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If you own or rent a car, every state except New Hampshire requires you to have some degree of auto insurance. And if you also drive for your business, you need a commercial motor vehicle policy.
While the cost of these coverages can add up, fortunately, there are tricks for solo entrepreneurs to save money and stay compliant and safe down the road.
What does car insurance cover?
It is essential that you understand what auto insurance covers and why it is important to your financial well-being. Auto insurance is a package of coverages that protect you from various potential financial losses, including:
Property Coverage, which compensates you for various damages to your vehicle. There is collision coverage, which pays for repairs after an accident with another vehicle. A comprehensive payment for theft and specific non-collision claims, such as damage from a natural disaster, animal or vandalism. Each coverage has a separate deductible, which is a set amount you pay before your insurance coverage begins.
medical Coverage, which pays for injuries to you or your passengers after an accident. Some types pay expenses beyond medical treatment, such as lost wages and funeral costs. Medical coverage, also known as Personal Injury Protection (PIP), is required in some states.
legal responsibility Coverage, which pays for certain expenses if you are involved in a lawsuit. For example, if you get into a car accident and hurt someone. Most states require coverage for both bodily injury and property damage. However, minimum limits differ from state to state.
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You can also usually buy:
Uninsured or uninsured driver Coverage, which is for situations where you are in the event of a collision, escape or accident with a erring driver who does not have enough or any insurance to cover your losses.
Car Rental Coverage, which pays for rent while your vehicle is being repaired covered.
glass Coverage, which pays for cracked or broken windows.
Roadside assistance, which pays for towing a truck or other services if your vehicle is stranded.
Tricks to save money on auto insurance
States and auto lenders have different requirements for the types of auto insurance and the amounts you must purchase. However, that’s just one factor in your price. Others include your vehicle’s make and model, annual mileage, driving history, age, gender, and marital status. A commercial auto policy may also take into account your type of business and years of experience.
While you may not be able to change some of the factors that determine your premium (like your age or years of work experience), here are eight ways to lower the cost of automatic coverage.
1. Maintain good credit. You may be surprised to learn that your credit plays an important role in how much you pay for auto insurance (exceptions include auto insurance in California, Hawaii, Massachusetts, Michigan, and New Jersey). Where permitted, insurers use credit-based insurance results to gauge a customer’s potential risk and probability of an accident. This is another reason to maintain excellent grades by paying bills on time and managing credit accounts responsibly.
2. Increase your discounts. As mentioned earlier, a deductible is an amount that you must pay before insurance benefits begin. The higher your discount percentage, the lower your insurance premium. For example, you can usually choose amounts like $500 or $1,000. However, the potential savings to increase tolerance varies from state to state and from insurer to insurer. Also, remember that raising your deductible means paying more for covered claims. Therefore, never raise your deduction amount unless you are confident that you have enough savings to cover it.
3. Maximize potential discounts. Insurance companies offer different discounts but they won’t always know if you qualify for some of them. For example, if they offer a discount for being married and you don’t let the insurance company know you tied the knot, that’s a discount you’ll lose. So, ask your carrier what discounts you can get and other ways to lower your premium. Here are some of the typical car discounts you may be eligible for:
multi-vehicle To secure more than one vehicle.
safe vehicle It has features such as anti-lock brakes and airbags.
safe driver For a clean driving record without accidents.
mileage To maintain annual mileage below certain thresholds.
cultured driver To complete the defensive driving course.
good student For drivers up to age 26 who maintain at least a “B” average.
Occupation To work in specific fields, such as the military, medicine, or education.
automatic payment to automatically deduct your premium from your bank account.
Loyalty For being a customer for a certain number of years.
landlord To own a home even if you insure it with another company.
If you have a commercial auto policy, you may qualify for discounts such as getting a commercial driver’s license (CDL), paying your annual policy in full instead of premiums, and no gap in your coverage. However, maintaining a clean driving record is one of the best ways to keep commercial vehicle premiums low.
4. Keep a clean driving record. The quickest way to find out the skyrocketing height of a premium car is to cause an accident or get moving violations. So, avoid distractions on the road and allow extra time to reach your destination. Being a good driver, an alert driver can pay off.
5. Enroll in the Pay As You Drive Program. Many auto insurance companies across the country offer programs that track your driving behaviors, mileage, and habits. Known as telecommunications, use-based insurance (UBI) and pay-as-you-drive (PAYD), it offers discounts to policyholders who are considered safe drivers. Once you enroll in the PAYD program, the insurance company sends you a device to keep in your car that syncs with a mobile app to track your details. This allows your insurance company to score your scores on different scales and issue applicable discounts upon renewal.
6. Pack the policies with your insurance company. Many insurance companies lower premiums if you purchase more than one type of coverage, such as auto and commercial insurance, or auto and home or renters insurance. It’s called polyline policy or “aggregation”.
7. Delete unnecessary coverages. If you have an older car that you paid for, consider a collision drop and comprehensive coverage to save money. A good rule of thumb is not to buy it unless the annual premium is 10% or less of the value of your car. Otherwise, you will be paying more premiums than you can ever collect from the benefits. However, as mentioned earlier, liability is a requirement, and for good reason. If you get into a severe car accident, you may be sued for a large amount of damages. The truth is, you may need more responsibility than the minimum in your state. Make sure you have enough to cover the value of your personal assets — such as real estate, savings and non-retirement investments — and any business assets for a business policy.
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8. Shop policies carefully. Each insurance company evaluates you differently and offers different discounts. In other words, it is not likely that the price of a commercial policy or car will be the same with another insurance company for the same coverage. Therefore, get into the habit of comparing quotes from three insurance companies at least once a year. Remember that rates change frequently. By collecting several quotes regularly, you will know if you have the best possible offer for your personal and business money.