Having auto insurance is like buckling up your seatbelt each time you get behind the wheel. It’s only after you get into an accident that you’re grateful for taking the precaution to protect yourself and your car.
Car insurance shopping is easier than ever before, so why do we still settle for policies that cost us money instead of saving it? A survey conducted earlier this year by Princeton Survey Research Associates International found that 39 percent of American auto insurance policyholders have never looked for more affordable rates.
Nearly 50 percent of people in the study weren’t even aware of some other insurance basics that could save them money, like switching insurers without waiting for their policy renewal.
There could be a number of reasons for this, from not wanting to deal with the hassle of shopping around for insurance to simply overlooking some basic car insurance 101. The right plan should fit your driving needs, your budget, and keep you fully covered, but until you understand some insurance basics, terms and rules, you may end up signing off on the wrong policy.
Here are some tips to keep in mind if you’re shopping for auto insurance:
Learn your state’s car insurance minimums
You get what you pay for, especially when it comes to car insurance rates, so part of finding the best policy is putting in the time to gather as many quotes as you can, comparison shop, and narrow down the ones with the greatest cost-to-coverage benefit.
Taking on the minimum coverage offered by an insurance provider may save you some money in the long run, but it may not benefit you in the immediate term when you’ve been involved in a serious collision and your policy won’t cover the thousands of dollars in damages billed to you.
It’s really a myth that you only need minimal auto insurance; the industry recommends a minimum of $100,000 in bodily injury coverage per person, and $300,000 in coverage per accident. So even if you’re happy with an insurance provider’s minimum coverage, check first to see if it meets your state’s standards.
Different states call for different auto insurance minimums. For instance, states like Wisconsin and Maine call for a minimum $100,000 in total bodily injury coverage, where Florida only calls for $20,000. California requires only a minimum $5,000 in property damage coverage under a car insurance policy, but live in South Carolina or Alabama and you’ll be required to have at least five times that coverage.
And if you live in New Hampshire, you only need to have auto insurance if you’ve been convicted of certain motor vehicle violations, like a DWI or causing a hit-and-run accident.
Know how much coverage you honestly need
While it’s not a financially smart idea to purchase the bare minimum auto coverage just to save money, maxing out your budget on the maximum insurance may not be worth it, either.
A practical way of determining just how much coverage you need is to use the same criteria insurance companies use when setting car insurance rates:
How much do I drive?
Are you still financing or leasing your car?
Where do you drive?
Why do you drive? Is it for personal reasons, business, or both?
Do you allow other people, like family members, drive the car?
Acquaint yourself with coverages
"Insurance" is actually just a catch-all phrase that can include several different types of coverage to choose from, so it’s smart to get to know what each one means, what they cover, and which ones to pay for when out rate shopping:
Liability coverage** is insurance protection that pays for bodily injuries or property or auto damages to another motorist that you were liable for.
Collision insurance** protection covers damages to another motorist’s vehicle or property when no other parties were involved (one example could be backing into a parked car and denting the fender -- your collision coverage would pay for the damages).
Comprehensive coverage**, also known as "other than collision" coverage, pays for losses not caused by a vehicular collision, such weather, natural disasters, fire, floods, earthquakes, rioting or falling objects from the sky -- anything that can cause damage to your car necessitating an insurance claim.
Additional coverages**, like uninsured/underinsured motorist protection, gap insurance, roadside assistance or rental car insurance are relatively affordable add-ons to complement your auto insurance policy. If you drive for a rideshare company like Uber or Lyft, you may need rideshare insurance to help protect yourself.
Remember that one type of coverage won’t protect you against everything, so a combination of the above coverages makes for a more comprehensive insurance policy.
Higher deductibles = lower premiums
In any insurance policy (auto, health, renters, etc.), your deductible is an amount you need to pay out of pocket for services before your insurance kicks in -- so, if you have a $500 deductible, you’ll need to pay $500 of your own money on insurance claims before your provider starts compensating for service. Your premium is the monthly, biannual or annual cost you pay to have an insurance policy.
Your premiums and deductibles work together very closely in determining the rates you can obtain. Generally, the higher you set your deductible amount, the lower your premiums. A higher deductible means that you’re paying more for damages to your car and taking that responsibility away from your insurer. In return, your insurance company offers you a lower premium.
Just be careful not to be wooed by too low of an insurance premium. A low rate that’s too good to be true could mean an insurer providing you with lesser coverage, like making you pay more for vehicle replacement parts.
Likewise, be careful not to make your deductible too high. While it can make your premiums more affordable from month to month, a single high-cost insurance claim could mean being unable to afford your deductible, and being denied service by your provider -- the same thing as being uninsured.
If you maintain a B average or higher in school, or you have a clean driving record free of any recent accidents, speeding tickets or insurance claims, you may be eligible for a discount from your auto insurance provider. The same goes for discounts if you’re a military veteran, if your car is equipped with an anti-theft system, or if you’ve completed a driver’s education defensive driving or safety course.
There are other discounts to find, too, like combining your auto insurance with other insurance policies, such as life insurance or homeowners plans. In the case of home, bundle it with auto and you may be eligible for a 15 percent discount from some insurers.
If your insurer doesn’t offer a rate reduction for any of these categories or some other discount you may qualify for, look for one who does, and don’t hesitate to switch policies or providers if getting a discount is a priority.
Vet prospective car insurance providers
Reviewing an insurance company’s track record and business reputation is just as important as examining the policy quotes they’ve offered you. The most cost-effective auto insurance policy means nothing if there’s not adequate customer service or provision of services to go along with it.
So, in addition to making sure you have a comparison of quotes and coverage info, payment policies and terms and regulations, vet out ratings and reviews of the insurer. Look them up through the National Association of Insurance Commissioners (NAIC) to find if any complaints have been filed against them, legal or regulatory problems related to their licensing, or financial issues. Just because they seem reputable doesn’t mean they are.
Your state’s official insurance website may also have more info, as will finance-based outlets like Standard & Poor’s.
It’s also a good idea to see what other ratepayers are saying about certain insurance providers. While the policy you’ve been offered may seem great, people may feel otherwise. Google customer reviews or research reviews on Consumer Reports, the Better Business Bureau, or other official sources or an idea if you’d like to make an insurance company your main provider.
When you decide on a new policy, make sure to review the terms carefully, and look for authenticity in the wording of the contract. For instance, experts strongly suggest reconsidering a policy that skimps on service that may be buried in the fine print, like only promising aftermarket vehicle parts instead of paying for original manufacturer equipment. Once you’ve gone over your plan with a fine tooth comb, cancel your old policy.
Most importantly, always keep checking in with your existing auto insurance policy. Becoming complacent with your insurance coverage can be selling your insurance and financial needs short. You may find that your current policy, your premiums, deductible, coverage and terms suit you just fine, or that you need a new policy to fit new needs.
There’s no such thing as the perfect insurance plan. There’ll always be better rates and deals around the corner, but it’s up to you to find them. By taking some of these tips into account when insurance shopping, it could mean the difference between paying an arm and a leg for rates, or getting a steal on a new policy.
image: Pictures of Money