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Tips for Purchasing Auto Insurance

One of the largest items in a New Jersey resident's budget is automobile insurance. Below are some general tips for purchasing a policy:

• Remember that liability coverage is the most important part of an auto insurance policy because there is no upper limit on a potential liability judgment. It can be whatever the results of a lawsuit are, if you are in an auto accident and a court decides that you are at fault. Awards in the millions of dollars are not unheard of.


• Increase liability coverage to at least 100/300/50. Limits of $200,000 per person and $500,000 per accident are even better or, better still, a $1 million umbrella liability policy. In addition, raise your "uninsured motorist" coverage (which covers you if a driver with no liability insurance or inadequate liability insurance hits you) to 100/300/50 or higher.
• Raise the deductibles on your policy (e.g., collision) to the highest level that you can afford to pay in case of an accident. Make sure that you have this amount (e.g., $1,000) saved in your emergency fund in case you need it.
• If you drive an older (7+ years) car, evaluate the cost and payoff for collision and comprehensive coverage on that vehicle. Check the Kelly Blue Book web site (www.kbb.com) to find out what your car is worth. If it got totaled, that is approximately how much you would get from your insurance company, after the deductible. Taking collision and comprehensive coverage off of older cars is a way to keep premiums down.
• Take advantage of available discounts. For example, combine two or more cars on one policy or purchase homeowners and auto insurance from the same insurance company. Discounts may also be available for short-distance drivers, part-time drivers (e.g., students away at school), drivers with a "clean" driving record (i.e., no "at fault" accidents), cars with anti-theft devices, female drivers age 30 to 60, and students with a B average or better. New Jersey consumers can also save premium dollars by choosing the "verbal threshold," which limits lawsuits except in cases of death or serious injury.
• Buy a make and model of car that is less costly to insure and equip it with money-saving features such as air bags and alarms. High performance sports cars are naturals for high-priced coverage. Standard sedans are usually the cheapest to insure.
• Keep your driving record clean and consider taking a Defensive Driving course (e.g., the "55 Alive/Mature Driving" class offered by AARP). Make sure that teen divers in your family take driver's education training and maintain a good academic record.
• Avoid duplication. An example is coverage for auto-related medical expenses if you already have a good comprehensive health insurance policy. However, if you drive at lot of non-family members around (e.g., carpooling), you may want to keep medical payments coverage. Otherwise, an injured passenger who does not have health insurance must sue you for negligence to get coverage under your liability.
• Shop around. Get information about rates, coverage, and claims service from a number of companies or agents. A few phone calls could save $50 or $100.
• Notify your insurance company if you, or an insured household member, substantially increase or decrease your driving; move to a different city or state; buy or sell a car; marry; or turn 21, 25, or 29.