Reviewing Auto Insurance Coverage

Warmer months and longer days may have you envisioning a road trip in the near future. Just as you review other aspects of your financial plan, you might want to review your auto insurance policy to determine whether your coverage is sufficient. Most drivers know that auto insurance is a contract between a policy holder (the person who pays the premium) and the insurance company (which agrees to pay the losses defined in the policy). But how exactly does it work?

An auto policy typically includes property coverage for damage or theft of the vehicle, liability coverage for the policyholder’s legal responsibility to others for bodily injury or damage to their property, and medical coverage for the treatment of injuries, rehab, lost earnings, and possible funeral expenses. Nearly every state requires drivers to have liability coverage, and all states set a minimum amount of insurance or financial security drivers must pay for harm, if they are proven negligent. Most people can easily comprehend the components of an auto insurance policy, but they often misjudge how life changes can affect their auto policy.

Changing Residence

According to the Census, the average person moves just over 11 times in their life. That sounds like a lot; however, even after turning 30 –years –old, an individual is likely to move at least five times. Wanting more space for children, changing jobs, downsizing after the children leave, or moving to a warmer climate are common reasons to move. When reviewing your auto insurance policy, a provider will consider the safety of the neighborhood, where you park your car, likelihood of severe weather events, and even the frequency of accidents in the area (not caused by you!). Note that most car insurance companies require their policyholders to report a new address in as few as 30 days, so your premiums may automatically adjust. Nonetheless, it is still beneficial to review.

Changing Work Status

Although you may not realize it, your job also affects your car insurance premiums. Per autoinsurance.org, insurers use both your occupation and education to determine how much you’ll pay because those factors tend to influence claims. In fact, the Consumer Federation of America found that Americans with less education and lower incomes often pay more for insurance than their highly educated skilled workers and executives. Technically, insurance companies can’t consider income when determining your rates, but they can use your job title to calculate your chances of being in an accident and filing a claim. If you’ve been working nights as a bartender but get a day job as an accountant, you could see a difference in the insurance premiums you pay.

Teenage Drivers

As a teen with a newly-issued driver’s license, you may have heard your family joke that the roads are no longer safe. Beyond the humor, teenage drivers are far more likely to engage in risky driving behaviors. Evaluate the costs of adding a teen to your policy versus buying a separate policy for them, and shop various insurance carriers. Other ways to keep your costs down: ensure your teen drives a safe car, consider usage-based insurance, and take advantage of any good student discounts.

Should you consider umbrella insurance?

Umbrella insurance is personal liability insurance that covers claims in excess of regular auto, home, or watercraft policy coverage. It can cover the entire household or family, not just the policyholder. Umbrella policies can make sense if you have significant assets to protect or want to cover injury to others or damage to their possessions. For example, an umbrella policy could be useful if your dog attacks a delivery person at your home or if your teen causes a multi-car accident and you don’t have enough liability coverage in your auto policy to pay the victims’ medical bills.

Insurance is a major part of any financial plan, and that includes protecting your vehicles and providing coverage if you are liable for loss on the road. While you should contact your insurance agent with specific questions about your policies, feel free to reach out to Savant if you have any questions on your financial plan or are interested in learning more.

This is intended for informational purposes only and should not be construed as personalized financial advice.