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UPDATED: Mar 13, 2020
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Purchasing car insurance is not something that you want to rush through. Taking your time and following the appropriate steps will help you to save money with your auto insurance like you never thought possible.
There are tons of car insurance options waiting for you right here as soon as you type your ZIP code into the FREE box!
Purchasing auto insurance coverage in the right way is not just about saving money, however. You can also get full coverage with a great company.
Choosing Your Coverage Levels
Choosing your levels of coverage is important to all of the other steps that you need to take before you buy your insurance policy. In fact, the other steps shouldn’t be started until you know exactly how much coverage you want.
Without knowing the exact coverage that you want, you will likely just try to find the lowest amount of coverage with the first company you come to. Then, you probably won’t have enough car insurance coverage to protect you.
You first need to determine how much liability coverage you want. Liability is required in just about all states in the U.S., and it pays for the damages that you cause to others when you are at fault for an accident. It is broken into three amounts, and each state has its own minimum amount of coverage that you must purchase.
The three amounts are coverage for medical bills for each person in an accident, the medical bills for the entire accident and the cost of repairing damage to vehicles, fences, utility poles, and other surrounding structures. When you purchase liability coverage, you must specify a limit for each of the three areas. You insurer will pay up to the limits that you purchase, but no more.
Experts advise that you purchase more coverage than the minimum amounts mandated by your state. The experts at the Insurance Information Institute maintain that you should purchase no less than $100,000 in coverage per individual and $300,000 in coverage for the entire accident. Having $50,000 to $100,000 in property damage liability is a good idea as well.
Some states might also require that you buy a minimum amount of coverage types like personal injury protection to pay your medical bills or uninsured and underinsured motorist coverage to ensure you have coverage if a driver without insurance hits you. Even if you are not required to purchase such coverage types, it is a good idea to do so to protect yourself, your vehicle, and your passengers.
Furthermore, you also need to figure out whether you want collision and comprehensive for full coverage or not. Collision pays to repair the damages to your vehicle after an accident, and comprehensive covers those events that are not related to a collision, such as fire, hail, or hitting a deer.
Your lender will require that you have full coverage, but the choice to purchase it is up to you after your car loan is paid off. Most experts recommend that you buy full coverage to protect the value of your vehicle. The National Association of Insurance Commissioners maintains that all vehicles worth more than $1,000 should have full coverage.
When choosing full coverage, you do need to choose a deductible level. A deductible allows you to take on some financial responsibility for repairs or replacement in exchange for lower rates. Common deductible amounts are $250, $500, and $1,000. Choosing the deductible amount that you can comfortably pay is important, as your insurer will pay for your damages or replacement value minus your deductible.
Lastly, there are all of those other options that you should consider, such as towing, roadside assistance, GAP insurance and rental car reimbursement. Overall, coverage add-ons a relatively inexpensive when compared with the amount of money they will save you after a crash or other loss.
For instance, the website Wiser Drivers advises that the annual cost of rental car reimbursement coverage is less than the amount of money it takes to rent a car for a day in many cities.
How Rates are Calculated
It is also important to understand what goes into car insurance rate calculations before you start to look for coverage. There are many different factors that insurance underwriters could use to assess your risk of filing a claim as a driver.
The biggest factor is obviously your driving record. Tickets and accidents will increase your risk level and your insurance rates.
Another factor is your credit history, though some states ban the use of a credit history when assessing risk. Insurance underwriters maintain that there is a statistical connection between bad driving and poor money managements. Those with a poor credit history will likely pay more in car insurance rates.
Where you live is also a big factor. Some areas make it more likely that a driver will have to file a claim in the future, either due to a high accident rate, a high car theft rate or an increased likelihood of severe weather. Also, those who drive more miles per day will have higher rates as they are increasing their probability for being in an accident.
The type of car you drive is the last really big factor that most car insurance underwriters look at. Safer vehicles will reduce the likelihood and the dollar amount of future claims, so they garner lower rates for their owners.
Other factors that car insurance companies might look at to assess risk have less of an impact on rates. Gender, income level, education level and are all other factors that might be used to determine your premium.
#1: Improve Your Risk
The first thing that you should do before you buy car insurance is to improve your risk in the eyes of the car insurance companies. You can make your rates fall if insurers see that your risk is lower.
There are long-terms ways to lower your risk and quicker ways that should be used in conjunction. First, you need to drive more safely to avoid tickets and accidents so that your driving record will be clean. On the short-term side, you can take a defensive driving course that will remove a point or two off your license.
Next, you need to improve your credit if it is low. While this is another long-term process, it will give you additional financial freedom alongside lowering your car insurance rates. There are really no quick and easy ways to fix your credit rating.
The Federal Reserve offers tips to improving your credit, such as checking your report often and maintaining low balances on your credit cards.
Another quick item that you can change is your risk of having your vehicle stolen. If you can park in a locked garage or parking lot, do so and let your insurer know that you are. Then, install some sort of anti-theft device, such as an alarm, a GPS tracker or VIN etching.
#2: Compare Prices
After you have improved your risk as much as possible, you are ready to start shopping. Looking for car insurance is a bit different from other shopping. Instead of checking one or maybe two companies, you want to get quotes from as many car insurance providers as possible.
Every expert in the car insurance industry will maintain that car insurance providers offer vastly different rates. Getting rate quotes is the only way to know which company will have the lowest car insurance premium for you.
This is where knowing how much coverage you want comes in handy. In order to be able to compare all of your quotes, they have to be for the same amounts of coverage.
How to Get Quotes
There have never been so many options for getting car insurance rate quotes as there are these days. Prior to the Internet, people had to meet an agent in an office or get a quote over the phone; people even bought car insurance through the mail.
You can still get car insurance quotes through all of the more traditional methods, but the Internet has added a few more. For instance, most major car insurance providers have a website where drivers can get quotes, ask questions, or even chat with a representative.
Yet the best online innovation has to be quote comparison websites, which allow you to get multiple quotes for just one application. They are much faster than filling out application after application at different websites.
#3: Look up Ratings
After you get a handful of quotes from likely car insurance companies, there is still one more step before you buy. You must research your company to make sure that you are getting the best company for your money.
You can look up car insurance companies through your state’s Department of Insurance and the Better Business Bureau to view any complaints against the insurer.
Customer service ratings through independent raters such as J.D. Power and Associates or Consumer Reports will give you an idea of the customer service of the insurance companies as well. Lastly, you should also review the insurance providers’ financial rating to make sure they are on sound footing.
Researching the backgrounds and reputations of car insurance companies allows you to make sure you are doing business with a reputable and reliable insurance company.
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