The biggest loan in most individuals' financial lives is a home mortgage. In contrast to a short-term auto loan, a home mortgage loan can run out to 30 years, and the amount borrowed is usually much larger than for an automobile.
Suppose that you recently bought the home of your dreams and qualified for a $250,000 mortgage loan for 30 years at a 6 percent annual interest rate. The loan requires monthly payments, so you divide the annual interest rate by 12 to determine the monthly rate, which is 0.5 percent (or 1/2 of 1 percent) per month. In almost all cases the monthly payments over the life of a mortgage loan are equal and uniform. Assuming uniform payments over the 30-year life of the loan, how much would each of your 360 loan payments be? How do you determine this amount? You probably would assume that the lender's quoted amount is correct — and you'd be pretty safe in this assumption. But how can you be sure?
You can use a relatively inexpensive business/financial calculator to quickly determine monthly loan payments. These handy tools have special keys for entering each of the variables of a loan. To determine the monthly payment in this example, pull out your trusty calculator and enter the following numbers for each variable:
N = number of periods — 360 months in this example
INT = interest rate per period — 0.5 percent per month in this example. (These calculators assume that interest is a percentage, so type .5, not .005.)
PV = present value, or amount borrowed today (the present time) — $250,000 in this example
FV = future value, or principal amount owed after the final monthly loan payment is made — $0 in this example. (This means that the loan is fully paid off after the last monthly loan payment; otherwise, you enter the amount of the balloon payment due at the end of the loan.)
PMT = payment per period based on the four numbers just entered — $1,498.88 in this example. (This is the amount you solve for, which appears as a negative number, meaning that you have to pay this amount per month.)
The big advantage of using a business/financial calculator is that you can enter the known numbers (the first four) and then simply hit the button for the unknown number, which appears instantly. Another big advantage is that you can keep these numbers in the calculator and make "what if" changes very quickly. For example, what if the annual interest rate were 4.8 percent? Just reenter the new interest rate (0.4 percent per month) and then call up the new monthly payment amount, which is $1,311.66. The monthly payment difference times 360 payments is $67,396.65 less interest over the life of the loan. It definitely pays to shop around for a lower rate.
If you use the Internet, you can find many Web sites that provide online financial calculators. You can go to one of the popular Web search engines, such as Yahoo or Google, and type "financial calculator" in the search bar. From the list you get, select one that seems to fit your needs. Also, Microsoft Excel and other spreadsheet programs include a financial function for calculating the monthly payment for a mortgage. The old-fashioned method — before handheld calculators and personal computers came along — was to use printed tables that give the factors for different interest rates and time periods per $1,000. Surprisingly, many people still use these tables, and accounting and finance textbooks still include them. Old habits die hard.
Each mortgage payment is divided between interest for the month and principal amortization, which refers to the reduction of the loan balance. For the first month of our example, the interest amount is $1,250 ($250,000 loan balance x 0.5 percent monthly interest rate = $1,250). Therefore, the first month's principal reduction is only $248.88. Right off, you can see that the loan's principal balance will go down slowly — and that a 30-year mortgage loan involves a lot of interest. Lenders provide you with a loan payoff (amortization) schedule. Take a look, although trying to follow down a table of 360 rows of monthly payments is tedious.
5.19.2008
Distinguishing Between Types of Credit
You may think that all credit is created equal. Lots of people think so, which is one of many reasons they run into debt problems. They definitely aren't created equal, and you should get familiar with these terms so you can become a better credit consumer.
Here are the types of credit you should be familiar with:
Secured: With this kind of credit, the creditor guarantees that it will be paid back by putting a lien on an asset you own. The lien entitles the creditor to take the asset if you don't live up to the terms of your credit agreement. Car loans, mortgages, and home equity loans are common types of secured credit.
Unsecured: When your credit is unsecured, you simply give your word to the creditor that you will repay what you borrow. Credit card, medical, and utilities bills are all examples of unsecured credit.
Revolving: If your credit is revolving, the creditor has approved you for a set amount -- your credit limit -- and you can access the credit whenever you want and as often as you want. In return, you must pay the creditor at least a minimum amount on your account's outstanding balance each month. Credit cards and home equity lines of credit are examples of revolving credit.
Installment: With installment credit, you borrow a certain amount of money for a set period of time and you repay the money by making a series of fixed or installment payments. Examples of installment credit include mortgages, car loans, and student loans.
Here are the types of credit you should be familiar with:
Secured: With this kind of credit, the creditor guarantees that it will be paid back by putting a lien on an asset you own. The lien entitles the creditor to take the asset if you don't live up to the terms of your credit agreement. Car loans, mortgages, and home equity loans are common types of secured credit.
Unsecured: When your credit is unsecured, you simply give your word to the creditor that you will repay what you borrow. Credit card, medical, and utilities bills are all examples of unsecured credit.
Revolving: If your credit is revolving, the creditor has approved you for a set amount -- your credit limit -- and you can access the credit whenever you want and as often as you want. In return, you must pay the creditor at least a minimum amount on your account's outstanding balance each month. Credit cards and home equity lines of credit are examples of revolving credit.
Installment: With installment credit, you borrow a certain amount of money for a set period of time and you repay the money by making a series of fixed or installment payments. Examples of installment credit include mortgages, car loans, and student loans.
Buying Life Insurance
You buy life insurance so that your death will not burden your loved ones financially — house payments will be made, groceries will be on the table, and college dreams can be realized.
Keep these pointers in mind as you buy life insurance:
If both you and your spouse work, then cover both incomes.
Cover the homemaker for the amount you would need to hire an outside service to perform the homemaker's functions.
Buy coverage of at least 6 to 7.5 times your current income. Add to this amount for final expenses and college costs.
Buy term life insurance, in most cases. Buy cash-value permanent insurance only if your need is permanent.
Keep these pointers in mind as you buy life insurance:
If both you and your spouse work, then cover both incomes.
Cover the homemaker for the amount you would need to hire an outside service to perform the homemaker's functions.
Buy coverage of at least 6 to 7.5 times your current income. Add to this amount for final expenses and college costs.
Buy term life insurance, in most cases. Buy cash-value permanent insurance only if your need is permanent.
5.18.2008
Buying a Replacement Car: New or Used?
How satisfied are you with your present vehicle? Unless additional safety features, increased fuel economy, or other compelling reasons really justify the cost of a newer model — or you're sick of driving the same old workhorse year after year — repairing a good older vehicle and continuing to drive it is often a wiser move. If you decide to replace your old car, you face another decision: whether to buy a new vehicle or a used one. Each option offers advantages and disadvantages, so keep an open mind until you have all the facts.
The advantages of buying new
The allure of new cars is certainly compelling: shiny paint in myriad rainbow colors; gadgets and doodads that blink and glow; and who can resist that new car smell? But there are more — and better — reasons than these to consider a new car.
Safety features
The best reason for buying a new vehicle is to replace one that lacks such vital safety features as air bags, integrated child seats, structural reinforcements and the like.
Other technological improvements
In recent years, innovations in steering and suspension, fuel injection, and basic equipment have resulted in vehicles that get better gas mileage, run cleaner, and can go for long periods of time between tune-ups and other periodic maintenance.
You don't have to worry about past problems/neglect/repairs
It's nice to have a car that's all your own, free of the mistakes, mishaps, and poor choices of a previous owner. It should be pristine, rarin' to go, and free of the battle scars and aging components that can plague an older vehicle. Of course, some new cars have problems of their own due to faulty manufacturing or newfangled systems that may succumb to unforeseen circumstances. The choice of risks is yours. However, there's no denying that a new car is often considered more attractive and prestigious than an older model from the same manufacturer. You pay your money and you take your chances.
The advantages of buying used
Although owning a brand-new car is nice, there are many reasons to buy a good used vehicle rather than a new one.
Used vehicles cost less to own and maintain
Consumer Federation of America spokesperson and author Jack Gillis advises that "buying a used car will reduce your ownership and operating expenses by about 50 percent." Perhaps the best proof of this is that, currently, the average age of vehicles in the United States is nine years — the highest in half a century. And if that's not enough to sway you, consider the following tidbits of financial fodder:
Registration, licensing fees, and insurance premiums for new cars are much higher than for used cars.
When you buy a used car, you don't have destination, "dealer prep," and shipping costs to pay.
You can keep a well-made vehicle running beautifully for a lot less than you'd spend on new-car payments, fees, and premiums, even if you rebuild the engine or restore the body.
In addition to the fact that new cars can depreciate 30 percent to 40 percent in only two years, buying or leasing a new vehicle can continue to cost you several hundred dollars a month for an average of three years. As one Consumer Reports Buying Guide put it, "A new car depreciates 20 to 30 percent the minute you drive it off the dealer's lot." Why not buy a two- or three-year-old used vehicle and let some other hotshot take the loss?
A well-built automobile that has been properly maintained can stay on the road for over 150,000 miles, even though most of us think our cars are played out at half that mileage.
Used cars can be classics
While new cars devaluate, many older cars are gaining in value and prestige. Some of us view cars as works of art and dream about owning a really classic piece of automotive engineering. If you're in the market for a status symbol, it may be wiser (and more impressive) to forget about the new luxury models and look for an older classic car instead. The same holds true if you consider your car an investment and not just a machine to move you and your brood from here to there and back again.
Such oldies increase in value because they're beautifully made — in many cases, by hand. And, although their owners usually love and pamper classic vehicles, in the long run, rust and accidents cause the supply to diminish and the value of the surviving ones to increase.
The advantages of buying new
The allure of new cars is certainly compelling: shiny paint in myriad rainbow colors; gadgets and doodads that blink and glow; and who can resist that new car smell? But there are more — and better — reasons than these to consider a new car.
Safety features
The best reason for buying a new vehicle is to replace one that lacks such vital safety features as air bags, integrated child seats, structural reinforcements and the like.
Other technological improvements
In recent years, innovations in steering and suspension, fuel injection, and basic equipment have resulted in vehicles that get better gas mileage, run cleaner, and can go for long periods of time between tune-ups and other periodic maintenance.
You don't have to worry about past problems/neglect/repairs
It's nice to have a car that's all your own, free of the mistakes, mishaps, and poor choices of a previous owner. It should be pristine, rarin' to go, and free of the battle scars and aging components that can plague an older vehicle. Of course, some new cars have problems of their own due to faulty manufacturing or newfangled systems that may succumb to unforeseen circumstances. The choice of risks is yours. However, there's no denying that a new car is often considered more attractive and prestigious than an older model from the same manufacturer. You pay your money and you take your chances.
The advantages of buying used
Although owning a brand-new car is nice, there are many reasons to buy a good used vehicle rather than a new one.
Used vehicles cost less to own and maintain
Consumer Federation of America spokesperson and author Jack Gillis advises that "buying a used car will reduce your ownership and operating expenses by about 50 percent." Perhaps the best proof of this is that, currently, the average age of vehicles in the United States is nine years — the highest in half a century. And if that's not enough to sway you, consider the following tidbits of financial fodder:
Registration, licensing fees, and insurance premiums for new cars are much higher than for used cars.
When you buy a used car, you don't have destination, "dealer prep," and shipping costs to pay.
You can keep a well-made vehicle running beautifully for a lot less than you'd spend on new-car payments, fees, and premiums, even if you rebuild the engine or restore the body.
In addition to the fact that new cars can depreciate 30 percent to 40 percent in only two years, buying or leasing a new vehicle can continue to cost you several hundred dollars a month for an average of three years. As one Consumer Reports Buying Guide put it, "A new car depreciates 20 to 30 percent the minute you drive it off the dealer's lot." Why not buy a two- or three-year-old used vehicle and let some other hotshot take the loss?
A well-built automobile that has been properly maintained can stay on the road for over 150,000 miles, even though most of us think our cars are played out at half that mileage.
Used cars can be classics
While new cars devaluate, many older cars are gaining in value and prestige. Some of us view cars as works of art and dream about owning a really classic piece of automotive engineering. If you're in the market for a status symbol, it may be wiser (and more impressive) to forget about the new luxury models and look for an older classic car instead. The same holds true if you consider your car an investment and not just a machine to move you and your brood from here to there and back again.
Such oldies increase in value because they're beautifully made — in many cases, by hand. And, although their owners usually love and pamper classic vehicles, in the long run, rust and accidents cause the supply to diminish and the value of the surviving ones to increase.
Car Buying: Before Getting a Lease or Loan
Your three major alternatives when acquiring a vehicle are leasing it, financing it with a loan, or using your own cash to pay for it. Of course, when you pay for a car with your own cash, you're not beholden to any person or institution. However, if you lease or borrow, keep the following information in mind.
Depreciation is a major factor
When deciding whether to finance a new vehicle with a lease or loan, keep in mind that the cost of a lease or loan is partially determined by the vehicle's rate of depreciation (or how much value the vehicle loses as it grows older) during the duration of the contract. For this reason, make sure that you know how much the vehicle you want will depreciate over the first two or three years you own it.
A new vehicle usually depreciates from 30 to 50 percent in the first three years in the United States, and an average of 2 percent per month in Canada. For this reason, you may decide to let someone else absorb the depreciation by selecting a 2- or 3-year-old, previously owned vehicle rather than a new one.
Also, the higher the purchase price, the more you'll continue to pay for licensing, registration, insurance, taxes, and interest. Be sure you understand how depreciation affects these arrangements and how you may end up paying for depreciation twice.
Credit or leasing companies require insurance
When you lease a car or purchase one with a loan, the lessor or the creditor can stipulate the kind of insurance you must get for your car. However, according to the AAA (American Automobile Association), although a credit or leasing company can require you to insure the vehicle for fire, theft, collision, and so on, it cannot force you to purchase a policy through a specific broker, agent, or company.
Look for the best coverage you can find before agreeing to purchase insurance through a dealer or financer, the person responsible for financing a lease or loan. If you decide to insure through one of these sources, do not let them include the insurance premiums in the cost of the lease or loan. If you do, you have to pay interest on your coverage.
You may need more than one type of insurance if you choose to finance a vehicle. You may consider getting some of the following types of insurance, for example:
Auto insurance coverage: Financer-required insurance usually does not include any minimum liability insurance that your state or province requires, or anything else besides comprehensive and collision coverage to repair or replace the vehicle if it is damaged or stolen. Verify that all insurance policies are in effect before you take possession of the vehicle.
GAP insurance: This type of insurance covers the difference between a vehicle's stated value in a finance contract and what an insurance company will pay if the vehicle is damaged beyond repair or stolen before the end of the finance period or lease. Some financing contracts provide GAP insurance free of charge; others include it as part of the up-front cost (the total amount you have to pay before you can drive a vehicle off the lot), and still others require you to purchase the insurance yourself. Although GAP insurance shouldn't cost more than a couple of hundred dollars, some policies can be much more expensive — especially if they're obtained through the financer.
Because a vehicle begins to depreciate as soon as you take possession of it, its replacement value soon may be substantially less than when you bought it, and your insurance policy may not cover the full amount that you'll have to come up with to compensate the financer, if the need arises.
Credit life or credit disability insurance: These policies make your payments if you die or become disabled while your financing is still in effect. This coverage is usually optional and extremely overpriced. If you feel that your estate could not cover the payments in the event of your death, you can buy this type of insurance at a better price from an outside source.
Some credit unions supply this insurance at no charge because the rules in many unions specify that loan obligations be canceled in the event of death. Because unscrupulous financers sometimes slip this coverage in whether you want it or not, be smart and recalculate the monthly payment shown on the final contract to be sure they do not include this coverage as a hidden charge.
Manufacturer's rebates and financing offers
Car manufacturers with their own financing departments may offer lower interest rates on loans and leases than rates that are available from outside credit sources. To ensure goodwill, some pay the security deposit and first monthly payment when you lease the next car from them after a previous lease contract with them expires. Others offer perks such as free maintenance, auto club and towing services, emergency hotlines, stolen-vehicle tracking, and other goodies. Generally speaking, the more expensive the vehicle, the greater the perks offered by the manufacturer.
Auto manufacturers run frequent promotions that offer you the choice between a rebate or a low-interest deal. Ask your accountant or a friend who's good with numbers to work out which alternative would be the most profitable arrangement for you.
If you go for the rebate, ask the dealer to base the sales or lease contract on the price of the vehicle after the rebate has been deducted, instead of writing the contract for the original price and mailing you the rebate later on. Doing this enables you to avoid paying higher taxes,interest, registration fees, and perhaps insurance, on the pre-rebate price of the vehicle, which may be a couple of thousand dollars more than the vehicle actually costs you.
Depreciation is a major factor
When deciding whether to finance a new vehicle with a lease or loan, keep in mind that the cost of a lease or loan is partially determined by the vehicle's rate of depreciation (or how much value the vehicle loses as it grows older) during the duration of the contract. For this reason, make sure that you know how much the vehicle you want will depreciate over the first two or three years you own it.
A new vehicle usually depreciates from 30 to 50 percent in the first three years in the United States, and an average of 2 percent per month in Canada. For this reason, you may decide to let someone else absorb the depreciation by selecting a 2- or 3-year-old, previously owned vehicle rather than a new one.
Also, the higher the purchase price, the more you'll continue to pay for licensing, registration, insurance, taxes, and interest. Be sure you understand how depreciation affects these arrangements and how you may end up paying for depreciation twice.
Credit or leasing companies require insurance
When you lease a car or purchase one with a loan, the lessor or the creditor can stipulate the kind of insurance you must get for your car. However, according to the AAA (American Automobile Association), although a credit or leasing company can require you to insure the vehicle for fire, theft, collision, and so on, it cannot force you to purchase a policy through a specific broker, agent, or company.
Look for the best coverage you can find before agreeing to purchase insurance through a dealer or financer, the person responsible for financing a lease or loan. If you decide to insure through one of these sources, do not let them include the insurance premiums in the cost of the lease or loan. If you do, you have to pay interest on your coverage.
You may need more than one type of insurance if you choose to finance a vehicle. You may consider getting some of the following types of insurance, for example:
Auto insurance coverage: Financer-required insurance usually does not include any minimum liability insurance that your state or province requires, or anything else besides comprehensive and collision coverage to repair or replace the vehicle if it is damaged or stolen. Verify that all insurance policies are in effect before you take possession of the vehicle.
GAP insurance: This type of insurance covers the difference between a vehicle's stated value in a finance contract and what an insurance company will pay if the vehicle is damaged beyond repair or stolen before the end of the finance period or lease. Some financing contracts provide GAP insurance free of charge; others include it as part of the up-front cost (the total amount you have to pay before you can drive a vehicle off the lot), and still others require you to purchase the insurance yourself. Although GAP insurance shouldn't cost more than a couple of hundred dollars, some policies can be much more expensive — especially if they're obtained through the financer.
Because a vehicle begins to depreciate as soon as you take possession of it, its replacement value soon may be substantially less than when you bought it, and your insurance policy may not cover the full amount that you'll have to come up with to compensate the financer, if the need arises.
Credit life or credit disability insurance: These policies make your payments if you die or become disabled while your financing is still in effect. This coverage is usually optional and extremely overpriced. If you feel that your estate could not cover the payments in the event of your death, you can buy this type of insurance at a better price from an outside source.
Some credit unions supply this insurance at no charge because the rules in many unions specify that loan obligations be canceled in the event of death. Because unscrupulous financers sometimes slip this coverage in whether you want it or not, be smart and recalculate the monthly payment shown on the final contract to be sure they do not include this coverage as a hidden charge.
Manufacturer's rebates and financing offers
Car manufacturers with their own financing departments may offer lower interest rates on loans and leases than rates that are available from outside credit sources. To ensure goodwill, some pay the security deposit and first monthly payment when you lease the next car from them after a previous lease contract with them expires. Others offer perks such as free maintenance, auto club and towing services, emergency hotlines, stolen-vehicle tracking, and other goodies. Generally speaking, the more expensive the vehicle, the greater the perks offered by the manufacturer.
Auto manufacturers run frequent promotions that offer you the choice between a rebate or a low-interest deal. Ask your accountant or a friend who's good with numbers to work out which alternative would be the most profitable arrangement for you.
If you go for the rebate, ask the dealer to base the sales or lease contract on the price of the vehicle after the rebate has been deducted, instead of writing the contract for the original price and mailing you the rebate later on. Doing this enables you to avoid paying higher taxes,interest, registration fees, and perhaps insurance, on the pre-rebate price of the vehicle, which may be a couple of thousand dollars more than the vehicle actually costs you.
Understanding Auto Insurance
Over the course of your life, you may spend tens of thousands of dollars on auto insurance, but are you spending it where it's most needed? Look for the following important features when searching for an auto insurance policy.
Bodily injury/property damage liability
As with homeowner's liability insurance, auto liability insurance provides insurance against lawsuits. Especially in a car, accidents happen. Make sure that you have enough bodily injury liability insurance to cover your assets. (Coverage of double your assets is preferable.)
If you're just beginning to accumulate assets, don't mistakenly assume that you don't need liability protection. Many states require a minimum amount — insurers can fill you in on the details for your state.
Property damage liability insurance covers damage done by your car to other people's cars and property. The amount of property damage liability coverage in an auto insurance policy is usually determined as a consequence of the bodily injury amount selected. $50,000 is a good minimum to start with.
Uninsured or underinsured motorist liability
When you are in an accident with another motorist and he doesn't carry his own liability protection or doesn't carry enough, uninsured or underinsured motorist liability coverage allows you to collect for lost wages, medical expenses, and pain and suffering incurred in the accident.
Should you already have comprehensive health and long-term disability insurance, then uninsured or underinsured motorist liability coverage is largely redundant. You do give up the ability to sue for general pain and suffering if you drop this coverage and to insure passengers in your car who may lack adequate medical and disability coverage.
Deductibles
To keep your auto insurance premiums down and to eliminate the need to file small claims, take the highest deductibles you're comfortable with (most people should consider $500 to $1,000). On an auto policy, two deductibles exist:
Collision applies to claims arising from collisions (note that you can generally bypass collision coverage when you rent a car if you have collision coverage on your own policy).
Comprehensive applies to other claims for damages not caused by collision (for example, a window broken by vandals).
As your car ages and is worth less, you can eventually eliminate your comprehensive and collision coverages altogether. The point at which you do this is up to you. Remember that the purpose of insurance is to compensate you for losses that are financially catastrophic to you. Insurers won't pay more than the book value of your car, regardless of what it costs to repair or replace it.
Special discounts
You may be eligible for special discounts on auto insurance. Don't forget to tell your agent or insurer if your car has a security alarm, air bags, or antilock brakes. If you're older or have other policies or cars insured with the same insurer, you may also qualify for discounts. And make sure that you're given appropriate "good driver" discounts if you've been accident- and ticket-free in recent years.
And here's another idea: Before you buy your next car, call insurers and ask for insurance quotes for the different models that you're considering. The cost of insuring a car should factor into your decision as to which car you buy because the insurance costs will be a major portion of your car's ongoing operating expenses.
Little-stuff coverage to skip
Auto insurers have dreamed up all sorts of riders, such as towing and rental car reimbursement. On the surface, these riders appear to be inexpensive. But the riders are expensive given the little that you'd collect from a claim plus the hassle of filing.
Riders that waive the deductible under certain circumstances make no sense, either. The point of the deductible is to reduce your policy cost and the hassle of filing small claims.
Medical payments coverage typically pays a few thousand dollars for medical expenses. If you and your passengers carry major medical insurance coverage, this rider isn't really necessary. Besides, a few thousand dollars of medical coverage doesn't protect you against catastrophic expenses.
Roadside assistance, towing, and rental car reimbursement coverage will only pay small dollar amounts and aren't worth buying. In fact, if you belong to an automobile club, you may already have some of these coverages.
Where to buy auto insurance
To obtain quotes for auto insurance, compare any of the following major providers that may be in your area:
Amica
GEICO
Liberty Mutual
Nationwide Mutual
State Farm
Progressive
Coping with teen drivers
If you have a teenage driver in your household, in addition to worrying a lot more, you are going to be spending a lot more on auto insurance. Best parental advice: Keep your teenager out of your car as long as possible.
If you allow your teenager to drive, you can take a number of steps to avoid spending all of your take-home pay on auto insurance bills:
Make sure that your teen does well in school. Some insurers offer discounts if your child is a high-academic achiever and has successfully completed a nonrequired driver's education class.
Get price quotes from several insurers to see how adding your teen driver to your policy affects the cost.
Have your teenager share in the costs of using the car. If you pay all the insurance, gas, oil changing, and maintenance bills, your teenager won't value the privilege of using your "free" car.
Of course, letting teens drive shouldn't just be about keeping your insurance bills to a minimum. Auto accidents are the number one cause of death for teens. So, before you let your teen drive, be sure to educate him or her about the big risks of driving and the importance of not riding in a car driven by someone who is intoxicated. Also be sure that your teens drive in safe cars.
Bodily injury/property damage liability
As with homeowner's liability insurance, auto liability insurance provides insurance against lawsuits. Especially in a car, accidents happen. Make sure that you have enough bodily injury liability insurance to cover your assets. (Coverage of double your assets is preferable.)
If you're just beginning to accumulate assets, don't mistakenly assume that you don't need liability protection. Many states require a minimum amount — insurers can fill you in on the details for your state.
Property damage liability insurance covers damage done by your car to other people's cars and property. The amount of property damage liability coverage in an auto insurance policy is usually determined as a consequence of the bodily injury amount selected. $50,000 is a good minimum to start with.
Uninsured or underinsured motorist liability
When you are in an accident with another motorist and he doesn't carry his own liability protection or doesn't carry enough, uninsured or underinsured motorist liability coverage allows you to collect for lost wages, medical expenses, and pain and suffering incurred in the accident.
Should you already have comprehensive health and long-term disability insurance, then uninsured or underinsured motorist liability coverage is largely redundant. You do give up the ability to sue for general pain and suffering if you drop this coverage and to insure passengers in your car who may lack adequate medical and disability coverage.
Deductibles
To keep your auto insurance premiums down and to eliminate the need to file small claims, take the highest deductibles you're comfortable with (most people should consider $500 to $1,000). On an auto policy, two deductibles exist:
Collision applies to claims arising from collisions (note that you can generally bypass collision coverage when you rent a car if you have collision coverage on your own policy).
Comprehensive applies to other claims for damages not caused by collision (for example, a window broken by vandals).
As your car ages and is worth less, you can eventually eliminate your comprehensive and collision coverages altogether. The point at which you do this is up to you. Remember that the purpose of insurance is to compensate you for losses that are financially catastrophic to you. Insurers won't pay more than the book value of your car, regardless of what it costs to repair or replace it.
Special discounts
You may be eligible for special discounts on auto insurance. Don't forget to tell your agent or insurer if your car has a security alarm, air bags, or antilock brakes. If you're older or have other policies or cars insured with the same insurer, you may also qualify for discounts. And make sure that you're given appropriate "good driver" discounts if you've been accident- and ticket-free in recent years.
And here's another idea: Before you buy your next car, call insurers and ask for insurance quotes for the different models that you're considering. The cost of insuring a car should factor into your decision as to which car you buy because the insurance costs will be a major portion of your car's ongoing operating expenses.
Little-stuff coverage to skip
Auto insurers have dreamed up all sorts of riders, such as towing and rental car reimbursement. On the surface, these riders appear to be inexpensive. But the riders are expensive given the little that you'd collect from a claim plus the hassle of filing.
Riders that waive the deductible under certain circumstances make no sense, either. The point of the deductible is to reduce your policy cost and the hassle of filing small claims.
Medical payments coverage typically pays a few thousand dollars for medical expenses. If you and your passengers carry major medical insurance coverage, this rider isn't really necessary. Besides, a few thousand dollars of medical coverage doesn't protect you against catastrophic expenses.
Roadside assistance, towing, and rental car reimbursement coverage will only pay small dollar amounts and aren't worth buying. In fact, if you belong to an automobile club, you may already have some of these coverages.
Where to buy auto insurance
To obtain quotes for auto insurance, compare any of the following major providers that may be in your area:
Amica
GEICO
Liberty Mutual
Nationwide Mutual
State Farm
Progressive
Coping with teen drivers
If you have a teenage driver in your household, in addition to worrying a lot more, you are going to be spending a lot more on auto insurance. Best parental advice: Keep your teenager out of your car as long as possible.
If you allow your teenager to drive, you can take a number of steps to avoid spending all of your take-home pay on auto insurance bills:
Make sure that your teen does well in school. Some insurers offer discounts if your child is a high-academic achiever and has successfully completed a nonrequired driver's education class.
Get price quotes from several insurers to see how adding your teen driver to your policy affects the cost.
Have your teenager share in the costs of using the car. If you pay all the insurance, gas, oil changing, and maintenance bills, your teenager won't value the privilege of using your "free" car.
Of course, letting teens drive shouldn't just be about keeping your insurance bills to a minimum. Auto accidents are the number one cause of death for teens. So, before you let your teen drive, be sure to educate him or her about the big risks of driving and the importance of not riding in a car driven by someone who is intoxicated. Also be sure that your teens drive in safe cars.
5.16.2008
Welcome to Bux.to!
Welcome to Bux.to!
At Bux.to, you get paid to click on ads and visit websites. The process is easy! You simply click a link and view a website for 30 seconds to earn money. You can earn even more by referring friends. You'll get paid $0.01 for each website you personally view and $0.01 for each website your referrals view. Payment requests can be made every day and are processed through AlertPay. The minimum payout is $10.00.
Earnings Example
» You click 10 ads per day = $0.10
» 20 referrals click 10 ads per day = $2.00
» Your daily earnings = $2.10
» Your weekly earnings = $14.70
» Your monthly earnings = $63.00
The above example is based only on 20 referrals and 10 daily clicks. Some days you will have more clicks available, some days you will have less. What if you had more referrals? What if there were more ads available?
Join now http://bux.to/?r=maxxis25
and receive a $0.05 Sign-up Bonus
Thousands of satisfied members that have received their payment. Proof of Payments.
Availability Limited!
Hard to find active members? Why not let us do the referring for you? We have a limited amount of un-referred members left for sale. Packages with 15, 35, 100 and 500 referrals are available now. You can pay with your MasterCard, VISA, American Express, Discover, Diners Club, JCB, Cheque or by Wire Transfer. Our available packages.
Success Stories
Been paid 12 times
Profit X 2, Finally into Profit
40 days - 4,155.6575 dollars - Portugal
Paid $1404.00, Big payday today from Bux.to
Paid $2150 to Bux.to card, Slight delay to card is nothing to worry about!
Received $3,000 on Bux card. Immensely superlative., Requested on 12/01
What Dreams are made of Bux.to Paid 1/11 cashout, PAID for the 9th time
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