Auto Insurance Buyer's Guide


UPDATED: APR 2020 | 2 MIN READ

If you’ve never bought auto insurance before, or if you’re just confused by the whole process, we understand. There are many moving parts to the auto insurance game, and it can be difficult to figure out what will best fit your needs for the right price. But after reading this quick and easy auto insurance buyer’s guide, you’ll be equipped with the tools you need to get an auto insurance policy which covers you at a price you deserve.

What You Need to Know About Buying Auto Insurance

When it comes to auto insurance, you need to know three basic things: what you’re buying, who you’re buying it for, and any additional factors which may increase the price. All of these things put together will determine what sort of insurance you need, how much you should expect it to cost, and which variables you can tweak in your favor in order to get a better price. Let’s start by taking a closer look at exactly what you should expect from your auto insurance policy. 

What Are You Actually Buying When You Purchase Auto Insurance?

Each state has its own, unique minimum auto insurance requirements. The best way to find out what the requirements are in your state is to check with your local Department of Insurance, either online, by phone, or in person. The vast majority of states will require at least liability coverage (for accidents which are your fault), and some form of medical payments or personal injury protection (for any medical expenses associated with the accident). Other types of coverage, which may or may not be required in your state, are listed in greater detail below.

It’s also important to mention that you aren’t just paying for the type – you’re paying for the amount of insurance coverage, as well. The less coverage you purchase, the lower your monthly premiums will be. But if you don’t purchase high enough coverage limits, you may be financially liable for out-of-pocket expenses if your insurance isn’t enough to pay the total cost for repairs, replacements, medical bills, or funeral expenses in the event of an accident. Some insurance companies only require $10k of coverage when most auto accidents can easily cost 3x-10x after all is said and done, so keep that in mind while you shop.  

Liability

There are two different types of liability coverage that you will most likely be required by state law to purchase: bodily injury, and property damage. Bodily injury liability pays out on claims if the accident is deemed your fault, and the injured parties have medical expenses and/or funeral costs associated with the accident. Property damage liability pays out claims if the accident is deemed your fault and the injured parties experience property damage as a result of the accident. Most auto insurance companies recommend purchasing $100k/$300k (per person/per accident, respectively) of total coverage if you can afford it. The coverage limit means that that dollar amount is the maximum amount of money your insurance company will pay out in claims. If the total costs of the accident is more than that, and you are deemed liable, you could be sued and your assets could be liquidated to pay the remaining debt. 

Collision 

Collision insurance helps repair or replace your damaged vehicle in the event that it is damaged in an accident and there is no other liable party at fault. Obviously, if there is another party at fault, their property damage liability coverage is what pays for the repairs. When you have to file a claim against your Collision coverage, you must first pay a deductible to your insurance company, then they will get the ball rolling on the repairs. Most deductibles are between $250 and $1,000. State laws usually do not require Collision coverage, but if you are leasing your vehicle or if you are purchasing a relatively new car, the dealership issuing you the lease or your car loan lender may require you to purchase Collision coverage.

Comprehensive

If some out-of-the-ordinary damage happens to your vehicle – such as vandalism, fire damage, theft, or flood damage, to name a few – your Comprehensive coverage is the coverage you will file a claim against in order to get the damages repaired or the vehicle replaced. Comprehensive coverage is usually not required by law. But you may want to take a close look at the fine print to make sure that disasters which are common in your area (hail damaged in the Midwest, for example) are actually covered by your policy.

Uninsured/Underinsured Motorist Coverage

Uninsured motorist coverage is required by law in some states, but not all. Uninsured motorist coverage is the coverage you file a claim against if you get involved in a hit-and-run accident which is not your fault, and the at-fault party is never caught. It is also the coverage you file claims against if the other driver is found at fault but does not carry insurance or does not carry high enough insurance limits to pay out what they owe. 

Medical Payments

Medical payments coverage is not required by law in all states, and may not be available in some states. But in the states where it is available, it helps pay for medical expenses for you and another passenger in your vehicle, usually up to $5,000. This is more of a supplemental form of coverage to help get you back on your feet quickly while your insurance companies bicker about who’s at fault and who should be paying for what.

Who (and What) Your Policy is Covering

Your auto policy, for the most part, follows your vehicle – but your personal circumstances as a driver of the vehicle which you are insuring also weigh heavily over your total costs. All of these things will help your insurance company calculate your total risk. The lower your risk of getting into an accident in the first place – and the less expensive it will be for your insurance company to pay out claims from an accident – the easier it will be for you to get a better value.

Factors that influence your total costs based on you as a driver include:

  • Age – younger drivers are a higher risk than older drivers. Even elderly drivers get better deals than motorists under the age of 25. The reason for this is because their lack of experience behind the wheel makes them more statistically likely to get into an accident. 
  • Financial responsibility – having a good credit score, owning your own home, full-time employment, and the like make you a more appealing customer because you’ll be more likely to pay your premiums on time and in full when they are due. Being responsible financially is also closely associated with being a less risky driver. 
  • Family status – married drivers sometimes get better discounts than singles. Furthermore, bundling onto the same auto policy with your spouse or a family policy with your adolescent children can get you discounts. 
  • Driving record – a clean, accident- and ticket-free driving record is best for the lowest premium. The more tickets and/or accidents you have under your belt, especially within your most recent 3-5 years of driving history, the more expensive your coverage will be. 

Factors that influence your total costs based on your vehicle and driving habits include:

  • Vehicle age – older vehicles typically don’t have as many coverage requirements as new vehicles straight from the dealership, or leased vehicles. They also cost less to repair and/or replace, so you don’t need such high coverage limits or extras like Collision/Comprehensive coverage. 
  • Make/Model of your vehicle – in addition to the age and actual cash value of your vehicle, the make/model of the vehicle you are insuring is important because you could be eligible for discounts related to safety features and other such factors. 
  • Number of vehicles on the policy – obviously, the more vehicles you insure, the more your coverage will cost. But bundling multiple vehicles on the same policy can also help you get discounts. 
  • Mileage – the fewer miles you drive each year, the fewer opportunities you have to get into an accident. You can get discounts for having fewer miles under your belt, as well as for temporarily driving with a tracking device plugged into your vehicle to prove that you are usually off the roads during high-risk hours of the day. 

So, How Can You Get the Best Deal?

Your first step should be to find a reliable, accurate car insurance quote comparison resource so that you can shop around between different auto insurance companies in your zip code. Sure, you could contact each company one by one on your own and ask for quotes, but this can be very time-consuming and tedious for most people. While you are shopping around and talking to different auto insurance agencies, you might also want to try one or more of the following strategies:

Asking for Discounts

Be sure to ask for as many discounts as you can get. There may even be hidden discounts you’ve never thought of, such as getting a discount for being in the military or for being a new customer. You might even be able to get a better price on your policy if you can prove to your auto insurance company that you were willing to take steps to mitigate your risk, such as taking a defensive driving course.

Tweaking Your Policy to Fit Your Needs

You probably won’t need extra coverage like Comprehensive/Collision if you’re driving around in a 1995 Toyota Camry. Ask questions of your insurance agent to make sure that you’re buying exactly the coverage you need, at the limits you need it, and that you aren’t accidentally buying extra bells and whistles that you’ll just end up wasting money on in higher monthly premiums.

Clean up Your Record

Sometimes, if you’re in a bad situation and need to improve your risk profile, the only thing you can do is be patient and wait. If you have a bad driving record or a poor credit score, do what you can to show that you want to adopt safer driving habits and get on top of your financial situation. The longer you can go without an accident or a poor mark on your credit history, the easier it will be to unlock discounts and lower rates in the near future.

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