Protect Against Collisions and More If you drive a car in the United States, liability insurance must cover it. This type of policy pays for medical and property damage resulting from a vehicular accident. You can also purchase comprehensive and collision insurance to cover other costs. These additional coverages help protect the value of your car should it be damaged. If you are calculating how much it will cost to buy a car, you need to take into consideration the cost of insurance as well. In this article, we’ll review the basics of car insurance and the best auto insurance companies in America, including costs, pros and cons. This is a brief introduction to automobile coverage. Liability Coverage When an accident occurs, liability insurance covers you, household members and authorized drivers for the costs associated with property damage and bodily injury. It covers the cost to repair or replace property damage that you caused. [youmaylike] You are also covered if you cause the bodily harm or death to someone else while you are driving the car. This includes medical expenses, loss of income and specified legal defense costs. Collision Insurance If you are involved in a collision, this type of insurance will help pay for repairing or replacing your vehicle. If the collision is your fault, the coverage may extend to other damaged vehicles involved in the accident. States do not mandate that you buy collision insurance, but your lender or car dealer will if you finance or lease the car. Policies offer a range of deductibles, which is how much you’ll have to pay for repairs before the insurance kicks in. Larger deductibles lower the policy premiums but expose you to more out-of-pocket expenses if a collision occurs. Comprehensive Insurance Comprehensive insurance covers damage to your car that occurs for reasons other than a collision, including theft, fire, vandalism, weather and natural disasters. This coverage is often required if you finance your automobile. You can add riders to this insurance to provide coverage of additional costs, including auto towing, glass repair, daily rental while your car is in the shop and emergency roadside service. As with collision insurance, you can set the deductible on your comprehensive insurance policy to cut your premium costs. Gap Insurance If your car is severely damaged in an accident or other incident, you might find that your comprehensive and collision damage won’t provide enough coverage to pay off the amount you owe on the vehicle. Many policies pay only the fair market value of a totaled car, which might be only 80% of the amount you owe. You can buy additional insurance to plug this gap and ensure you can pay off the car loan in full if the vehicle is destroyed or stolen. Normally, car leases require you to buy gap insurance. If you pay cash or pay off your loan, you can save money by avoiding or dropping gap insurance when no longer needed. Top Five Auto Insurers These five insurers all offer full coverage policies and many additional services. Amica Amica is a superstar among car insurers, winning accolades from Consumer Reports and J.D. Powers. It’s known for handling the claims process smoothly. The average annual cost for full coverage: is $1,360. Pros You can have your car repaired at any body shop, without restrictions. Offers a premium package which, for an additional cost, provides full glass coverage, rental coverage, good driving rewards and identity fraud monitoring. Superior financial stability rating from A.M. Best. Cons Missing some discounts, such as military, low-mileage and prepay discounts. Must speak on the phone to get a quote. Sparse website when it comes to customer education. State Farm State Farm is the country’s largest multi-line insurance company. It excels in customer service and regularly garners high marks from customers. The average annual cost for full coverage: is $1,337. Pros Superior financial stability rating from A.M. Best. Excellent online quote tool, getting customers a quote in as little as five minutes. Easy claim handling and top service from its more than 18,000 agents and its easy-to-use mobile app. Cons Doesn’t offer coverage for new car replacements or uninsured motorists. Missing prepayment and automatic payment discounts. The Hartford While only 11th in size, The Hartford is big when it comes to policy options. It offers rates based on your actual driving as well as full replacement of new cars when destroyed shortly after purchase. Average annual cost for full coverage: N/A. Pros Solid benefits, including superior roadside assistance and towing programs. High marks from customers for their purchase experiences. One of the few insurers with mechanical breakdown coverage for out-of-warranty repairs. Cons Mediocre service interaction according to J.D. Power surveys. Sparse online learning materials. Geico Geico is the second-largest U.S. car insurer. It is a favorite among tech-savvy geeks who appreciate the insurer’s mobile app and excellent online service. The average annual cost for full coverage: is $1,627. Pros Geico offers plenty of ways to save, such as multi-vehicle, driving history and vehicle safety equipment discounts. Special savings for active and retired military members and federal employees. Full-featured mobile app for getting quotes, buying insurance, managing your policy, submitting claims, summoning roadside assistance and making payments. Cons Human help may be in short supply, as just about everything is handled online. No gap insurance is offered. USAA No insurer matches USAA for service to military members. Unfortunately, it's only available to active service members, their families and retired veterans. Average annual cost for full coverage: $896. Pros Superior financial stability rating from A.M. Best. Top-ranked purchase experience score from J.D. Power. Cons Missing gap coverage. Doesn’t offer interior vehicle coverage or new car replacement coverage. Limited availability. The Right One for You Competition in the insurance industry helps drive down prices and prompts insurers to offer money-saving features. For example, your carrier might reward you for a safe driving record and for having a long-term relationship with the insurer. The right insurer for you is highly rated for service, offers the exact coverage you want and does so at an unbeatable price. You should always gather multiple quotes before selecting an insurer, and make sure you get credit for all applicable discounts.
What to Do After a Stock Market Crash
It’s never a great feeling to watch your hard-earned money evaporate right before your very eyes during a stock market crash.
That’s exactly what investors have experienced over the last few weeks as COVID-19 wrecked the economy and, with it, the stock market itself. Both the Dow Jones Industrial Average and S&P 500 plunged as more pieces of virus-related bad news hit the market. The only saving grace for investors has been that stocks have recovered somewhat, although we’re far from being out of the woods just yet. The market could easily plunge again if social distancing and other virus-suppression efforts don’t work as well as expected.
Investors also need to remember that this won’t be their last stock market crash. The economy has a funny way of imploding every decade or so, meaning investors must come up with strategies that will withstand every market crash, not just the current one.
To give some advice on what to do after a stock market crash, let’s take a closer look at some strategies regular investors can use to effectively navigate through this market crash, as well as the inevitable future ones.
First Off, Don’t Panic
The time to panic and sell everything is when nobody else is. Because by the time everyone else panics, you’ve already lost a big chunk of your money. By then it’s way too late.
The first step towards not panicking is to understand the nature of markets. The stock market is going to crash every decade or so; it’s a reality of investing. Sometimes the bull market will last a little longer than a decade, but the result is inevitably the same.
Going through today’s market panic is a wonderful experience for the next one. I realize that may be of little comfort now, after you’ve lost a bundle, but it really does help. The Great Recession of 2008-09 was my first stock market crash, and I always regretted not buying more cheap stocks. I was paralyzed with fear, worried the economy would never come back. I didn’t make the same mistake this time.
The Beauty of a Diversified Portfolio
Many investors are all about stocks, putting 100% of their portfolio into equities. The logic is simple. Stocks offer better long-term return potential than bonds. Stocks are more volatile, but many rookie investors shrug off this downfall by telling themselves the volatility won’t be so bad.
And then the inevitable happens, and these investors start to panic. It’s happened a million times, and it’ll happen a million more. It’s a pretty common mistake.
To keep things simple, say you have a portfolio of 50% stocks and 50% bonds. The stocks fall by 25% and the bonds hold their value. That translates into a 12.5% loss, which is much easier to stomach.
But bonds also have another big advantage. They serve as a convenient cash source when you get the opportunity to buy undervalued stocks. It’s easy to sell a portion of your bonds, use the proceeds to load up on cheap stocks, and then replace the lost bond capital with your savings after stocks rally again.
Bonds can also serve as a backup emergency fund, capital that can be withdrawn if you’re facing an extended job loss or other similarly dire situation. Having access to extra cash during a recession is a nice safety cushion, even if your emergency fund is fully stocked.
When Should You Sell?
Ideally, the answer is never. Especially during a market crash. The last thing you want to do is crystallize a loss when markets have reached their bottom. Investors usually start to worry right around when stocks are bottoming, since that’s when economic and stock market news tends to be the worst.
The above is especially true if you own a diversified collection of ETFs. Such a portfolio doesn’t have much risk from the individual companies that make up the ETF itself, so you needn’t worry about individual companies going bankrupt.
It’s a slightly different story when you own individual stocks. Most companies will recover from a downturn, especially if you focus your portfolio on strong organizations that have a history of navigating successfully through tough times. But there’s always a sector or two that gets hit particularly hard — like airlines or hotels this time around — and a decision must be made about any investments in that area. Selling an investment that’s down 50 to 75% can be painful, but sometimes it’s the correct decision.
An Easy Buying Strategy
One thing that paralyzes investors during any market crash is an ill-advised quest to put all their cash to work at an opportune time. They’re trying to time the bottom of the market to maximize their profits.
I know I fell victim to this back in 2009. I kept holding out, looking for a slightly better entry point. Then, markets turned on a dime and I missed my opportunity.
Investors need to realize they can’t time the market. The greatest minds in the investment universe can’t accurately predict where stocks will go tomorrow, next week or next month. If they can’t do it, what chance do regular folks have?
We have a much greater chance of success if we predict where stocks will be five or ten years from now. Sure, there are historical exceptions, but if you guessed stocks would go higher over the long-term, you’d very likely be correct. We must remember that stocks usually go up over time. They’re even more likely to go up over time if you’re buying during a market crash.
For my own portfolio, I’ve been following a simple rule. I’ve slowly been putting money to work over the last couple of months, steadily buying as markets fell. I’ve also been buying as markets recover. I’m confident this dollar cost averaging strategy will work well over the long-term.
The Recovery Process
Just like we can’t predict the bottom, we also can’t predict how markets will recover.
We can make some guesses based on previous market recoveries. History has shown the market tends to recover right as economic news hits a bottom. That’s right, the market recovers right when things look the bleakest.
There’s just one big problem: how do you know when things look the bleakest in real time? You might think things can’t get any worse, and then they do. We can only measure this years later, and by then it’s too late to buy.
Remember, the stock market looks forward. It doesn’t necessarily reflect the news of the day. Rather, it reflects investor expectations of the world three to six months from now.
The Bottom Line
Stock market crashes are tough on any investor. There are few worse feelings than logging into your brokerage account and seeing a big chunk of your money evaporated away.
But remember a few important lessons and you’ll end up just fine. Stocks will inevitably recover. You only lock in a loss if you sell. The time to buy stocks is when the market is on sale, even if you miss the bottom. And, most importantly, don’t panic. Just stay the course and you’ll end up just fine.