Let's start by addressing one big, fundamental thing: There's no one thing called "car insurance." Car insurance is a collection of different policies that cover you in different ways. Here's how they break down:
Liability coverage - These policies help cover your rear-end when you've hit another car and it's your fault. The money will go to the people you hit, it won't cover the people in your car.
Bodily Injury Liability (BIL) - This policy pays for other people's medical expenses. You'll often see BIL policies described as a "20/50" policy or a "100/300" policy. These numbers describe the maximum dollar amount the policy will pay for a single person's injuries and the maximum for all the injuries sustained by all the occupants of the other car. So, for example, a 20/50 policy will pay out as much as $20,000 for a single person's injuries, and up to $50,000 for injuries to everyone who was in the car you hit.
Property Damage Liability - This policy pays for damage done to the other car. Property liability is sometimes referred to alongside BIL as a third number, so a 20/50/10 liability package will also up pay up to $10,000 for damage to the other car. The following policies pay you if you're in an accident and/or your car gets messed up:
Personal Injury Protection - This covers your and your passengers' medical expenses. If you lose time at work because of your injuries, this policy can also help cover lost wages.
Uninsured/Underinsured Motorist Coverage - This helps cover costs if the car you hit doesn't have insurance, or only has the required minimum.
Collision - This policy gives you money to repair your car if it's been in an accident.
Comprehensive - This policy pays you if your car is stolen, or if it's damaged without being in an accident.
2. Do You Need Car Insurance? How Much Do You Need?
Nearly every state requires you to have auto insurance, and most states have set minimum values for different policies. The state can impound your vehicle if you aren't insured. To find out what your state's minimums are, check out this website.
"The least you can have," though, isn't necessarily all you should have. In New Jersey, for example, you're required to carry a 15/30/5 liability package. Now, in a bad enough collision, it's entirely possible that an individual's medical expenses could exceed $15,000, or a group to have more than $30,000. Not to mention that $5,000 isn't necessarily a large amount of damage, considering that the average car now costs a little more than $20,000.
And where do you think the lawyers look for money when there's no more insurance? Yeah, that's right: you. That's why many people get more than the minimum required liability policies, particularly if they have a lot of assets that can be seized by said lawyers.
A good rule of thumb is to get liability coverage that is equal to the value of your assets (you know, your house + your car + any money in the bank + investments).
What about insurance for yourself?
Well, you probably don't need to spend a lot of money on a Personal Injury Protection policy. You should be covered if you have health insurance and some disability insurance through your employer. Just buy the minimum if it's required.
Uninsured or Underinsured Driver insurance, on the other hand, is worth having. First off, it's cheap (something like $40 a year for $100,000 worth of coverage). Second of all, it can help cover costs your health insurance won't pick up. If you're covering the people you injure for $100,000/$300,000, do the same for yourself.
Collision and comprehensive coverage is worth having if the car you're driving is worth repairing or replacing. A couple of things here: These policies have a deductible (the amount you have to pay for a repair before coverage kicks in), and they pay you based on the current value of your car (taking into account the fact that it's depreciated in price over time), not what you paid for it.
As far as the deductible is concerned, you want the highest one you can afford. Why? Because it will significantly lower your premium (i.e. your regular monthly payment). Remember, you're getting this coverage for major damage to your car, not for every little thing that can go wrong. It's better to spend $500 out of your own pocket every couple of years on minor repairs than cough up an extra 30 or 40 bucks a month because you don't want to pay a nickel for anything. Save collision insurance for when the damage is in the thousands, not the hundreds. Remember, if you decide to make a claim for every little thing, your premium will go up.
Also, a handful of states require no-fault insurance. Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, Utah and Puerto all do - though the rules around how these policies work vary by state. Basically, the states require you to have an insurance policy that pays out no matter who was at fault in the accident (known as personal injury protection or PIP) and they also limit your ability to sue other drivers. These policies tend to be expensive, so be sure to shop around for the best deal if you live in a no-fault state.
3. Advice on Getting a Good Deal on Car Insurance
First thing. Go to insweb.com and insurance.com and fill out their applications. Do that, and you'll get a set of quotes from several car insurers that you can compare. You'll be able to get rates from all kinds of insurers, all of which can be broken down into three camps:
Direct sellers - These are you GEICOs and your Progressives and such. They sell their insurance directly to you, bypassing an insurance agent. Since there's no agent, there's no commission and theoretically the savings is passed on to you. But insurers such as these only accept the best drivers, so you may have trouble qualifying for coverage if you're less than a saint (i.e. you have a moving violation or two) behind the wheel.
Large national brands - Allstate and State Farm are better equipped for drivers with a bit of a blotchy past, and their rates are usually pretty good (they may even be able to match some of the offers from the direct sellers). These companies sell through local agents, but their agents are exclusive-a State Farm agent only sells State Farm, nothing else.
Independent insurance agents - These guys sell all kinds of insurance from all kinds of companies. If you have any issues affecting your ability to get coverage (you have a lousy driving record, you have a teenage driver in your house) independent agents can usually find you better coverage at better prices than what you'd find on your own. Ask friends and family if they have an insurance agent they would recommend.
Then consider these factors when negotiating with your insurance company of choice:
Ask your insurer about all available discounts - There is almost always a way to save money. You may get a discount if you're car has anti-lock breaks, if you don't drive your car that often, etc. Always ask for a list of all possible discounts to see if you qualify for any.
Skip the Towing Insurance - It's better to take that extra money and join an auto club (such as AAA) instead. Not only will they tow you, but you can get additional services (flat-tire repair, hotel discounts) as well.
Consider glass insurance - That's a better deal, since you can chip a windshield any ol' time, and it's pricey to replace. Just make sure it's part of your comprehensive coverage. If it's offered as a separate policy, glass insurance can get expensive.
4. Grilling Guide: Questions to Ask Potential Car Insurers
Can you provide me with a list of all available discounts?
There are tons of ways you can pay less for car insurance: your car has airbags, you only drive the car on the weekends, you're a conscientious driver, etcetera.
I want to use my own repair shop in case of repairs. Is this going to be a problem?
Expect some resistance here, but stand firm. You should find a repair shop you trust (whether or not it's on your insurer's list) and insist upon using it. It may take more time to get your claim processed, but you'll be better off in the long run. Insurer-approved shops are faster, but they're not working for you-they're working for the insurance company.
I already have a homeowner's policy with your company. Is there a deal I can get on car insurance?
Bundling can work in your favor. Your home insurer should want more of your business. But shop around as well, just in case a better deal lies somewhere else.
How well does this insurer rate with AM Best or Standard & Poors?
Firms like AM Best and Standard & Poor's rate the financial health of insurers Each insurer is graded from A++ to D [AM Best] or from AAA to CC [S&P]. No matter which ratings-agency your insurer quotes, its grade better start with the letter "A."
Also, your state's department of insurance should have an annual complaint report showing how many people logged grievances about particular insurers. (Go here to find yours.)
Source: life123
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