What company do you buy car insurance from? Chances are, it’s the same company that your parents bought from. People rarely shop around for car insurance. But that could be costing you hundreds of dollars each year. Car insurance is one of those things we would rather not think about or deal with. With complicated terms like comprehensive coverage and lease payoff coverage, most without specialized knowledge of the insurance industry are left in the dark about what types of coverage they need.
I want to get you thinking about car insurance before you might ever need it. With a couple hours of your time, you can research the basics of insurance plans, evaluate your insurance needs and shop around for the best price.
There are two basic types of insurance: Liability coverage and Physical Damage coverage. First I’ll cover Liability.
Liability protects you if you are found at-fault in an accident. It can be broken down into two types: Bodily Injury and Property Damage. Bodily Injury covers you if you cause injury or death to another during an accident. It pays for medical bills, loss of income or to protect you from lawsuits filed against you as a result of an accident. Property Damage covers you if you cause damage to another’s property — usually their vehicle but could also be fences, buildings, etc.
Physical Damage protects you if you are not at-fault in an accident. It includes two types of coverage: Comprehensive and collision. Collision insurance covers the cost to repair your car after an accident, and comprehensive covers damage caused to your car from anything other than a collision (theft, inclement weather, etc.)
There is a third type of coverage you may want to consider: Uninsured or under-insured motorist coverage. If you’re the victim of a hit-and-run or if the at-fault driver either doesn’t have insurance or doesn’t have enough, your policy will step in and pay for your medical bills and car repairs, up to your policy limit.
An important step in buying car insurance is to evaluate your needs. Do you have an older car that isn’t worth much? If so, you should consider dropping Comprehensive and Collision coverage and going with Liability only. Do you have a lot of assets? If so, consider increasing your Liability coverage. Many insurers offer roadside assistance for a small fee, which could be worth it if you’re not a member of AAA. Also, before buying a car consider the cost to insure it.
Comparing rates is easier than ever. Sites like Insurance.com and Netquote.com allow you to see personalized quotes from several insurers all at the same time. All you have to do is enter in some of your basic information. Be sure to check which discounts the various insurers offer, including:
- Good driving, if you’re accident-free for a number of years
- Anti-theft devices and anti-lock brakes, if your car has these
- Multi-line, if you have another type of insurance with the same company
- Good grades, if you have a student on your policy
- Defensive driving, if you’ve taken a course
- Payment in full, if you pay your entire premium up front rather than in monthly installments
Insurance companies have different formulas for determining your premium. So one company may quote you $75 a month, while another may quote you $110 for the same level of coverage. This shows the importance of shopping around to compare prices.
The purpose of car insurance is to protect you financially if you are in an accident. Being proactive by evaluating your insurance needs and shopping for the best price is the best way to protect yourself and your wallet.