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How To Maximize Your Auto Insurance Policy's Value

By Kade Phillips

Republish: EasyPublish™
Published: 04Mar2010
Word count: 707
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Car insurance is obviously a necessary component of driving. It offers financial protection in the event of a court judgment. It also pays for your medical expenses if you're injured by an uninsured or underinsured motorist. And of course, driving without auto insurance is illegal in every province. That said, while nearly every motorist has coverage, many people are paying too much for too little.

Bodily injury and property damage liability, PIP coverage, and collision and comprehensive can send your auto insurance premiums through the roof. For that reason, it's worth taking the time to make sure you're getting the most value for your money. Below, we'll provide a few suggestions for maximizing the value of your car insurance policy.

Liability Coverage Revisited: A Brief Review

Liability coverage pays for the damage you inflict upon others. That includes injuries sustained by other drivers and pedestrians during a traffic accident for which you are found at fault. In this case, your policy would cover (up to your limit) their medical bills and expenses related to medications and rehabilitation. This portion of your policy is called bodily injury liability.

The other side of liability coverage pays for damages you cause to another person's property. This can include damage to someone's vehicle as well as a person's fence, yard, house, or storefront. This is part of your property damage liability coverage.

Adjust Your Liability Coverage For Reasonable Protection

A lot of people carry less bodily and property damage liability coverage than they need. Policyholders tend to maintain the minimum limits necessary to comply with their province's laws with little regard for their financial exposure.

For example, suppose you cause an accident that results in another driver being injured, and her medical bills grow to $100,000. Further suppose your policy has a $50,000 limit. In this case, your auto insurance company would only pay up to your limit, leaving you responsible for paying the difference - or $50,000.

Review the value of your assets (e.g. home, investments, liquid accounts, etc.) and your household income. Increase your liability coverage - both bodily and property damage - to bridge any gap that exists between it and your assets' aggregate value. If necessary, consider buying an umbrella policy that extends your coverage beyond that which your car insurance company is willing to underwrite.

Invest In Uninsured/Underinsured Motorist Coverage

In the same way maintaining the legal minimums exposes you to a financial loss if you cause an accident, other drivers carrying the minimums can also leave you exposed. For example, suppose you're hit by a motorist who either lacks liability coverage or lacks a sufficient amount to pay for damages and your medical bills. You might win a court judgment, but it will do little good if the offending driver lacks the resources to pay.

This is the reason you should invest in uninsured/underinsured motorist coverage. If you are injured or your vehicle sustains damage due to another driver's actions, and that person lacks sufficient coverage, this feature bridges the gap. Without it, you might find yourself in financial distress, paying for auto repairs, medical bills, and even rehabilitation from your own pocket.

A Cheaper Policy Is Not Necessarily "Better"

Squeezing more value from your auto insurance policy does not necessarily mean paying as little as possible for coverage. This is a common trap that ensnares millions of policyholders. In seeking to buy the least expensive policy, they inadvertently expose themselves to a potentially severe financial loss.

It is critical that you take stock of your current financial circumstances. The purpose of car insurance is to offer protection from the high costs associated with being involved in a traffic accident. It makes little sense to buy coverage that fails to provide an adequate protective buffer.

The above is not to suggest you should avoid shopping for low car insurance rates. On the contrary, you should consider doing so a priority and routinely comparison shop between multiple providers. The key is to find an insurer that is willing to offer the coverage you need with the lowest rates possible. One without the other does little good. Fortunately, you can compare auto insurance rates online and find the package that offers the most value for your money.

Kade Phillips is a writer for an insurance rate comparison website where you can find cheapest auto insurance quotes. If you are a Canadian reader looking for cheapest auto insurance rate, visit Kanetix Canada.

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