Undestanding Your Automobile Insurance Costs

When it comes to buying car insurance, you know that you need to have a policy to drive legally. You may already know the cost of your premium and deductible, but understanding the costs can help you determine which type of policy and how much insurance to purchase. Here are some things to know when you look at your current policy or when you get ready to buy a new one.

Premium Payments

Premium payments can sometimes be confusing, particularly depending on how you are billed. Your statement may show your annual or six-month cost, but this number will be different than what you pay monthly.

Ask your agent to give you a breakdown of your monthly cost, and be sure to ask about payment options. Some companies may provide a discount if you pay your premium for the entire year upfront. If you can afford to do this, you may be able to save a significant amount of money.

Deductible

Your deductible is the amount of money for which you are responsible to pay before your insurance coverage kicks in. The higher your deductible is, the lower your premiums may be. This is why it's important to know what your deductible will be before you purchase a policy.

If your monthly premiums are low, you may find that the deductible is too high to meet your current financial situation. It's a good idea to keep the amount of the deductible in a savings account. This way, you know that you can always cover the cost should your car be damaged or stolen. 

Policy Limits

Of course, your insurance policy likely has a limit. This is the maximum amount that the insurance company will cover. Any additional expenses after the maximum are reached are typically your responsibility.

The max limit can be a roadblock if your car is stolen and you need to replace it, as you may find that you still have to cover some of the cost associated with getting a new vehicle. It can also come into play if you are involved in an accident and accrue serious injuries.

Fortunately, you can discuss your current policy limits with your agent. You may find that with a small increase in your premiums, you can get a limit that better meets your needs. Remember that the value of your vehicle does decline with time, so you may still end up owing additional money if the car is totaled or stolen at any point.

It's a good idea to sit down with your auto insurance agent every year before your policy is up for renewal. You can review your premium, deductible, limits, and coverage to ensure the policy you pay for is always tailored to meet your needs.