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Car insurance basics

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However, David Snyder, assistant general council for the American Insurance Association in Washington, D.C., disagrees with Swan.

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"Even if you have health insurance, think twice before you reject or waive PIP coverage," he argues. "PIP usually provides dollar-one coverage [with no deductible]. People with significant deductibles and co-pays should have PIP."

Collision and Comprehensive
These are two parts of a policy that can add significant costs to your premium. Collision provides coverage in the event of any kind of accident, whether it's with another car or an object, such as a utility pole or fire hydrant. Comprehensive insurance covers you in the event of theft or natural disaster.

If you have an older car, and the cost of repairing or replacing your car is likely more than its value, then experts such as Swan advise waiving both collision and comprehensive coverage.

Keep in mind that any coverage you decline on your policy, you'll need to have when renting a car, from Avis or Hertz for example, says Neagle. So, if you decline collision and comprehensive, you should either accept a rental car company's insurance or use a credit card that provides rental car protection just in case.

For newer cars, you should have a deductible on both collision and comprehensive that is the maximum amount that you can afford to pay out-of-pocket for repairs, says Snyder. The higher the deductible the lower the premium. Insurance professionals say that the average policy carries a $500 deductible for both collision and comprehensive claims.

Uninsured Motorist
As the name indicates, this coverage provides you protection from crashes with motorists not carrying car insurance, as well as covering you in the event of a hit-and-run accident. Also, uninsured motorist insurance coverage comes into play when an at-fault driver doesn't have enough liability coverage to pay for the damages from an accident. Most states require drivers to carry uninsured motorist coverage.

Ask for discounts
Now that you understand the basic parts of a policy, you can save money on premiums by asking your insurance company for a discount.

Discounts available vary by state, but typically include: safety equipment discounts (air bags, anti-lock brakes and security systems), multipolicy discounts (if you have other insurance coverage with the same company or have several family members on the same policy), good student discounts and premium reductions for driver's education classes.

The experts recommend shopping around with several insurance companies to get the best premium rate, especially if you have a clean driving record for the last three years. The longer that you avoid an accident, the better the cost of the insurance.

"Every day you drive, you're helping to determine what your insurance cost is," advises Snyder. "By driving carefully, you're lowering your insurance payment."

Finally, car insurance premiums will be higher for cars that are attractive to theft and that suffer extensive damage during a crash. The CCC Information Services conduct studies and release an annual listing of the most frequently stolen vehicles.

Bankrate.com's corrections policy -- Posted: May 10, 2002
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