If you have to consider one thing when purchasing car insurance, consider this:

Buying car insurance can seem like a difficult task. After all, there are many insurance companies that offer policies. And a variety of car insurance products are being sold. Sorting through all this information to get the right protection in place at a fair price can seem like a full-time job.

The good news is that there is only one thing drivers need to do when purchasing car insurance. This is what it is.

Consider the most important thing when purchasing car insurance

The most important thing every driver should ask themselves when purchasing car insurance is how much they can afford to lose.

The reason this question is important is because insurance is supposed to protect your assets. Many people forget this in their quest to get the cheapest coverage. As a result, they end up not getting the protection they need, or taking on risks such as setting policy limits too low or deductibles too high to afford.

Returning to this fundamental question, auto insurance buyers can make more informed choices about what risks they transfer to their insurance company. Instead of saving a penny or two on premiums, they can choose coverage based on what really suits their personal finances in the long run.

Here’s a guide to purchasing insurance:

So how can drivers put this into practice and actually figure out how much insurance they should buy based on their idea of ​​what they can afford to lose? It’s simple:

• Consider how high your deductible is. Your car insurance deductible is the amount you must pay out of pocket when a covered claim is made. If a driver cannot afford a $1,000 deductible, he or she should choose a lower deductible, even if it means higher premiums.
• Consider whether it’s possible to pay for a new car out of pocket. The average price of a new vehicle today is over $48,000. Drivers who cannot afford to pay out of pocket to replace their vehicle in the event of an at-fault collision must purchase collision insurance.
• Consider whether it makes sense to pay off the remaining balance of your car loan after the insurance company pays fair market value. While insurers only pay out what a car is worth, data shows that around 20% of people have negative equity in their vehicles (owing more on them than the car’s market value). Drivers who cannot afford to pay the difference between what they owe and the value of their car should purchase difference insurance.
• Consider whether it makes sense to pay for a rental car. If your car needs to be repaired due to a covered loss, most people will need something to drive in the meantime. If you can’t afford to pay out-of-pocket for a rental car (which averages more than $100 per day), you should add rental car coverage.

Take a look at what each type of coverage offered protects against. If it’s a loss that could seriously damage your bank account and you can’t afford it, consider purchasing insurance to cover that loss. This should guide all drivers to get car insurance so they can get the protection they really need.

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