by George Littler

Created on: August 09, 2008   Last Updated: August 19, 2008

Insurance: everybody needs it, nobody likes it.

Often, insuring an automobile is a person's first experience with buying insurance. People often say, "I'm a good driver, so why is my premium so high?" There are many reasons for this, too many to delve into here. Suffice it to say, even if your driving record is accident and violation-free that doesn't mean you will have a reasonable auto insurance premium. Particularly if you live in the northeastern United States.

First, the basics. In most cases, auto insurance premiums are going to have two big-ticket items: your auto liability coverage, protecting everyone else against bodily injury and property damage you cause, and collision insurance for your own car. The more expensive and sportier your car is, the higher your collision insurance premium is going to be.

So, how much liability insurance should someone buy? There is no simple answer since liability claims involving bodily injury are incalculable. Insurance companies can't estimate just how much it will cost to settle a claim. So, ask not how much coverage should I buy, but what assets do I have that need protection?

Generally, while younger drivers usually have fewer assets, they are the less experienced, riskier drivers. Older, more experienced drivers, will own a house, have savings, perhaps a 401K. So they stand to lose much more, if found at fault for an accident. But even using the example above - younger buy less liability coverage, older more, is not a slam-dunk. Historically, the first group has more accidents than the second.

So make the decision to buy as much auto liability coverage as you can reasonably afford. Someone with significant assets can and should buy the maximum limits available in their state. Younger drivers should buy at least one level about the minimum, then add more coverage later. Remember, rates start out high for young male drivers, moreso than for female drivers, but lessen as the young male driver gets a little older or gets married, and maintains a good driving record. Employment close to home, or commuting to work by mass transit, helps reduce costs, too.

In states like New Jersey, make sure your auto liability coverage is purchased, including a lawsuit verbal threshold. This will limit your right to sue, if you are hurt in a car accident caused by someone else, but it also, on average, makes your auto liability premium 30 percent lower than if coverage is purchased with no lawsuit threshold.

As far as collision insurance

• 1
• 2
• Next Page >>