get back and forth, you will be happy you have this coverage on your policy. It is fairly inexpensive but if you will need a car in the event of a claim, it is best to keep this on board as well.

Emergency Road Service-Now here’s one that can come in handy in the case of a used car. Let’s suppose your used car decides it just doesn’t want to start anymore. Well, you will need to tow it somewhere to get it fixed. This inexpensive little coverage can reimburse your towing expenses. In addition, it can cover things like roadside maintenance such as running out of gas or having a flat tire.

As you can see, an auto policy for a used car is not all that different than for a new one. Collision is the main decision you will have to make here but, while the tips above may help you decide, it is ALWAYS wise to sit down with an insurance professional and go over your plan coverage by coverage.

This entry was posted on Wednesday, August 12th, 2009 at 7:03 pm and is filed under article. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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