One of the major costs and one of the most confusing issues for any motorist these days is insurance.
When choosing or updating an insurance policy, dozens of questions can come up: How much coverage is enough? How can I reduce my rates? Should I change my insurance carrier?One of the best ways to cut your insurance costs is to drive carefully. AAA Michigan says being ticketed for running one stop sign and being at fault in one accident during a three-year period can boost rates by 40 percent.
The car that's being insured also has a big effect on premiums, says Greg Vartanoff, actuarial director for AAA Michigan, one of the state's largest automobile insurers. A family car will be insured less expensively than a sports car.
"A 1990 (Chevrolet) Lumina has a base price of around $12,000 but it's insured as a $10,000 vehicle," he said. "A 1990 Camaro IROC has a base price of about $14,000 but it's insured as a $30,000 vehicle."
Another way to cut insurance costs is to shop around. Insurance laws sometimes change, which can affect the amount you pay. Changes in levels of coverage or deductibles, for example, can raise or lower your premiums.
Perhaps the only time a motorist actually looks over an insurance policy is at new-car buying time. Along with sticker shock at the dealership, a driver may be shocked to discover changes in insurance costs.
New cars cost more to insure than old cars simply because they're worth more.
But many of today's cars come with safety features that can slash insurance costs. Air bags, automatic seat belts and anti-lock brakes can cut them, too, sometimes by considerable amounts.
Anti-theft devices such as alarms and stolen-vehicle tracking systems also can save some money in some states.
"If you have an active device that requires some sort of manual action, you get a 5 percent deduction in comprehensive coverage," Vartanoff said. "A passive device, you can get a 10 percent deduction."
He said one of the easiest ways to reduce costs is to increase deductibles, or the amount of money a customer is willing to pay for vehicle repairs before insurance money kicks in.
Here is a brief vocabulary of car insurance terms. Some forms of coverage are mandatory, others optional. Check with state laws.
- Liability coverage. Divided into two subcategories, bodily injury and property damage. Bodily injury, in turn, is divided into two groups - per person and per accident - with dollar limits to each. This bodily injury coverage is frequently referred to as 20-40, for example, meaning $20,000 limit per person and $40,000 limit per accident. Property damage liability is listed on a per accident basis also with limits. States establish minimum liability coverages.
- Uninsured motorists. Covers your injuries caused by an uninsured motorist. Limits also are on a per person and per accident basis.
- Collision. Protects the vehicle up to its market value. Deductibles are paid by the policy holder. The higher the deductible, the lower the premium.
- Comprehensive. Protects the vehicle against mishaps other than collision, such as fire, theft, flood and so on. Deductibles also are common in comprehensive protection.
- Car rental. Provides financial help for a motorist who needs to rent a car while his own is being repaired.
- Death indemnity. Provides a one-time payment to the estate of the policyholder or spouse when an accident results in death.
- Property protection. Protects the policyholder for damage to another vehicle when the policyholder is negligent, provided the other car does not have collision coverage.