Car Insurance Buying Guide

Car insurance is an importance purchase regardless of your age, location, or driving history. If you live in the United States, you must have coverage if you are going to legally operate a motor vehicle.

There are three primary reasons to purchase auto insurance:

  • To comply with state laws. Every state has its own auto insurance requirements.
  • To meet the requirements of your lender. If you take out a loan to buy a car, most lenders require proof of insurance.
  • To protect your assets. With the right policy you will receive multiple levels of protection including bodily injury and property damage liability.

Within your any auto insurance policy there are multiple types of protection, also known as coverages. Some of these are required while some are options. As a consumer, you must decide what coverage is best for you, your budget, and your vehicle.

State Law Requirements

Your state has set minimum auto insurance requirements. This includes:

  • Bodily injury liability
  • Property damage liability

Based on where you live, you may be required to purchase the following coverage:

  • Uninsured and underinsured motorist
  • Personal injury protection

Do you live in a no fault state? In this case, your insurance company will pay for any injuries to you and any passengers. This is true regardless of who is found to be at fault.

Lender Requirements

Your lender will require that you show proof of insurance. This gives them peace of mind, knowing that their investment is being protected. In addition to what you are required to purchase by your state, your lender may require:

  • Collision coverage
  • Comprehensive coverage

How your Premium is Calculated

Most consumers are interested in knowing how their premium is calculated. There are multiple factors that are taken into consideration, including the company that you choose to do business with. In other words, not every company uses the same formula for determining your premium.

Some of the factors that will affect your premium include:

  • Driving history
  • Age
  • Gender
  • Credit history and score
  • Type of vehicle you are insuring
  • Your location
  • The number of miles that you drive per day/year
  • Vehicle use
  • Past insurance coverage
  • Previous claims
  • Coverage chosen, including the deductible
Tip: If you like to see how the factors above relate to the cost of insurance in your specific location take our car insurance quiz to see what people pay in your area and where you compare based on your profile.

Discounts

Most auto insurance companies offer discounts as a means of helping the consumer save money. You should ask your agent about any and all available discounts. You may find that you can receive a break on your premium for the following reasons:

  • Insuring your car and home with the same company
  • Safety and security features
  • Completing a defensive driving course
  • Achieving good grades in school (for high school and college students)
  • Being a member of a particular organization

Smart Shopping Tips

No two insurance companies are the same. This holds true with coverage, cost, and customer service. For this reason, it is important to shop around for the best coverage.

Typically, insurance companies use one of the following methods to attract new customers:

  • Direct sales via the internet, mail, or phone
  • Exclusive agents that only sell products from one insurance company
  • Independent agents that have the right to represent multiple companies – also known as a broker

There are many steps you can take to find the right insurance company.

  • Ask friends and family for a referral
  • Search online for information and to request quotes (compare rates)
  • Phone book

Requesting Quotes

One of the most important steps of buying auto insurance is to request and compare premium quotes. Before you can do this, however, you need to decide what type of coverage you need.

As you get started, you will find that you can receive quotes online or by contacting agents and brokers direct.

You may start with a minimum coverage quote. While the price may be intriguing, remember one thing: this coverage is not extensive enough to cover you in the event of a serious accident.

When requesting quotes from multiple companies, be sure that the coverage and limits are exactly the same. This allows you to compare “apples to apples” to eventually find the company with the most affordable price.

Note: Your final premium may be different from your initial quote. For example, this could happen if you tell your company that you have never been involved in an accident but upon reviewing your driving history they find that this is not the truth.

When requesting quotes, be sure to ask the following questions:

  • Do I qualify for any discounts?
  • What limits are available in my state?
  • Are your licensed to do business by my state insurance department?
  • What doesn’t my policy cover?
  • Does my credit history affect my premium?
  • If I am in an accident, what is the process for making a claim?
  • If I need a rental car will my policy reimburse me for the expense?
  • If my child is away at college in a different state is he or she covered?
  • If I rent a car will I be covered by my policy?
  • Can I make changes to my policy in the future?

Your Responsibility as a Consumer

When you buy a car insurance policy you are entering into a legal contract. This contract explains your rights. You should always keep an active copy of your policy in a safe place.

Before you sign on the dotted line, read over the policy to ensure that you understand it. If you have any questions, contact your insurance agent or company for clarification.

Here are a few tips to keep in mind:

  • By paying your premium online you can ensure that you will always be on time. This may also save you money.
  • Most companies allow you to pay monthly or every six months. The choice is yours.
  • Keep a copy of your official policy at all times.

If Involved in an Accident

Nobody wants to be involved in a car insurance accident, however, this is a regular occurrence throughout the country. If you are involved with another car, you should exchange insurance information with the other driver. Additionally, collect their name, address, and insurance company’s name. Some drivers may neglect to share this information. In this case, get the car’s license plate number if nothing else.

Tip: you should be prepared to share the same information.

  • If there are any injuries call 911 immediately
  • If your car is drivable move it to the side of the road
  • Collect the following information:

1. The license plate number, color, make, and model of any other cars involved in the accident.

2. Witness contact information

3. The name and contact information of any police officer who responds. This will help you obtain an accident report at a later date.

4. Time, date, and location of the accident

5. In the case of a hit and run, call the police for immediate assistance.

Filing a Claim

Just as nobody wants to be involved in an accident, the same holds true for filing a claim. This can be a stressful process as the insurance companies attempt to determine who is at fault.

To file a claim, contact your agent or insurance company representative. From there, you will be walked through the process.

Soon enough, your insurance company will assign an adjuster to your case. This person is responsible for assessing the damage to your vehicle and determining the payment. There is a good chance that the adjuster will want to meet with you in person to review the car and discuss the damage.

It is not uncommon for your insurance company and the claims adjuster to disagree. In this case, you should work with your agent, prompting him or her to speak directly with the adjuster.

In some cases, you may have a difficult time agreeing with your insurance company on how the claim should be settled. If you have tried everything else, it may be time to contact your state’s insurance department.

Losing Auto Insurance Coverage

It may not sound like it, but there is a difference between having your policy cancelled and your insurance company not renewing your coverage.

Cancellation: this means that you or your insurance company has stopped coverage before the expiration date. As a consumer, you can cancel your policy at anytime. Your insurance company, on the other hand, needs a reason for doing so. This could include lying on your application or not paying your premium on time or in full.

If your policy is cancelled, your insurance company is required by law to give you advance notice. The length of notice depends on the state in which you live.

Non-renewal: this means that your company refuses to renew the policy after it expires. You can find the expiration date on your policy and insurance card. Insurance companies have the right to not renew your coverage.

Can’t Find Insurance?

If you are have looked everywhere and still can’t find a car insurance policy, contact your state’s insurance department. You may find that there is a “high risk driver” program that can help.