Purchasing Auto Insurance

Do You Require Car Insurance?

If you own a car, you almost certainly have car insurance. Most states in the U.S. require drivers to have a minimum amount of insurance. Even in the two states where car insurance is not mandatory by law, drivers must be able to pay for any harm they cause. So yes, getting car insurance is still crucial. 

What is Car Insurance? 

Auto insurance is critical financial security for both you and your vehicle. It covers the expenses if you cause a car accident that injures or damages someone else’s property. It can also cover damage to your own vehicle caused by a crash or some form of hazard such as hail, fire, dropping objects, or theft. Car insurance will help pay for towing if you are stuck on the side of the road, as well as a rental car if yours is in the shop after an accident.

What is the Cost of Car Insurance? 

According to a 2020 National Association of Insurance Commissioners (NAIC) survey, the average car insurance premium was $1,134 per year (approximately $95 per month). However, auto insurance premiums can vary greatly based on factors such as driving background and vehicle model. Your insurance provider is also important; you can apply the same profile to three different companies and receive three very different quotes. 

Car insurance premiums are determined based on factors such as your age, claims history, venue, and even your credit score and marital status.

What Does Car Insurance Cover?

Every car insurance policy is made up of various forms of coverage, each of which provides a different level of protection. When you hear the term “full coverage car insurance,” it simply refers to an auto insurance policy that provides comprehensive coverage for both you and your vehicle.

Coverage Options and What They Protect Against

Liability for Bodily Harm: Injuries caused by your vehicle if you rear-end another driver and the impact causes whiplash.

Property Damage Liability: Property damage caused by your car if you run a stoplight and collide with another vehicle, breaking their passenger-side door. 

Personal Injury Protection: If you live in a “no-fault” state and are involved in a car accident, you must pay for your own and your passengers’ medical costs (which is mandatory in some states). 

Uninsured/Underinsured Motorist: Damage caused by a driver who lacks insurance or whose insurance does not completely cover repair costs if you are t-boned by an uninsured driver and your vehicle needs costly repairs. 

Comprehensive: Damage that is not a direct result of a collision, such as an ice tree branch falls onto your car’s roof, crushing it and breaking the windshield. 

Collision: If you backed into a telephone pole and smashed your rear bumper, regardless of who was at fault.

Auto Insurance Providers 

The best auto insurance provider isn’t necessarily the one with the lowest rates. When selecting auto insurance, consider cost as well as factors such as claims satisfaction levels and consumer satisfaction. 

Independent third-parties such as J.D. Power, which ranks insurance companies based on input from actual clients, and A.M. Best, which ranks insurance companies based on their financial stability, are good places to look for assistance in selecting the best insurer for you. Low rates are fantastic, but you also want an auto insurance provider that will assist you if you need to make a claim.

How to Buy Car Insurance

Whether you are purchasing auto insurance for the first – or tenth – time, it can be daunting. If you’re not sure where to begin, here are the steps to purchasing and selecting auto insurance coverage:

  1. Choose How You Want to Purchase Car Insurance

Car insurance can be purchased in two ways: directly through an insurance broker or through an independent insurance provider. 

If you already have homeowners or renter’s insurance, it could make sense to get your new car insurance from the same provider. Bundling different forms of coverage normally results in a discount. In general, if you already have an auto policy and want to add a new car to it, the process should be easy. The only disadvantage of sticking with your current insurer is that you won’t be able to bargain around for better deals.

You can shop around by getting quotes from many insurers, but this takes a lot of time. Not to mention a lot of emails as each company may send you a quote via email). This method allows you to do the comparisons on your own, but it can take some time to go through the quote process with each carrier separately. 

Purchasing auto insurance through an independent insurance broker will help to expedite the process. You can submit one application and receive several quotes, and then you’ll be guided through the process by an expert.

Brokers can guarantee you have the right coverage and the best price because they partner with several insurance providers. If you already have a policy for homeowners or renter’s insurance, or if you plan to merge policies, a broker will provide you with the same bundled savings as a carrier.

  1. Determine the Amount of Car Insurance Coverage You Need

One of the most difficult aspects of purchasing auto insurance is determining how much of each form of policy you need. To begin, you should become acquainted with the various components of an auto policy. These are some of the coverages offered:

  • Liability Compensation – Many states provide liability insurance which covers the damages if your car causes an accident, collateral harm, or injury to another person. 
  • Personal Injury Insurance – Provides coverage for treatment and recovery costs if you or your passengers are involved in a car accident. Associated costs, such as lost income, are also covered. 
  • Coverage for Uninsured/Underinsured Motorists – Pays for your expenses if you are involved in an accident caused by a driver who either does not have insurance or whose insurance cannot cover the full extent of the injury. 
  • Collision Compensation – Pays for damage to your own car in the event of an accident, regardless of who was at fault.
  • Comprehensive Coverage – Covers any damage to your vehicle that occurs when it is not being driven, such as damage caused by severe weather, dropping objects, flood, fire, vandalism, and robbery. 
  • Gap Insurance – If your car is totaled, this covers the difference between the car’s current cash value (ACV), which includes depreciation, and the amount you still owe on a car loan or lease, allowing you to avoid making payments on a vehicle you no longer own.

Then there are options for extra coverage, such as roadside assistance, which includes items like flat tire changes, jump starts, and towing. Also, new vehicle repair coverage which would pay for a replacement if your new car were totaled within one to two years of ownership. 

You can also investigate the auto insurance provisions in your state. However, keep in mind that the state minimums are just a starting point for assessing coverage; they are often insufficient to protect you in the event of a major accident.

Assume your state needs at least $15,000 in property damage liability compensation, and you experience a $45,000 damage accident. You’ll have to pay the difference, leaving you with a $30,000 bill that you’ll have to pay out of pocket.

Consider variables such as how much and where you drive, whether your car could be robbed or broken into, and whether you live in an area where extreme weather could affect your vehicle when deciding on coverage types and levels.

  1. Apply for Car Insurance Quotes

If you apply for car insurance through an independent broker or perform a complete quote comparison on your own, you’ll need the following information on hand: 

  • Names of all household drivers 
  • Dates of birth for all household drivers 
  • Driver’s license numbers for all household drivers 
  • Social Security numbers for all household drivers 
  • VINs (Vehicle Identification Numbers) or make and model years are required for all vehicles
  • The insured’s address (where you live and where the car is garaged, which is usually the same place) 
  • Your most recent auto insurance policy’s declarations page

When you go through the process, you’ll be asked questions such as if you’ve had any injuries or violations on your record, whether you’re a full-time student, and if your car has certain features such as an anti-theft device.

  1. Receive Car Insurance Quotes

Regardless of how you apply for insurance, you can receive quotes very fast. Some carriers will provide you with several quotes, typically one with low coverage limits, one with average coverage limits, and one with very high coverage limits. Working with an independent agency can take longer, but you can receive quotes from several companies rather than only one at a time.

Remember that having high coverage limits for the necessary coverage forms is usually a good idea. However, the higher the limits are, the more you’ll pay. Your quote can also provide coverage that you do not want or need, so carefully consider your choices. 

Setting the deductible higher results in lower premiums when you plan to pay more out of pocket if you make a claim for your comprehensive or collision insurance.

  1. Compare Auto Insurance Quotes

You may be tempted to pick the car insurance provider with the lowest price but do your homework on the different carriers. Carrier A may have quoted you marginally higher rates than Carrier B, but if it has substantially higher claims satisfaction scores, the additional cost may be worthwhile. Also, not all auto insurance companies have the same coverage plans, so if you require anything unique, you should consider which insurer provides that form of coverage.

Examining an insurance company’s track record and market integrity is just as critical as looking over the quotes they’ve sent you. The most affordable car insurance policy is meaningless if it is not accompanied by adequate customer service. 

So, how do you know you’ve picked the right company? There are several methods for conducting due diligence:

  • Examine scores on third-party websites such as Trustpilot, Consumer Reports, and the Better Business Bureau. 
  • Check with the National Association of Insurance Commissioners (NAIC) to see if any lawsuits have been filed against the insurers, if there are any legal or regulatory issues with their licenses, or if any financial concerns arise. 
  • Check out auto insurance providers and carrier ratings.
  1. Pick a Provider and Get Covered

After you’ve compared the quotes, researched your possible insurers, and chosen a car insurance provider you trust, it’s time to put the policy into effect and get insured. 

You can sign up for the policy through any route, whether you get quotes directly from an insurer or from an independent insurance broker, and you’ll get the same rate. As an added benefit, both brokers and providers will provide you with preferential rates on other insurance plans issued by the same insurer, such as tenants or homeowners insurance. If you’ve been dealing with an insurance company, they might also be able to sign you up for the policy.

  1. Cancel Any Previous Auto Insurance Policy 

If you’ve been looking for auto insurance to replace an existing policy, wait until your new plan begins before canceling your old one. You want to be certain that there are no holes in coverage. 

Set the cancellation date of your old policy and the effective date of your new policy on the same day to accomplish this. Insurance plans begin and finish at 12:01 a.m. on a given day, so you won’t have a full day of conflicting insurance.

Other Items to Consider

What Causes Car Insurance Rates to Increase?

Your rates can rise as a result of an accident, a lawsuit, or the addition of a new driver to your policy. Changes in the industry can cause your prices to rise at times. Remember that if you are dissatisfied with the quality of your auto insurance, it never hurts to shop around for new coverage. 

Who Provides the Most Affordable Car Insurance?

Since auto insurance rates are personalized, the cheapest car insurance provider can vary for each driver. That is why it is important to shop around and compare quotes from various providers before deciding on a policy.

At What Age Does Car Insurance Become More Affordable? 

Younger, less seasoned drivers pay more for auto insurance because they are riskier to insure. However, rates for teen drivers decrease over time before they reach the age of 25 if they remain as accident-free as possible. 

Can You Get Car Insurance if You Don’t Have a Driver’s License? 

It might be difficult because you need a driver’s license to qualify for auto insurance. However, under certain circumstances, you may be able to purchase a car insurance policy without a license if you are not the one driving the car. For example: if you own a car but will be driven around by a caregiver or relative.

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