(MotivateDaily.com) – If you’re on a tight budget, you might be looking for ways you can cut costs and put more money back into your pocket. Maybe you’ve considered making changes to your auto insurance coverage. Do you really need the extra towing or windshield coverage? What about increasing your deductible?
Reducing your coverage might shave a little off the policy premium, but it’s almost never a good idea. In fact, it could even cost you thousands in the future.
Here’s why.
Passing on Comprehensive Coverage
Comprehensive auto coverage refers to what the insurance company will pay out should your vehicle be stolen, vandalized or damaged through a naturally occurring event. If you have a lien on your vehicle, your lender may require it.
Coverage varies depending on the total policy. If you’re going through your policy and see this amount can be altered and reduced, think twice before you do anything. You may never turn in a claim, but you don’t know what tomorrow will bring. If you eliminate the coverage or reduce it, you could get stuck paying a large out-of-pocket bill in the event of a chipped window or fallen tree branch.
Taking the Minimum Liability Limit
Most states require basic liability insurance on all licensed motor vehicles. This is an across-the-board minimum amount that’s incorporated into new policies. From there, you can build on it to increase liability limits and protect your assets in the event another party sues you.
You may want to keep premiums low by slashing coverage, but this could hurt you if you cause severe injury to someone else and it’s your fault. Choosing a reasonably high limit for total injuries and property damage may be your saving grace in the event of an accident, so don’t cut corners here.
Increasing Deductibles
Having the wrong car insurance could be as simple as choosing a high deductible. Deductibles of $1,000 or $2,000 can be easy to select if you’re looking to slash your total policy amount, but this isn’t usually a good idea. If you have to turn in a claim, you’ll need to come up with that amount before the insurance company pays. Unless you have money set aside for this in an emergency fund, you should opt for the lower deductible.
Lower Monthly Premiums
Do you make monthly installments on your car insurance? You could be paying a lot more than you need to after all the monthly service charges. Consider staying closer to budget by paying your policy in full at the beginning of the term, which could save you hundreds of dollars right off the bat.
Your car is a sound investment. Having the right coverage for it can protect you, other people and your personal property. Don’t learn the hard way and get burned by having the wrong insurance. Your financial future could depend on it.
~Here’s to Your Success!
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