Car Insurance - Low Rates vs. High Coverage

Low car insurance rates have a direct relationship with quality of the the coverage they are associated with: the less you pay, the less you get in return. The question on every consumer's mind is how to strike the right balance between premium and coverage. There is no catch-all balance that works for every driver. However, there are some simple ways to make sure you are getting the right deal for your situation.

Determine What You Can Pay

It is not a good idea to blindly look for the lowest quote available or likewise for the highest coverage. Assess your finances first to determine your goal payments. Start with your monthly net, after tax, income. Cut it in half. Subtract a mortgage, rent or home owners fees you pay each month. Next subtract your auto loan payment or any other debt obligations you pay monthly. What you have left over is the recommended amount you can spend each month on insurance, which will include your home and auto. Stay within this range, and your insurance will be affordable.

Determine What You Can Lose

It is important to consider how much you could pay out of pocket on a single claim or in a catastrophic accident. You can roughly determine this by assessing your savings, year-end dividends or bonuses, or other monies that are not dedicated to day-to-day living. Some people can afford to pay $3,000 on a catastrophic loss while others can afford to pay $300. Many people think they get car insurance so they never have to pay for a claim. If you do this, you may end up paying more to your insurance company than you would lose paying out of pocket. Knowing the range you can afford to pay for a loss, say $1,000 to $1,500, will give you a target for your insurance rate quotes.

Adjust Your Deductible

Your deductible is the amount you pay out of pocket before insurance kicks in. This is where your ability to lose comes into play. Look for a deductible that is just over your ability to lose per occurrence. If you select a deductible that is under your ability to lose, you will be paying more in premium. Also, by using your insurance to pay each claim, your premiums will continue to climb. Try a few quotes in the range of deductible you are looking for. Are you getting a low car insurance rate? You should be close to your target, and then you can begin adjusting your limits.

Adjust Your Limits

Here is where your ability to pay out in a catastrophic loss comes into play. If your car is totaled, how much will you need from the insurance company to buy a new car? The chance of your car being totaled is relatively low. You can assume some of this risk yourself by opting for lower limits. This will lower your overall car insurance rates. Continue to adjust your limits and deductible in accordance with your ability to lose until you get a quote in the range of your ability to pay.


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