Car insurance is certainly a must. It is not a coincidence every driver is obliged by law to have such protection. Whether you are a car owner with years of experience or you have just bought your first car, car insurance is definitely something to consider.

Despite that, many individuals don’t give it much thought when shopping for car insurance. People do it mostly because it is required.
Therefore more often than not, the lowest premium cost is the major determinant for buying car insurance. The other extreme is paying for an insanely high-priced insurance policy when there are cheaper and potentially even better alternatives for you on the market.

As with all things in life, the key here is balance. You want to get the right amount of protection at a reasonable price. In this comprehensive guide, we will help you achieve that goal.

#1 Choosing The Right Kind of Cover For You

There are 3 main types of automobile insurance available.

1. Liability Coverage (Third-Party Only)

   This type of insurance is the minimum coverage level one should have to be able to drive legally. The purpose of this insurance is suggested by its name. It actually protects other parties and not yourself and your vehicle. If you get in an accident, the insurance will cover the damage made to other cars and people, including your passengers. Any personal injuries or damages to your vehicle will be disregarded. 

2. Third-Party, Fire, and Theft  

This insurance is basically the same as the third-party only with two simple additions. The first one – it protects your vehicle from being damaged or demolished by fire. The second one – it provides compensation if your car gets stolen. Again it doesn’t protect you or your car in case of a crash.

3. Fully Comprehensive

Comprehensive insurance includes the above-mentioned protections, but it also covers you and your car in case of an accident. This makes it the most complex insurance type out there. However, comprehensive insurance may sometimes require additional payment upon claiming(known as deductible). This varies from provider to provider. Nevertheless, it is always wise to read the contract carefully before signing it.

Do your research and discover which one out of these three types of cover will be the best option for your specific case and needs.

#2 Know How Your Credit Score, Driver Profile and External Conditions Affect The Pricing

Although already illegal in some states in the US, an important factor most insurance companies take into account while setting prices is your credit history and credit score. If yours aren’t particularly good you should try searching for a provider who doesn’t have this practice so you end up paying much less.

Your driver profile and history are the most significant pricing component. The cost of your insurance may go up and down depending on several factors. It could be because of a recent crash, a large number of speeding tickets, a new car purchase, or if you added a teenage driver to your policy.

External conditions should also be included in the equation. Insurance companies could apply for an across-the-board price increase to compensate for the higher exposure to risk they sometimes face. It could be because of your living area recently having worsened climate conditions or any other reason that could cause a higher car accident rate.  It is a common practice for companies to refrain from informing clients about this price change. So always ask for the reason if you see your insurance premium price surge. 

#3  Choose the Right Amount of Coverage

Most drivers approach this matter with negligence. The minimum coverage required by law in the state is usually the standard. However, this isn’t a pretty smart thing to do. Let’s examine why.

Liability insurance is mandatory in all states, New Hampshire and Virginia being the only exceptions. 
For example, in Colorado, the minimum coverage is 25/50/15 BI & PD liability. This stands for a maximum of $25.000 coverage for one person with bodily injury, $50.000 for all people injured in the accident and $15.000 for property damage liability you caused.

There are states like Oregon that have additional required insurance coverage. Except for Oregon’s BI & PD liability of 25/50/20, you should also get Personal Injury Protection(PIP), Uninsured Motorist(UM) coverage, and Underinsured Motorist (UIM) coverage.

A demanded insurance that is not as common is the Medical Payments Coverage(MedPay).

Despite your living area minimum requirements, it is always best to purchase extra coverage. We will take the above example with Colorado. Let’s suppose you are at fault in an accident, and you have liability coverage of $25.000 BI for the person you injured and $15.000 PD for his car – a total of $40.000. However, the expenses of these end up around $100.000. Now the other party can claim the rest $60.000, which isn’t covered by your policy from your personal assets. Even if you don’t have much net worth locked in assets or zero, in some states, money from your paycheck could be withheld if they file a lawsuit against you.

#4 – Compare Different Companies and Prices

Now that you know the basics,  it is time for the real deal. You can begin your research either online or offline. If you prefer the old fashioned way, it is best to get advice from friends and family. Don’t inquire only about prices and conditions. You should look for evidence on how you will be treated in the case of a real-life event like a claim, for instance.

If the insurance company treated your cousin right and he is more than happy with them, they are definitely worth your attention. Still, make it personal and call the company to get an individual offer.

If online research is your winner, then there are plenty of aggregator websites out there. Just prepare your documents and get personalized quotes. A number of high-tech websites offer this service, and you can obtain quotes in under 5 minutes. This will help you build an impressive list of companies and services to compare so you can make an informed decision.

Image courtesy of Flickr

#5  Optimize Your Insurance Spendings

There are a number of ways to get a discount on your auto insurance. Bundling can be a very useful tool. The biggest price cut you can usually run into is when purchasing your car insurance and home insurance from the same company. Of course, multi-policy discounts are available with other types of insurance, like motorcycle, RVs, or life insurance, just to name a few.

Another way is to have multiple cars insured in the same company. And if these cars have all the safety equipment recommendations, the discount keeps adding up. Being a part of an organization like AAA can save you a lot as well. You can get a reduction even for things like having good grades in school. Amazing, right! 

You have every right to inquire insurance companies about all discounts they offer to ensure you are getting the best deal possible.

Final Thoughts

Choosing the right car insurance is an important task. We hope that the insights we provided will help you identify the best combination of price and value for your car insurance.