Choosing a car insurance policy

There are a lot of factors to consider when choosing a car insurance policy, like how much coverage you need, what you can afford, and which insurance company to choose.

Andrew Hurst

By

Andrew Hurst

Andrew Hurst

Senior Editor & Licensed Auto Insurance Expert

Andrew Hurst is a senior editor and a licensed auto insurance expert at Policygenius. His work has also been featured in The New York Times, The Wall Street Journal, Forbes, USA Today, NPR, Mic, Insurance Business Magazine, ValuePenguin, and Property Casualty 360.

Updated|7 min read

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When choosing the right car insurance, there’s more to consider than just price. Picking the right car insurance starts with understanding how your policy would and wouldn’t protect you after an accident, and then getting enough insurance to fully cover your car (and yourself) in the event of a crash.

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When you know how much coverage you need to get, you can shop around for insurance and choose the company that offers the types of coverage you need at an affordable price.

Key takeaways

  • Before choosing a policy, consider how much coverage you need for yourself and your car, and how much coverage you can afford.

  • Be sure to consider customer service reputation, including claims service and responsiveness, before choosing a car insurance company.

  • Get quotes from different car insurance companies before choosing a policy, since one might offer you the same amount of coverage at a cheaper rate.

  • You should shop around for a new car insurance policy every couple of years to get better rates

How to choose the right amount of car insurance coverage

Nearly every state requires a minimum amount of car insurance, but these requirements are only a starting place for choosing the amount of auto insurance you actually need.

State-minimum amounts of car insurance aren’t enough to cover the actual costs you could rack up if you’re responsible for an accident. For example, if you have a state-minimum policy that caps out at $30,000 in coverage for damage from an at-fault, you could be allowed to drive, but you could be on the hook for tens of thousands of dollars worth of damage after a major car accident.

Instead of getting the lowest amount of coverage you can, you should pick enough car insurance to fully protect you after an accident. Here’s what to consider in order to choose the right amount of each type of car insurance coverage:

Liability coverage

A car insurance policy is made up of multiple kinds of coverage, but liability coverage is the most important part. That’s what covers damage that you’re responsible for in an accident. 

Liability coverage is split into two parts: Bodily injury liability pays for other people’s injuries and property damage liability covers their car repairs. Remember, liability coverage doesn’t cover any damage to your own car.

We recommend you choose at least $100,000 of bodily injury liability coverage per person and $300,000 per accident, plus $100,000 in property damage liability coverage.

Injuries, lost wages, and property damage can be very expensive (the CDC estimates that in 2018, fatal crashes caused $55 billion in accumulated costs), and you don’t want to be left paying for tens of thousands of dollars yourself if the damage from a crash exceeds your policy’s limits. [1]

Uninsured and underinsured motorist coverage

Uninsured and underinsured motorist coverage (UM/UIM) both cover you if you’re hit by someone who’s uninsured or doesn’t have enough of their own car insurance.

Since the amount of uninsured motorist coverage you have usually has to match up with your liability insurance, you have less choice in the amount you’ll get. It’s also a required coverage in some states.

But even if your state doesn’t require UM/UIM, we still recommend adding it. Otherwise, you could be stuck paying for the damage yourself if you’re hit by an uninsured driver.

Personal injury protection

Personal injury protection, or PIP insurance, covers your injuries and medical expenses after an accident, no matter who was at fault. It’s sometimes referred to as no-fault insurance, since it’s required in so-called no-fault states.

If you live somewhere where PIP is required, you need to have at least the mandatory amount, but whether or not you should get more on that depends on your situation. If you don’t have health insurance, you may want to choose a policy with as much PIP as you can afford, but if your health insurance coverage is solid, PIP may not be as important.

Comprehensive and collision

Comprehensive and collision coverage are both parts of full-coverage insurance policies. Together, they cover damage to your own car, whether it’s caused by an accident or something else entirely, like theft, vandalism, or hurricanes.

Unlike other types of car insurance coverage, you don’t have to choose how much comprehensive and collision insurance to get (instead of having a limit, like liability coverage, they just cover your car up to its value). 

Instead, you just have to decide whether or not you want them. But even though comprehensive and collision coverage are never required by law, they’re still mandatory for some drivers.

If you bought your car with a loan, or if you lease your vehicle, you’ll be required to have comprehensive and collision coverage. Even if you own your car outright, it’s still a good idea to add them to your policy. That way, you can avoid paying to repair or replace your car yourself if it’s stolen, damaged by weather, animals, or other unexpected events.

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Choosing additional car insurance coverages

Besides these basic parts of a car insurance policy, there are some other coverages that you should think about adding. Additional car insurance coverages you may want to consider include:

  • Roadside assistance coverage:Emergency roadside insurance is a useful add on if you don’t already have AAA or another roadside service provider. That way, you don’t have to worry about getting stranded by the side of the road.

  • Rental car reimbursement: It’s a good idea to add rental car reimbursement so that you won’t need to pay for a temporary replacement vehicle after yours is damaged.

  • Gap insurance:Gap coverage may be required if your car has a loan or is leased. It covers the difference between your car’s depreciated value and the amount you still owe on your loan or lease after the car’s totaled.

  • New car replacement: New car replacement is usually only available if you own a car that’s two or three years old (or newer). It pays to replace your car with a brand new one of the same make and model, and it may be a good coverage to add if you’re worried about totaling a new car and don’t mind paying a little more for peace of mind.

How to pick a car insurance company

The most important thing to consider when picking a car insurance company is that any carrier you choose actually offers all of the coverage that you need. Chances are that you’ll have at least a few companies to choose from.

Price is important when picking a car insurance company, but it’s not the only thing that matters. Try to choose an insurance provider that has affordable rates, along with a reputation for attentive customer service, a fast claims process, and solid financial standing (our Policygenius reviews of the top insurance companies take all of this into account).

You can also check ratings with third-party crediting rating bureaus and the National Association of Insurance Commissioners, which publishes data on complaints companies receive from their policyholders. 

Remember it’s important to get quotes from multiple insurers. Shopping around can help you save hundreds of dollars per year, since one company might offer a cheaper rate than another for the exact same amount of coverage.

Choosing what to pay for car insurance

While companies take the same information into account when calculating your price, rates can vary from company to company — even for the same driver. 

The best way to pick an insurance company that has the right coverage for the price is to first estimate the cost of the coverage you’ll need.

Using an insurance coverage calculator can help you get an idea of how much insurance costs drivers like you. While you can’t choose exactly what your rates will be, knowing what insurance often costs can help you to pick an insurance policy that’s not too expensive compared to average.

Choosing a car insurance deductible

When you choose your car insurance policy, you’ll be asked to choose your deductible amounts. Your deductible is the amount you’ll pay out of pocket per claim before the carrier picks up the rest. Liability coverage never has a deductible, but comprehensive and collision coverage each require one.

Deductibles are typically $500 or $1,000, but depending on the company you might be able to select one that’s even higher. Lower deductibles means your car insurance will be a little more expensive, because it increases the amount your carrier has to pay for a claim.

When choosing your deductible, see how much each deductible amount affects your costs and think about how much you’d be comfortable committing to pay before you’d be able to use your insurance.

Car insurance discounts

Most companies offer car insurance discounts as a way for you to lower your premium. 

Available discounts shouldn’t be the make-or-break decision when choosing a car insurance policy, but it might make more sense to choose car insurance from one company that offers you a lot of discounts instead of a similar company with fewer discounts.

Some popular car insurance discounts include:

  • Safety equipment discounts: Owning a car with safety features like an anti theft system or crash protection tech could result in a discount.

  • Association discounts: Being a member of certain clubs, an employee of some companies, or a student or alumni of some universities can lead to a discount from some insurers.

  • Safe driving discount: Most insurance companies will offer a discount to drivers who take a driver’s education course or who have a history of safe driving.

  • Good student discount: Discount given to student drivers who have a high grade-point average. Both high schoolers and full-time college students can qualify for this discount.

  • Paid in-full discount: You can get a discount from most companies by paying an entire year's worth of premiums up front when you start your policy.

  • Bundling discount: Save by buying your auto insurance and home, renters, or condo insurance from the same company.

When to choose a new car insurance policy

Once you choose a car insurance policy and finalize coverage, you should plan to repeat the process again in the future. It’s important to review your coverage when it’s time for your policy to be renewed.

It might be time to choose a new car insurance company before your old policy is renewed if you find out that your rates are going up. There’s no cancellation fee for switching insurance carriers, so don’t hesitate to choose a new company if you feel like you’re paying too much. 

Some of the other reasons to shop around for a new car insurance policy are if:

  • You’re adding a new driver to the policy: Whenever you add a new driver, especially a newly licensed driver, be sure to review your coverage with your insurer and shop around to see if you can get a better rate.

  • You’ve been driving more safely: You might be able to get a safe-driver discount if you’ve avoided accidents and tickets for a few consecutive years. Because safe-driver discounts vary by insurance company, the number of years you may find a better rate by shopping around.

  • You just turned 25 years old: Car insurance for younger drivers can be pricey, but rates drop by a lot once you turn 25. If you’ve reached an age where you think you’ll qualify for cheaper insurance, it won’t hurt to look around for a new car insurance policy.

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Frequently asked questions

What type of car insurance should you choose

You should get enough insurance to protect your car and give you enough coverage in an emergency. We suggest a policy with high amounts of liability coverage, plus comprehensive and collision coverage. You may also want to add extra coverage like rental car reimbursement and roadside assistance.

How do you know what insurance company to choose?

As you choose from different insurance companies, be sure to find carriers that offer the coverage types you need. Then find the company that has the best rates, customer service, and financial stability.

Why would you shop around for car insurance when picking a company

On average, the cost of car insurance can vary by hundreds or even thousands of dollars per year depending on the company and where you live. It’s a good idea to shop around for coverage instead of just choosing the carrier that’s most familiar to you so you don’t end up paying far more than you have to for insurance.

References

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Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of our

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  1. Centers for Disease Control

    . "

    State-Specific Costs of Motor Vehicle Crash Deaths

    ." Accessed September 26, 2022.

Author

Senior Editor & Licensed Auto Insurance Expert

Andrew Hurst

Senior Editor & Licensed Auto Insurance Expert

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Andrew Hurst is a senior editor and a licensed auto insurance expert at Policygenius. His work has also been featured in The New York Times, The Wall Street Journal, Forbes, USA Today, NPR, Mic, Insurance Business Magazine, ValuePenguin, and Property Casualty 360.

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