Quiz: Is Your Auto Insurance Right?
During tough economic times, it can be tempting to cut back on auto insurance. But there’s a fine line between saving money and putting your financial future at risk. Take this quick quiz to determine if you’re over-insured or simply engaging in risky behavior.
Is the cost of comprehensive insurance coverage greater than the value of the car? In general, if the value of the car is equal to or greater than three years’ worth of premiums, it is a good idea to keep comprehensive coverage. Otherwise, you might benefit from reducing or eliminating comprehensive coverage for your old clunker. Just be sure that you have the ability to replace or repair the vehicle should a total loss occur.
Do you have a second car or additional vehicle available?
If so, you may be able to reduce comprehensive coverage on older automobiles as well as eliminate extras, like rental coverage, on the policy. Determine if the savings is worth the inconvenience before dropping coverage.
Do you have enough money in savings to pay for small repairs out of pocket?
If so, you may benefit from an increased deductible that lowers the cost of auto insurance. On the other hand, if you don’t have much money in savings or you are worried about cash flow, keeping a lower deductible is a quick way to supplement your emergency cash savings.