Auto Insurance Buying Guide: How much Car Insurance Do I Need?
Determining what type of auto insurance can be confusing especially if you are unfamiliar with the type of coverage available. Many individuals make the mistake of purchasing only the minimum coverage while others make the mistake of purchasing too much. Knowing how much specific auto insurance you need is important. However once you understand the purpose of each type of coverage, you can better decide if you require that for your motor vehicle.
What is Liability Insurance?
Nearly every state requires this type of coverage, but we will discuss it anyways. The purpose of this insurance coverage is to cover the cost of damage done to another person’s property and/or the medical costs of any person in an auto accident that you may have caused. Each state requires a specific amount, but you will not be required to have more than $100,000 bodily injury coverage and $25,000 property damage.
This means if you are involved in a serious accident, the minimal coverage may not be enough. The amount of liability insurance you need will depend on the worth of your assets (cost of your car). The more limits you purchase, the less your car insurance will cost.
What is Collision Coverage?
This policy covers any repairs to a car after an accident.
What is Comprehensive Coverage?
This type of policy covers cost if the car is stolen or damaged.
What is Uninsured Coverage?
This type of insurance coverage covers costs if you are hit by a driver without insurance or with minimal insurance coverage.
What is Personal Injury Protection?
This type of coverage is responsible for both you and your passengers’ medical expenses after an accident including hospital costs or lost wages.
What to Know About Insurance Coverage
It’s important to understand what your state requires car owners to carry. Most states have minimum values and if you don’t carry insurance, the state can impound your car. Make sure that you’re covered for an amount equal to the total value of all of your assets whether savings, investments, car or a home.
What Coverage to Purchase
Typically if you drive an expensive car, live in an urban area or commute in heavy traffic, you will want to purchase all of this coverage. However for those with an older or cheap car or who live in a rural area will be less likely to need all of this coverage.
In terms of Personal Injury Protection, those with health insurance and/or disability insurance will be covered through their policies, so buy the required minimum.
It is important however to make sure you have enough coverage for uninsured or under-insured drivers. This is usually cheap in most states and will help you to cover costs your health insurance may not.
In terms of collision and comprehensive coverage, these policies require a deductible. Choose the highest deductible that you can afford because this lowers your overall premium. Collision insurance may not be good for small claims as they can influence your premium for years when you could have paid for the repairs out of pocket.
Many states also require drivers to carry no-fault insurance, which are insurance policies that pay out no matter which driver is at fault with an accident. These states include: New Jersey, New York, Florida, Hawaii, North Dakota, Kansas, Kentucky, Michigan, Massachusetts, Pennsylvania, Utah, Minnesota, Michigan, and Puerto Rico. These plans can be expensive, so make sure you shop around if you live in one of these states.
Shopping for Car Insurance
Once you have decided the type of insurance coverage you require, it’s time to start shopping around. Ultimately auto insurance policies will vary depending on your car, your age, your credit, your driving record and other factors.
Direct sellers such as GEICO and Progress are those who sell insurance coverage directly to you. Since there are no agents, there’s no commission, which means savings for you. These insurers only accept the best drivers on the road, so for those with a history of accidents or tickets, it may be hard to get coverage from these companies.
Insurance companies such as State Farm and Allstate are great for drivers with a past. These companies sell coverage through local agents.
Independent Insurance Agents
These sellers offer a variety of insurance types for different companies. These types of agents can help you find better coverage at better prices. Word of mouth is the best way to find the best agent.
Things to Consider
Ask about any discounts available. There is almost always a way to save money, whether your car has an alarm system or anti-lock brakes or you are a college alumni.
Also, consider skipping towing insurance. It’s best to save that money for AAA, which offers roadside assistance as well as towing.
Consider purchasing glass insurance. If you chip a windshield, auto glass can be expensive to replace. Make sure that glass is a part of your comprehensive coverage policy and not a separate policy.
Getting an Insurance Quote
Many insurance companies offer consumers the option of getting a quote online, however it may be best to contact the company directly for the latest rates. Be aware that the more insurance coverage you purchase, the higher your annual premium will be. You can reduce your premium by taking on a higher deductible and any other discount that may apply to you.