Dave Ramsey has a lot to say about many things including the baby steps method, including car insurance. One of the questions he often asks is to figure out how much care insurance you actually need.
How does car insurance work per Dave Ramsey?
Dave Ramsey is of the opinion that everyone needs car insurance. And with the right insurance, you’re at ease that you’re covered from some sudden undesirable losses.
An average American has a flair for cars! But it’s more than the infatuation. We rely on vehicles to convey us from a location to the other. And I’m pretty sure it’s the purpose everywhere in the world. But if you own a car, then owning a car insurance policy is a legal requirement if your vehicle is roadworthy.
Dave Ramsey took time to explain how car insurance works in his article titled basic insurance policies everyone needs. He explained that although the average automobile insurance premium is $1,134 per annum. The exact figure is determined by your age, your automobile’s age, the make, your car’s age, your state of residence, your insurance type, and your driving history—quite a lot to consider.
He advised that you select your insurance type after considering how much insurance you need. You’ll have to select between comprehensive, collision, and liability insurance he said. Here’s a breakdown of what each type entails:
Comprehensive Insurance:
This type of coverage kicks in to repair or replace your vehicle if it’s damaged by a natural disaster or it’s stolen.
Collision Insurance
With this coverage, your car will be replaced or repaired if you had a collision accident with another vehicle, another individual, yourself, or an object. This policy covers you irrespective of who’s at fault.
Dave Ramsey explains that you’ll only be covered by someone else’s liability coverage if the person is at fault. And that’s if their liability insurance is large enough to cover you.
Liability Insurance
This will cover the expenses of the victim if you caused the accident. Dave Ramsey suggests that you choose at least $500,000 worth of liability insurance coverage to avoid falling into debt in case the accident involves bodily injury and property damage.
You may find it confusing when you see “250/500/250” or “$250,000/$500,000/$250,000” as the coverage limit of your insurance policy. Here’s what it means:
- The 250 represents that there’s a limit of $250,000 in an accident that involves bodily injury (per person).
- There’s a limit of $500,000 of coverage for the accident if it involves bodily injury.
- There’s a limit of $250,000 for an accident that involves property damage (per accident).
How much car insurance do Dave Ramsey say you actually need?
According to Dave Ramsey, the answer to this question is complicated by the numerous variables that you’ll have to consider. Each state has its required car coverage level, and some require that you have numerous insurance types. To know the exact requirement for your state, then you might want to check out the Automobile Financial Responsibility Laws for each state.
Nearly all states require liability insurance with the exception of New Hampshire. However, you’ll still be required to pay for any damage you caused during a collision, so why don’t you get one to prevent yourself from going bankrupt.
Dave Ramsey believes that you should stick with the minimum amount of liability in your state if you’re low on cash. And if you can, he advised that you should opt for more extensive coverage that will protect your asset if the worst happens.
How do I find the best car insurance rates?
Dave Ramey suggests using his endorsed local providers (elp) to find a suitable car insurance rate. His elp’s are quite efficient in reducing costs as testimonies. And from those that have used them shows that they can reduce your insurance policy cost by as much as 50% within a 6 month period.
HowHowever if you’ll prefer to make the search yourself, then you might want to compare car insurance quotes and the reputation of the company offering them.
Beyond the rate they offer, ensure that they don’t compromise their coverage. This way, you’ll be certain that they’ll serve their purpose when you’re in distress. Here are some strategies you might want to employ to get auto insurance discounts.
Request for discounts: Chances are high that there are some discounts you’re not using. And how will you know they exist if you don’t ask the insurance company? Ask the insurance company for a list of their car insurance discounts.
Revisit quotes when driving record improves: Look for suitable insurance quotes for your vehicle after 3 and 5 years of maintaining a clean driving record.
Cash in on significant life changes: Some life changes have been known to result in cheaper insurance premiums. For example, most insurance companies reduce the cost of insurance premiums for married couples.
If you change your location to one with a lesser accident rate, you might also get a reduced premium cost.
How do you switch car insurance?
If you’re happy with your current car insurance provider and the insurance rate it offers.
Then I’m pretty sure you haven’t considered switching to another provider. But if the premium increases significantly, then you might need to shop for an alternative.
Dave Ramsey believes that shopping for a better deal on your car insurance is a good idea. And he thinks that you may get a much better deal since the competition for customers is high. Dave suggests that you speak with an independent insurance agent. You’ll be asked to submit your info with him/her to find a cheap coverage that won’t compromise on price. Dave believes that the endorsed local providers are the best option for finding the best policy for you. And Dave says most people that patronize them save about $700 in insurance premium cost.