Best insurance coverage for your car

Buying insurance for your car is always a wise decision. However, there are different ways in which you can reduce how much insurance costs you without compromising on the coverage against various risks. The key is to know the exact age of your car and what type of risks are most likely. These are simple estimates that are within the capacity of the average car owner.

car-insurance

One of the things you can do to maximize your insurance coverage while reducing insurance costs is to hold on to your old car for a little longer. Many owners feel compelled to do this because of the high price of a new car, but this strategy also helps you to accept a greater degree of risk since most of the car has already depreciated over the years.

Owners of new cars usually have no choice but to pay for full insurance coverage because this may be required by the leasing agency. Full insurance coverage includes both liability insurance as well as collision insurance. The former compensates the car owner in the event of damage caused to another vehicle while the latter is aimed at compensating for damage sustained to the car owner’s own vehicle. Another type of insurance is comprehensive insurance which has a maximum limit up to the full value of the insured vehicle.

If you are going to seek financing for your new car purchase, then you will be expected by the leasing company to purchase full coverage insurance in order to protect the value of the asset. Banks offer various plans to reduce the overall cost of insurance to you; however, ultimately the difference is not very significant because the bank will charge you a sum for every assistance rendered with the insurance. Getting full coverage is recommended for a new car because damage to a new vehicle can be much more costly than similar damage to an older vehicle.

If, however, you feel that the full coverage insurance is too expensive, you may opt for gap insurance. Gap insurance offers to pay the loss you may suffer if your vehicle suffers a total loss within a year of purchase. Because the market value of a car drops significantly from the purchase price within the first year, a total loss will give you less from the insurance company than what you actually owe under the lease payments. This loss can be recovered through gap insurance.

In case your car is not some years old and its market value is approximately a third of the original value. You can go for an insurance plan that offers a higher deductible because it will reduce your insurance bill, provided that you are in a position to bear the loss if the car becomes a total loss. It is advisable that you retain collision and comprehensive insurance to get the maximum protection for your car.

With slightly older cars, the following strategy is recommended. If you find that the premium costs is almost the same as 10% of what the insurance company is likely to pay in the event of a total loss (i.e. market value minus deductible), then you may drop the comprehensive and collision coverage from your plan.

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