Financial IQ Test: Do You Have the Best Auto Insurance Coverage for Your Needs?

By Nora Dunn on 14 May 2010 (Updated 9 May 2011) 2 comments
Photo: Alan Vernon

How well do you know your auto insurance coverage? Have you read — and do you understand — all the fine print? Is it structured it properly? Have you researched and comparison shopped for your ideal policy? And are you sure you’re getting all the discounts available to you?

Following is a Financial IQ Test to help you determine if you have the best auto insurance coverage for your needs. Simply look at each statement, and answer it with a YES, NO, or NOT SURE. Keep track of your answers, and we'll see how you score at the end. Then, check out the resource articles below to increase your knowledge base.

Researching and Applying

  1. I understand how my credit rating can affect my insurance premiums.
  2. Before I buy a car, I shop around for insurance rates to ensure I can afford it.
  3. I understand how telecommuting can reduce my insurance rates dramatically.
  4. I’ve weighed out the option of participating in a car sharing program instead, since insurance is included.
  5. I shop around for my insurance, and take the time to ensure I’m comparing apples to apples with each quote.
  6. I’m honest about my mileage in the application — if it’s higher than actual mileage driven I’ll pay more than I need to, and if it’s lower than mileage driven I could get into trouble if I make a claim.
  7. I know what the exclusions are on my policy, and have agreed to them.
  8. I use an insurance broker who can help me comparison shop.
  9. I’ve looked into group insurance options through my employer or industry association.

Policy Structure

  1. I’ve selected the highest deductible I can afford to reduce my premiums.
  2. I know the book value of my car, and pay only for collision insurance if I can’t cover it myself.
  3. I only insure regular drivers on the car.
  4. If I have good health insurance coverage, I lower the medical payments portion of my auto insurance policy.
  5. If the annual premium is 10% (or more) of the book value of my car, I drop the collision coverage.

Saving Money

  1. I’m aware of the discounts applicable to me, and I’ve asked my insurance company to apply them.
  2. I’ve compared monthly to annual rates, and selected the cheapest option.
  3. I’ve combined my auto and home-owner’s/renter’s insurance policies with the same company for additional discounts.
  4. I ask about — and ensure I’m getting — a no-claims discount (if I’m accident free).
  5. I’ve asked about other ways I can reduce my premiums (such as having an alarm or immobilizer).
  6. I negotiate my auto insurance rates with my insurer.
  7. At renewal, I shop around for new quotes. If I find a better deal, I call my insurance company to see if they will match it.

Policy Maintenance and Making Claims

  1. Every few years I calculate the deductible, book value, potential payout, and premiums, and I adjust the policy to minimize my expenses and maximize my available protection.
  2. When my car is fully paid off, I let the insurance company know so we can adjust the coverage and lower my rates.
  3. I call my insurer before making any modifications to the vehicle.
  4. After an accident, I get the other driver’s details; including name, address, license, registration, insurance company name, and insurance policy number.
  5. I don’t file small claims with my insurance company, as it’s too detrimental to my record and no-claims discounts.
  6. I keep detailed records of phone calls and copies of all correspondence and receipts in making a claim.
  7. I keep proof of insurance with me all the time (for example, in my wallet).

Scoring

Did you keep track of how many times you answered YES, NO, and NOT SURE? Great! Give yourself the following points for each answer:

YES = 4 points

NO = 0 points

NOT SURE = 2 points

Analysis

Score 0-44: Start Researching and Reading Your Policy!

Chances are you’re paying more than you need to for auto insurance, or you don’t have the coverage you need and could end up in a jam if you make a claim. Pull out your policy, read the fine print, and research any terms you don’t understand. To make the task less painful, consider using an insurance broker for relatively unbiased advice and the ability to educate you on various terms.

Score 45-88: The Devil is in the Details

You’re part way there in that you’ve covered off some of your bases and are maximizing value in some areas. But the devil is in the details — make sure you know exactly what coverage you have now, and not when the time comes to make a claim. Don’t be afraid to ask how you can save money and what discounts are available to you. Go over your policy with a fine tooth comb, and make sure you understand every word — one word in the policy can quite literally make a world of difference.

Score 89-112: Top Dollar

You’re doing a great job of researching the industry, structuring the policy in a way that suits you, and making sure you are saving money in the meantime. Take a look at any questions you said “no” or “not sure” to, and make sure you incorporate those strategies into the fold, as you may be able to save even more money and/or adjust the policy to suit your needs.

Wise Bread Resources on Auto Insurance

4 Tips to Save on Car Insurance

Save Money on Insurance

Are You a Telecommuter Paying Commuter Rates for Auto Insurance?

When to Drop Collision Coverage on Your Car

Car Sharing: Why Own When you can Just Share?

Other Financial IQ Tests on Wise Bread:

Financial IQ Test: How Healthy is your Debt Management?

Financial IQ Test: How Healthy are your Bank Accounts?

Financial IQ Test: How Healthy is your Budget?

Financial IQ Test: How Healthy is your Health Care Plan?

Financial IQ TEST: How Healthy is your Disability Insurance?

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Guest's picture

Nice Quiz Nora! I stand somewhere in the 80s range so that means I know quite a bit and need to know more I guess . But I did know and got my son a student discount and myself a defensive driver’s certification discount from our auto insurance company, The Hartford. I’m going to recheck my policy with a magnifying lens to see if I can snatch some more discounts from them. Thanks for the information and keep up the good work!

Guest's picture

Wow what a great unique way to get people interested and aware about their current insurance situation. Kinda fun actually!

Just wanted to say that point #6 I keep detailed records of phone calls and copies of all correspondence and receipts in making a claim is very important. Thanks for the quiz!