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May 12, 2006


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Before buying auto insurance, it is very important that the person goes for a thorough analysis of the proposals offered by different companies for such insurances. Different companies offer different quotes for the insurance of the vehicle, the consumer must look out for the best one, which suits his needs and which proves to be very economical. Many companies also give different discount schemes to attract more and more consumers. The consumer can save a good deal, while purchasing auto insurance by comparing the quotes of different companies and choosing the cheapest one which satisfies all his needs.

Quotes from different companies can be compared on the internet, for buying the best available auto insurance, it provides a wider platform to the consumer, where he can easily access and compare quotes from several companies and choose one among them. The main thing about choosing a quote is that the quote need not necessarily be cheap but the company must be an established one on which the customer zeros on.

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As a former insurance adjuster (for years in the biz):

1. Don't lie on an application. This is about the worst thing you can possibly do. If you lie, you'll get caught at some point. You'll then be cancelled/declined, and that will follow you around for years. You'll notice on each application, there is a question something along the lines of, "Have you ever been denied insurance or had a policy cancelled before?"

They'll check. They'll also pull your MVR (Motor Vehicle Report). They'll also likely run a CARFAX on your vehicle to see if it has been involved in any prior accidents.

2. Pick the highest deductible that you can afford. This is difficult for many people to comprehend. Many times, people will choose $500 or $1000 deductibles because it makes the premiums very attractive. Unfortunately, when you get into an accident (your fault or not), you then have to pony up the deductible (unless the other carrier pays for your damage). As an adjuster, one of the most common complaints that I'd hear is, "Well, I don't have $1000 in the bank to repair the car. The accident wasn't my fault. What are you going to do about it?"

Unfortunately, the answer typically is that the adjuster is not going to do anything about it, aside from try to get your deductible back from the responsible party, either by the process of subrogation (one insurance company going after another) or a lawsuit if the person is uninsured. Neither guarantee success, and in most cases, the adjuster is going to require that your vehicle be fixed prior to taking any action against a responsible party because, if we do it beforehand and the repairs cost more than the demanded amount, the insurance company is out that additional money.

So, the rule of thumb is as follows: If you don't normally have $1000 in the bank, then don't take the $1000 deductible. If you really only have $500 or $250 in the bank at any one time, choose that as your deductible amounts.

3. Know the value of your vehicle. Many people throw out thousands of dollars per year on useless insurance. A good and honest insurance agent will help you determine if you need Comprehensive and Collision insurance. A less-than-good agent (not necessarily dishonest, but let's leave it at inexperienced) will write you up any coverage you want without asking money-saving questions.

In the Internet-shopping environment, many times you don't deal with sales agents to look out for you. Saying that, most people have no realistic clue on the planet what their vehicle is worth. Check some here.

You have to be realistic when you use these websites, particularly NADA and Kelly Blue Book (KBB). Read the descriptions, particularly the "Vehicle Condition" descriptions on the website. While you may think your vehicle is in "excellent" condition, it is extremely likely that it isn't. KBB will help you, if you need it, to accurately determine the condition of your vehicle.

The above websites are what your own insurance company uses to value your vehicle in the event it is a total loss. They'll also likely use CCC Valuescope, which is not a free site. But, CCC Valuescope relies on CARFAX and NADA to do a lot of the dirty work for them.

Realize that mileage is one of the biggest factors in determining the value of your vehicle. Higher mileage equals lower value.

Compare the premium of the Collision and Comprehensive insurances to the value of your vehicle, and don't forget to take into account the deductible. If you're carrying a $500 deductible on a $1500 vehicle, you're throwing out money. All you need is liability insurance, along with whatever uninsured motorist protection and medical coverages you need. You don't need to be wasting your money on Comp and Collision.

Finally, the whole depreciation issue comes to bear. Depreciation is best defined as Replacement Cost (what it would cost you to purchase something new at today's price) less any Betterment (any wear/tear that is associated with the use of the product). Let's take tires for an example. If a new tire costs $100 (Replacement Cost), and has a 100,000 mile useful life (not realistic, and warranty is a seperate issue), and you've put 25,000 miles on the tire (betterment), then the depreciated value of the tire is $75. That's all you're going to get from anyone, unless you have a Replacement Cost policy (extraordinarily rare).

Paint, any moving parts, rubber, carpeting, leather, vinyl, lights, etc. all wear out and thus, are depreciated. Most insurance companies won't depreciate paint if only a panel or two is damaged on your vehicle. But, if the entire car requires repainting, you're going to suffer a depreciated payment on top of the deductible that you've already incurred. So, you need to keep depreciation in mind when you're considering a deductible.

To recap, a $500 deductible might wind up being more than that when depreciation is factored into the mix. Sometimes, with engines for instance, the depreciation can be several thousands of dollars. To see how different insurance companies price check

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