Did you know that you can tailor your personal auto policy coverage to your specific needs? Aside from any state-required minimum liability limits and from any requirements of a lender concerning coverage on the car itself, you can select the type and amounts of coverage you'd like and can afford. Here are some tips to help you choose the right policy for your situation.
How long will it last? Choosing the policy period
Auto policies are typically in effect for one year, but you may be able to purchase auto insurance for longer or shorter policy periods. For the most part, your premiums should be slightly lower when you purchase a policy with a longer policy period, since the insurer can spread out the administrative costs of writing the policy over a longer period of time.
Calling it quits
You can cancel your auto policy at any time before the policy's expiration date. However, you'll probably need to prove that you no longer need to carry auto liability insurance by showing a receipt for surrendered license plates. If you still have a registered vehicle on the road, cancellation is unlikely to be an option for you. Usually, insurance companies impose penalties for early cancellation. Instead of refunding your premium on a pure pro rata basis (1 day equals 1/365 of the annual premium), a short-rate basis will apply. This means that the company will keep extra premium to cover its expenses for writing and servicing the policy for the time it was in effect. For details concerning rights of cancellation, read the cancellation language in the General Provisions part of your policy.
Paying your premium
Most insurers give you three options for paying your insurance premium:
- Pay the entire annual premium upfront
- Make a down payment on the premium (typically 30 percent) and then divide the remainder into monthly installments
- Pay an equal monthly amount for 10 or 12 months
Each method has advantages and disadvantages. For example, paying the entire amount upfront might be financially impossible for you. And while a payment plan may be more manageable, most insurers will charge you interest or a service fee in order to do so (although some insurers will waive their service fee if you have multiple policies with them).
When your spare is flat, get help just like that
One relatively inexpensive option you can add to your auto policy provides coverage for emergency road service and towing. Under this option, the insurer will pay towing and labor costs incurred each time your car is disabled, up to the limit indicated for this coverage (usually in the range of $25 to $75). This coverage is available whenever your vehicle breaks down and is not limited to accidents covered under your physical damage coverage.
Keep in mind that the insurer will pay only for labor (e.g., changing a tire or jump-starting your car) performed at the place where your vehicle is disabled, not for any repair work done at a service station.
When your coach turns back into a pumpkin . . .
If you carry collision and other-than-collision (also known as comprehensive) coverage on your car, you probably have coverage up to a limited amount for the cost of substitute transportation if your car is unusable due to an accident or theft. Typical limits for this coverage are $15 per day, subject to a maximum of $450. Purchase of extended transportation expenses coverage may increase both your per-day and total limits for this coverage. Under both basic and extended coverage, your vehicle must be unavailable for more than 24 hours before you can collect, and you can't collect for a period of time longer than what is reasonably required to repair your vehicle.