Buying guide for choosing the best auto insurance
You know you need auto insurance, but which company is right for you? Once you find a suitable company, which types of coverage should you select from its menu of options? Some states mandate certain types of coverage — for example, collision coverage is usually required — but it’s not as simple as signing up for insurance and driving off into the sunset. You must choose from a buffet of options, and each option carries a price tag.
For example, should you spring for comprehensive coverage in addition to collision coverage? If so, how large or small should your deductible be? What about roadside service? Rental car coverage? These nice-to-haves add dollars to your monthly bill, but they can be worth their weight in gold.
In this guide, we give you a tour of the entire process, from choosing the types of coverage you need to signing up with an auto insurance agent. Read on to get started.
Before you select a company
Before you meet with potential insurance agents, it’s helpful to have an idea what type of auto insurance you want and need. An agent can make recommendations, but the decision is ultimately yours.
There is no “one size fits all” auto insurance policy. You can tailor yours to fit your needs as well as any state law requirements. For example, you might choose to invest in both collision and comprehensive coverage. Or, you might choose to skip the comprehensive coverage and save some cash on your monthly premium.
Learn about insurance types
When you sit down with your agent to plan coverage, it’s smart to come to the table informed. Otherwise, you may feel like you’ve been broadsided by a deluge of options. Here’s a quick look at basic types of coverage.
Liability coverage: This coverage is mandatory in most states. It helps cover costs if you cause an accident that harms someone. Liability insurance can be subdivided into two categories: coverage for bodily injury and coverage for property damage. Note that liability insurance does not pay for damage to your person or property if you’re at fault. For that, you need collision and comprehensive coverage.
Collision coverage: This coverage isn’t mandatory, but if you get in an accident and need to fix or even replace your vehicle, it’s certainly nice to have. If your car is a prized possession (new, expensive, or both), collision coverage is a particularly wise investment. If your car has driven past its prime and the resale value is low, you might decide to take the gamble and skip collision coverage.
Comprehensive coverage: This covers non-collision damage. For example, if your car gets dinged in a hailstorm, comprehensive coverage will help cover repairs. Comprehensive coverage is not required by law in most states, but if you’re applying for a car loan, the lender may stipulate that you purchase it.
Uninsured and underinsured coverage: This coverage proves valuable if a driver with no auto liability insurance (or limited liability insurance) injures you. Yes, the law requires drivers in most states to carry liability insurance, but a significant number of drivers break this law. Should one of these drivers injure you, this coverage will help pay your costs.
Medical payments coverage: Known as MPC, this coverage helps pay for medical bills related to an accident in your insured vehicle. The coverage is not limited to just you; others in your vehicle are also covered. For example, if a family member were injured while driving your car, MPC would step in to help pay their medical bills.
Personal injury protection: Known as PIP, this insurance helps pay for the medical expenses of anyone in the insured vehicle after an accident. It may also reimburse you for other harm, such as lost wages.
Depending on where you live, some of these coverages are mandatory and some are optional. Understanding what you need and what's required in your state can help you choose the right coverage for your situation.
Determine whether you need no-fault or at-fault insurance
In the U.S., each state government determines whether drivers must adhere to “no-fault” or “at-fault” policies. It’s important to know which label applies to you, as it determines who foots the bill in the event of an accident.
At-fault: In an at-fault state, the insurance company of the errant driver pays for damages. Most states are “at-fault” states.
No-fault: In a no-fault state, auto owners are required to purchase no-fault insurance, which covers their own medical bills in the event of an accident regardless of who caused the accident. If you are the one at fault, it can also cover damage to the other person’s property.
Notably, in an at-fault state, it’s possible to be sued even though your insurance covers the other person’s damages. This can happen if the injured party feels your insurance company did not cover their damage adequately.
Give your information to an agent
A surefire way to get the best deal is to compare quotes from several insurance providers. To get a quote, you’ll need to share some personal information with potential insurers. You might meet with the insurance agent in person, speak with them on the phone, or fill out an application online.
Information you can expect to give to a potential agent includes the following:
- Your name
- Your email and phone number
- Your address, zip code, and birthdate (including the year)
- Your gender
- Your marital status
- Your vehicle’s make and model
- Your homeowner status (own, rent)
- Recent driving history
Choose your deductibles and premiums
Once you’ve paired up with a company, it’s time to make important decisions about where your money will go. The deductible is the amount of money you pay toward repairs or other damage in the event of an accident. The premium is the amount of money you pay on a regular basis to maintain your insurance coverage.
Most companies allow you to choose, within reason, the dollar amount of your deductible. Amounts range from $0 to $1,500. You may be thinking, “Great, I’ll choose the $0 deductible!” But that might not be your best option because the lower your deductible is, the higher your premiums will be.
- If you want low car insurance premiums, you’ll need to select a higher deductible amount.
- If you want a low deductible, you’ll need to pay higher premiums.
Unfortunately, this is not a situation where you can have your cake and eat it, too. Think about your monthly budget before you settle on deductible and premium amounts. Do you have an extra $1,500 to spare in the event of an accident? If so, a lower premium might suit you fine. Are you living paycheck to paycheck with little cash to spare? If so, a deductible that’s too high could immobilize you in the event of an accident.
Common mistakes to avoid
Finding an auto insurance provider and hashing out the details of your plan is no day at the beach, but it’s necessary for responsible driving. Unfortunately, some consumers rush through the process and regret it later. Here are some mistakes to avoid.
You don’t shop around. Each insurance company will offer you a package and rate. You might get a vastly better deal from one company than another. You won’t know this, however, if you simply stick with the first insurance company you find. Compare quotes from at least two providers to get a feel for the possibilities.
You don’t research the company’s reputation first. Some insurance companies are more responsive than others when it comes to addressing claims. In the midst of accident or injury woes, you don’t want your insurance provider making your headache worse. Read online reviews of any insurance company you’re considering and pay particular attention to customer opinions on responsiveness and timeliness.
You don’t ask about discounts. Insurers often reward low-risk drivers. If you have a spotless driving record, ask if you can get a lower rate because of it. If your car has anti-theft features that make it less of a crime target, you may qualify for a lower premium. Don’t assume that a company will immediately offer you these discounts; speak up.
Tips
- Track your points. If you’ve recently received points on your driver’s license, your auto insurance rate will probably go up. Wait three years after the date of the violation and check for a lower rate. Check again at the five-year mark to make sure you’re still getting the best deal.
- Don’t pay twice. Before you invest in MPC, read the fine print of your health insurance policy. If your health insurance company covers vehicular injuries, you might not need to also buy MPC.
- Bundle for savings. Some auto insurance companies also provide home insurance. You may qualify for a discount if you choose to bundle auto and home insurance from the same company.
- Decide if you want to apply online. You can obtain insurance quotes from the comfort of your laptop or phone, which is highly convenient for many consumers. However, you should realize that online quotes are only estimates. The final numbers may look different. If you want concrete figures, speak with an agent.
FAQ
Q. What is “underinsured” coverage?
A. Underinsured coverage helps pay your costs if the at-fault driver has a policy with a liability limit that’s too low. For example, if a driver causes $5,000 in damage but their insurance only pays for $4,000, your underinsurance would kick in the remainder.
Q. I’m about to buy my first car, and I don’t have insurance yet. Can I drive the car home and sign up for auto insurance later?
A. No. In the U.S., you must be insured before you drive a vehicle, even if it’s only a few blocks from the dealer to your home. In fact, the dealer won’t let you depart with the vehicle until you provide proof of insurance. Get the formalities squared away with your insurance company first. Then, go get your car.
Q. What is an “independent” auto insurance agent, and how do they differ from other auto agents?
A. An independent agent is a person who doesn’t work strictly for one insurance company. They can give you information about a number of policies from multiple companies, which broadens your choices and may help you land a better deal. Often, these people work solely on commission.
An agent who works for just one insurance company is sometimes called a “captive” agent. If you want a go-to person who can guide you through each step of the process, consider a captive agent. Bear in mind, however, that the options a captive agent presents may be more limited.
Q. I have a DUI in my past. Will any company cover me?
A. You may have to look harder to find a good deal, but there are “high-risk” car insurance agencies that specialize in covering high-risk drivers. In addition to those with spotty driving records, there are other populations that may find success here: new drivers, elderly drivers, and owners of exotic or extremely expensive vehicles, to name a few.
