Car insurance is an essential financial tool for all drivers in the United States and purchasing car insurance is a relatively simple process. But choosing which insurance coverage to get and getting the best coverage possible for your budget is another matter. It's very important that you know exactly what kind of coverage is available, and how it actually helps you. Some insurance coverage only covers damages to other people when you are at fault. Other types of coverage cover the financial expenses you incur when you are injured or your car is damaged in an accident.

In most cases, the decision to take on more or less insurance coverage is a financial one. But there are certain types of coverage that you should try to get even if your budget is tight. Insurance companies regularly come up with new offers and discounts rates change quite regularly, and if you know what coverage you might not need and what coverage is essential, you should be able to cover your bases without spending an arm and a leg on insurance premiums every month.

In This Auto Insurance Guide:

How Does The Car I Drive Affect How Much I Pay For Insurance?
How Does The Place I Live In Affect My Auto Insurance Costs?
How Do I Choose The Right Auto Insurance Company To Work With?
What Auto Insurance Coverage Do I Actually Need?
Are Optional Riders And Benefits Worth It?
Which Auto Insurance Coverage Components Are Essential?
Should I Request Multiple Car Insurance Quotes?
How Do I Save Money on Car Insurance?

  1. How Does The Car I Drive Affect How Much I Pay For Insurance?


    Most auto insurers require the insured to own a car before underwriting a car insurance policy. The named insured must be the same as that on the vehicle title. In some instances, such as when the insured buys a new car or truck, he or she must buy car insurance before driving off the dealer lot. But whether you are buying a new vehicle or insuring an auto which you already own, you must identify the vehicle to be insured before buying a car insurance policy.

    Which vehicle you drive plays a big part in determining how much you will pay in premiums. The size of the engine and maximum speed are normally taken into account, and vehicles classified as recreational vehicles often demand lower premiums because insurance companies don't expect these cars to be used frequently. Many insurers offer cheaper premiums for hybrid cars and electric cars, because statistically those cars have fewer accidents. If you plan on buying a new car, get car insurance quotes for that vehicle to get an idea of how the cost of insuring that vehicle compares to that of similar vehicles.

  2. How Does The Place I Live In Affect My Auto Insurance Costs?


    Insurance companies work with statistics. The more accidents happen in a certain area, the more you can expect to pay for insurance coverage if you stay in that area. As a rule, if you live in a more rural area you will pay lower auto insurance premiums compared to what you pay if you live in a suburban or urban area.

  3. How Do I Choose The Right Auto Insurance Company To Work With?

    Brokers, agents, and online direct insurance provide consumers with the flexibility of online access today. Car insurance is sold by captive agents, independent insurance brokers, or directly from the carrier. Because many people appreciate the ability to compare and purchase auto insurance online, most car insurers have some kind of website presence.

    You may prefer to buy insurance through a local insurance agency with a reputation to uphold in the community. But buying insurance directly from insurance companies is also an option. Currently there are three main resources you can use to find the right auto insurance.

    1. Captive agents are preferred providers chosen by an insurance company to market their car insurance products to consumers. The agency works only for the insurer and does not offer multiple insurance carriers to consumers. If you prefer to get personal consultation from somebody near you then buying insurance through a captive agent rather than directly from the insurance carrier is a nice option to have. The obvious downside of captive agents is that they are limited to helping you find the best policy offered by the insurance company they promote, rather than tapping into all available policies.

    2. In contrast, independent insurance agents work for themselves. They offer insurance products sold by more than one insurance carrier. These agents offer multiple options to consumers and are an important resource when customers want to compare different auto insurance policies. A good independent insurance agent can help you find the best insurance policy available taking your budget and insurance needs into consideration. But bear in mind that an independent insurance agent may carry a bias towards certain policies that offer a larger kick-back. Choose a well-recommended insurance agent who will act in your best interest.

    3. Direct insurance carriers allow consumers to avoid brokers and agents by selling online insurance products directly to consumers. Some insurance providers let you apply for a policy directly on their website, and in some cases, insurance can be less expensive when you buy it directly. But unless the insurance carrier has a company-operate branch office near you, there won't be an agent to explain you the benefits and pitfalls of an insurance plan. You should have some understanding of insurance terms and coverage limits before applying for a policy this way. Online reviews and comparison sites such as GET.com can be a useful resource in making an educated decision.

  4. What Auto Insurance Coverage Do I Actually Need?


    Auto insurance laws vary by state, and each state establishes different guidelines. Drivers should know the minimum coverage requirements in their state as a starting point. Of course, purchasing the minimum requirements is almost never recommended because, in many cases, these levels are not high enough to protect drivers involved in a future serious auto accident.

    Start by checking state requirements at the resident state insurance commission website. Although drivers are legally insured by complying with their state's legal limits, financial planners say these minimum limits are typically not enough. State minimum requirements often lag changes in the economy. For instance:

    • The State of Wyoming's minimum driver insurance requirements are $25,000/$50,000/$20,000, or 25/50/20. Each person injured in an auto accident would receive as much as $25,000 per incident with a maximum of just $50,000 per accident. This means if more than two people were injured in an accident, they could only access up to $50,000. The remaining $20,000 would be available to cover property damages.

    • Other states' minimum driver requirements are even more modest. For example, Florida's minimum of 10/20/10 or Ohio's 12.5/25/7.5 are the lowest minimums in the United States.

    Most drivers buy higher than minimum levels because demonstrating financial responsibility in a serious accident is important to them.

    Each driver should evaluate his or her future liability and property damage needs before an accident occurs. Purchasing enough auto insurance is an essential part of the car insurance evaluation process.

  5. Are Optional Riders And Benefits Worth It?

    Auto insurers must aggressively compete for new clients to increase sales. Extra perks are one of the ways that insurers attract new clientele. Keep in mind that car insurance rewards are not automatically included with all policies. Although some policies will include certain additional benefits, almost all policies withhold certain perks as optional riders, which you can get at an extra cost:

    Accident forgiveness. If the insured is at-fault in an auto accident, his or her rates do not automatically increase. Accident forgiveness per insured driver is typically one accident per three years. If the insured has an accident every year for three years, his or her auto insurance premiums are likely to rise. This optional perk is useful for average to good drivers with a history of few accidents, as the extra cost of the benefit is very little compared to the higher monthly premiums might pay after filing an accident claim.

    Minor violation forgiveness means that a minor ticket (one ticket every three years per insured driver) will not increase your car insurance premiums. If you rarely commit traffic offenses then this rider is a good backup just in case. Regular offenders won't benefit from this perk.

    Disappearing deductibles. If you choose a disappearing deductible you can receive an instant $100 credit on your auto insurance policy deductible. Your deductible then goes down by $100 a year for every year in which you go without an accident claim. Usually this is capped at a maximum reduction of $500, which you will reach after driving 5 years without having an accident. So if you have a $500 deductible, you could eventually pay no deductible at all when you do have an accident. This benefit is a good add-on for good drivers who want to avoid a big out of pocket expense if they do happen to have an accident in years to come.

    Total loss waiver. If your car is deemed a total loss (aka a write-off) in an accident, you won't have to pay the deductible. This perk can help shield you from a big out-of-pocket payment at a time when you will most likely need all the money you can get towards a new car and possibly medical expenses. This rider can benefit most drivers, good or bad. But the cost of this perk should be minimal since the chances of your totaling a car are small.

    Safe driver bonus. This rider lets you receive a "safe driving bonus" for each six-month period in which you drive accident-free. If you are a good driver and don't have any accidents, the bonuses you collect make the cost of this perk well worth it.

    Loyalty rewards. Many insurers include you in some kind of loyalty rewards program to encourage you to stick with them. The benefits you get usually increase over time. For instance, first-level loyalty perks may include an unlimited amount of small accident claim forgiveness, while second-level loyalty benefits might include young driver discounts, continuous coverage discounts, and claim forgiveness for more major accidents.

    Not all insurers offer every reward or reward level, so it is important to find out the optional benefits that you can get (both those included and optional perks) with a policy before signing up. Use your past driver experiences to determine the future value of additional benefits. Since some auto insurance check drivers' credit scores before agreeing to underwrite a car insurance policy, it is important to check credit reports to correct errors before applying for new car insurance.

  6. Which Auto Insurance Coverage Components Are Essential?


    In most states only basic liability insurance is required. This protects other people and their property from the cost of damages when you cause the accident. But the compulsory auto liability insurance imposed by most states only gives you pretty low liability coverage compared to the potential costs you could face if an expensive car is totaled or worse yet, if a person is disabled or killed.

    What's more, basic liability insurance does not cover any damages to your car or your medical costs. If your car slides off the road in winter and is totaled, for example, liability insurance won't cover any of the cost since you didn't damage another persons property or cause an injury to someone else.

    Although liability insurance is a good start if you can't afford more coverage, you should seriously consider getting additional coverage which covers your own costs as well as those of others involved. These are the main components of auto insurance, both compulsory and optional:

    Bodily injury liability coverage is obligatory in many states and covers the cost of injuries to other people injured in an accident when you are at fault. Many states only require minimal coverage, but considering the cost of medical expenses and possible law suits you may incur if someone is seriously injured, disabled or killed in an accident you cause, you should opt for coverage with a higher benefit if you can afford it.

    Property damage liability coverage is also obligatory in most states, and covers the cost of damages to other people's property (car, front yard, etc.) when you are at fault for an accident. The required coverage is usually enough in this case, though more certainly won't hurt if you can afford a higher premium.

    Comprehensive insurance usually covers vehicle damages resulting from external conditions, such as fire, flood, or hitting an animal. Your car will also be covered for damages resulting from theft of the vehicle or vandalism. If you live in an area that is prone to flooding, fires, car theft, vandalism, or damage from wild or domestic animals, then comprehensive auto insurance coverage is a nice extra. This is especially true if you drive an expensive or rare car. But if money is tight, there are other insurance components that are more essential and you should consider those first.

    Crash protection is one of the essentials. This type of coverage protects you and your car when a collision accident occurs. If you don't have plenty of money to spend repairing your car and paying hospital bills in the event that you are injured in an accident, then get at least the minimal amount of crash protection coverage.

    Physical injury insurance is another essential component of car insurance that allows the at-fault driver to compensate others for injuries and damages caused. A "no-fault" personal injury protection plan typically includes 80 percent of medical, lost wages, rehab, or funeral costs of an accident without assigning fault.

    Underinsured and uninsured motorist insurance assist you with costs when you are involved in an accident with an at-fault driver who doesn't have enough liability coverage to pay for all your damages. "Underinsured" policies absorb additional costs that are not covered by the at-fault driver, up to a predetermined limit. That coverage makes a lot of sense to get, because many drivers can't afford more than the compulsory liability insurance, which pays out very minimal benefits that may not cover all your car repair or medical expenses. In comparison, "uninsured" motorist coverage helps you to recover from an accident in which the at-fault driver does not carry liability car insurance at all. Although all drivers are required to carry car insurance when they get behind the wheel, another driver's temporary policy lapse or irresponsibility might make their insurance coverage void at the time of an accident. These two types of coverage are normally bundled as one component, and getting this coverage is always a good idea.

  7. Should I Request Multiple Car Insurance Quotes?

    Requesting a car insurance quote from each carrier is important when comparing multiple car insurance policy costs. Advertisements from auto insurers entice insured drivers to compare and save, and most companies will give you a free insurance quote. Even if the car insurance policy you have now gives you really great benefits and rewards you for your good driving and customer loyalty, you can't lose by getting a few quotes from other insurance companies every year or so.

    According to the Federal Trade Commission, one of the top reasons to compare insurance quotes is price. Insurers frequently change rates without notifying their customers. Drivers with safe driving records may be able to find cheaper car insurance premiums with another insurance carrier:

    Compare car insurance quotes. To compare different car insurance carriers, get a side-by-side comparison by checking the policy declarations page. Give the declarations page of the current policy to several car insurance agents so that they have all the relevant details. Ask each agent to quote auto insurance rates for similar to identical coverage.

    Ask agents to email or fax the quotes to avoid arranging personal meetings with each agent. To determine true savings, if any, by comparing apples-to-apples coverage. Verify any discounts quoted by the agent to ensure these discounts apply to the driver(s) requesting new car insurance coverage. In addition, look for discounts that may apply to the individual or family. A teenage driver may qualify for a good student discount or safe driver program.

    Check Driving Records. Each insured should ask the Department of Motor Vehicle to run an MVR, or motor vehicle report, to identify tickets, accidents, or violations that he or she has been involved in over the previous five-year period. Disclose relevant details to the agent, broker, or direct insurance provider for an accurate quote.

    Check Customer Service. Many drivers want to change car insurance providers because of poor service. For this reason, ask for referrals from relatives and friends about their satisfaction with an insurance company, broker, or agent before making a decision about new car insurance coverage. Checking out online customer service reviews and forums can also help you get an idea of what kind of service you can expect from an insurance provider.

    The combination of low premium prices and great customer service is the ideal combination for most car insurance buyers. If an insurance company or agent gets rave reviews from customers then you may want to consider their policies even if the cost is marginally higher than what other companies offer. Remember that an insurance company or agent is only as good as their readiness and efficiency when it comes time to pay up. A knowledgeable, available, and client-focused agent can help you save money and frustration later.

    By taking the time to compare multiple car insurance carriers' costs and performance, it is possible to buy car insurance that best meets the insured's needs. Buying car insurance is required for all drivers, but not all car insurance policies, premiums, and services are the same.

  8. How Do I Save Money on Car Insurance?


    Although many car insurance companies offer new bells and whistles to potential customers, not every proposed benefit makes financial sense for all drivers. Purchase car insurance after a careful side-by-side comparison of policies offered by different carriers.

    Look Out For New Insurers. Many insurance companies offer great deals when they first open or move into a new region or city market. If you move fast you can get good auto insurance coverage below the market price.

    A safe driving record will make you more desirable to auto insurance companies and help you score better deals. You will usually have to go five years without having an accident to get a discounted premium.

    A good credit score is another key to getting lower insurance premium rates. Insurance companies, like all businesses, will do their best to attract customers who pay their bills.

    Paying up front. Many insurers offer a sizable discount when you pay the entire premium for the year up front. Since you will spend that money anyway, it may well be worth it for you to pay it up front if you can afford it.

    A monitoring device. Some insurance companies give you the chance to earn lower premiums by installing a driving-behavior monitoring device in your car (if the device records low speeds and no harsh turns or stops).

    Having good grades will entitle students to discounts with many auto insurance providers. No kidding. It's statistically proven that good students have less car accidents.

    Insuring more than one car on the same policy will entitle you to good discounts from most insurance companies.

    Getting more than one policy, such as a homeowners policy and an auto insurance policy, from the same insurer will usually help you score a serious discount.

    Owning your own home will get you a discount on many insurance policies. That's because statistically home owners drive more responsibly.

    To evaluate car premiums in any market, plan to check car insurance premiums every two years or so.

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