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Optional Auto Insurance Coverages Worth Considering

mother and baby in carWhen it comes to choosing the best cheap auto insurance in Miami, and identifying areas to save money, here’s what every car owner needs to know. I’ve already covered the required Personal Injury Protection and Property Damage Liability insurance you need to own a car in Florida. So in this article, I’ll discuss some of the other major and not so major areas where you can lower your premium by adjusting the coverage limits.

But before diving into the details of each component, and making decisions, you should calculate your net worth (current assets minus current debts). Knowing your net worth is important because it will let you know what your insurance is protecting. You may also be able to save money because there is no need to have insurance coverage that far exceeds your net worth total, unless your financial advisor suggests otherwise.

With that in mind, let’s start with the areas that will usually make up the biggest chunk of your total premium. Those being Bodily Injury, Uninsured/Underinsured Motorist, Collision, and Comprehensive insurance.

What Are the Car Insurance Coverages Available in Miami?

Bodily Injury

Usually when you review an insurance policy, the bodily injury description includes a set of important numbers that look something like this — 100/300. The 100 number means that the insurance company will pay up to $100,000 for any one person injured in the car accident. The 300 number means that the insurance company will pay a maximum of $300,000 to all persons injured in the car accident.

For inexpensive car insurance in Miami, the 100/300 can be lowered to whatever you’re comfortable with. Doing this will reduce your premiums.

Uninsured Motorist/Underinsured Motorist

It would be nice if everyone behind the wheel of a car had full insurance coverage. But for various reasons, not everyone does.

This coverage comes into play if your vehicle is hit by a motorist who has no insurance or minimal insurance. It also covers you in the event of a hit and run driver.

The coverage is defined similar to the 100/300 limits discussed above, and you can adjust them to suit your preferences.

When you get this coverage, you’ll also have to decide if you want it “Stacked” or “Non-Stacked”. Stacked means that you have multiple vehicles you want covered under the policy. So you’re doubling (2 vehicles) or tripling (3 vehicles) the coverage, for example. Therefore, no matter which vehicle is involved in the accident, you’ll be able to collect payment. Non-Stacked means that only one vehicle is covered under the policy.

Collision Insurance

This will cover any damage that occurs to your car as a result of a crash, excluding the deductible. Among other things, the cost of this coverage is based on the type of car you drive and its age. You can lower your premiums if you raised the deductible for this coverage.

How Long to Keep Collision Insurance On a Car?

It’s no secret that the value of a car starts depreciating as soon as you drive it off the lot. And if you keep it long enough, its fair market value (or the amount someone would pay you for it) will drop to pocket change.

Once the value of a car falls beneath a certain level, you should seriously consider eliminating the collision coverage. There are multiple factors you should weigh.

As mentioned, your car’s current market value is one factor. A second factor is how much you’re paying for this coverage and the collision deductible. For example, if my car was valued at $3000, Collision deductible was $1,000, and I was paying $500 per year for this coverage, I’d probably drop it. That’s because the $500 premium is 15% of the value of the car. That’s pretty high. If the cost was only $100 per year, I might keep it.

A third factor is what else you might lose if you dropped this coverage. Depending on the insurance company, you might be required to give up the rental car option as well. That may have some value to you if an accident robbed you of your car for a whole month while it was being repaired.

But, if your financial position and bank account are in decent shape and you have access to alternative transportation, that might give you reason to end the insurance coverage. It’s really a judgment call, and the next section below might also sway your decision.

How Does Car Insurance Pay for a Totaled Car?

Imagine if you were involved in a pretty good, but not serious, accident that whacked the front passenger side of your car. So the hood, front panel, bumper, wheel, axle, headlight and a few other minor things would have to be repaired. How much do you think that would cost? A few thousand dollars? Maybe a little more or less?

Next, think about how much you would get if you sold your car today. If you don’t know, just visit a web site like www.kbb.com (Kelley Blue Book), www.NADA.com (National Auto Dealers Association), or www.blackbookusa.com (Black Book) to find out.

What actually occurs when you’re involved in an auto accident is that the insurance company will send out an adjuster to assess the damage. The adjuster will use a secret complex formula to determine how much it will cost to repair your vehicle and how much they will pay you.

At the same time, the adjuster will determine how much your car was worth prior to the accident.

The fact of the matter is the insurance company is not going to reimburse you the full amount to repair your car if its market value is less than the repair cost. They’ll simply label the car as totaled, write you a check for its current market value (less the deductible), and send you on your way.

You can take the damaged car with you and see if someone will fix it for the amount you received. If you financed the car and happen to owe more, then that becomes an out-of-pocket cost to you. There is something called Gap Insurance that you can buy to cover this situation.

cheap auto insurance in miamiComprehensive Insurance

This will cover non-collision damage to your car. For example, if it is vandalized, stolen, flooded, or catches on fire.

How long to keep Comprehensive insurance on a car?

As you might imagine, one key factor to consider is the age of the car. If it’s over 5 years old and has more than 100,000 miles on it, then it is less likely to be stolen. So that’s not a significant worry.

Secondly, compare the amount you’re paying for this coverage versus the value of the car. A general rule of thumb is that if the annual premium for this specific coverage exceeds the value of the car by more than 10%, then seriously consider dropping it.

How Do Deductibles Work for Car Insurance?

Deductibles are the amounts you agree to pay out of your pocket for the accident before the insurance company gets involved and pays the rest. If you get Comprehensive and Collision coverage as part of your insurance, you’ll be asked to determine a deductible amount for each of these. The amounts do not have to be the same.

Deductibles are a way of letting the insurance company know that you’ll bear a small amount of risk, and take care of any minor vehicle damage. In general, the higher the deductible the lower the premium. This is one of the best ways to find cheap auto insurance in Miami and be protected in the event of a catastrophic accident.

What Is Towing & Rental Car Insurance?

These are optional coverages that can be of great help if your car is damaged in an accident. Sometimes they are included with one of the big coverages like Collision. Other times, depending on the insurance company, you’ll have to pay for them as separate options. Be sure to ask the agent.

In conclusion, all of the above coverages offer flexibility that can result in lower rates. You can raise or lower limits to suit your budget. The two main variables to consider in your quest for cheap auto insurance in Miami is the current value of your car and your net worth. Remember that getting insurance is primarily about protecting the things you care about most.