Accidents happen, and when they do, insurance is what keeps our finances safe and sound. Whether an auto collision is your fault or somebody else's, your car insurance coverage should help you. How much it helps, however, is up to you, and this is determined by the combination of options that comprise your insurance policy.
- Car insurance is designed to protect you financially if you're involved in an accident or your vehicle is damaged.
- Liability insurance, collision coverage, comprehensive insurance and personal injury protection are some of the types of vehicle insurance you may need.
- Almost every state requires some type of liability coverage for drivers.
- Shopping around is important for finding the best deal on car insurance rates.
What Car Insurance Do You Need?
In order to protect yourself without overpaying, explore the factors you should consider in putting together the right coverage for your vehicle, as well as how to select a good insurance company that will handle your claims if an accident happens. It can be confusing, but remember that taking it step-by-step makes it a much easier experience.
To figure out what works best for your car insurance needs—and your budget—here are some of the most important things to consider.
Personal injury or personal liability coverage should be given great importance when putting together an insurance package. All states except New Hampshire require minimum amounts of liability insurance.
Liability coverage encompasses both bodily injury liability as well as property damage liability. One covers costs associated with injuries following an accident; the other covers costs associated with damage to personal or business property. Both can protect you financially from personal lawsuits stemming from accident.
Failing to obtain necessary liability coverage could result in a suspension of your license and/or fines and jail time.
According to an Insurance Research Council (IRC) study, if someone is injured in an auto accident, the chances are about one-in-eight that the at-fault driver is uninsured. Don't trust other drivers and don't take for granted that they will have as good coverage as you do. Though it can be hard to digest that you must pay a premium and the deductible for someone else's mistake, it's better than forgoing this coverage and risking losing your vehicle.
Accidents and vehicle damage
You should never neglect the worst-case scenario when selecting insurance. What if your car is totaled and needs to be replaced? If the accident is not your fault, the other driver's insurance (or your uninsured motorist coverage) will pay for the vehicle. But there are other situations and natural calamities that can also destroy your vehicle, and in those cases, you'll only be able to rely on your own insurance. In case such a situation arises, it is better to have enough coverage to fully repair or replace your vehicle.
That includes both collision and comprehensive coverage. Collision coverage can help pay for damages stemming from an accident. Comprehensive coverage can help pay for damages related to things other than accidents. For example, if a tree branch falls on your tree or a hailstorm leads to damage, your comprehensive coverage could kick in.
A vehicle is a combination of mechanical, electrical, and rubber parts. Things can go wrong at any time, and they are not always in your power to prevent. However, being prepared for those events is in your power if you add towing and rental coverage to your insurance. This might work out better than having a separate towing club membership, which could save you those annual fees.
You can also check your credit card's travel benefits as many cards offer roadside assistance and towing.
Car Insurance Costs
Car insurance is a necessary expense but it's important to consider just what you're paying for. Paying more money for car insurance doesn't necessarily mean you have a better policy. Likewise, paying less for car insurance doesn't guarantee that you have the coverage you need.
As you consider how to buy car insurance, keep the following in mind.
Deductible vs. premium
The insurance deductible is inversely proportional to the premium amount. If the deductible goes up, the premium goes down and vice versa. This relationship reflects whether you prefer to pay more or less from your own pocket before stretching out your hand to the insurer. Whichever option you choose, make sure you can afford it. Some people are better off paying a higher monthly premium in exchange for a lower deductible to avoid any large payments after an accident.
Driving records and insurance rates
Many insurance companies automatically recommend certain coverage for particular drivers. For example, if you have a teen driver at home, it is better to have good personal liability coverage with a lower deductible because new drivers are prone to making mistakes. On top of that, rates to cover teen drivers will automatically be higher because of their lack of driving experience. Try not to let the higher rates prevent you from getting ample coverage.
Experienced drivers with past mistakes, such as moving violations or accidents, can also have higher premiums. Defensive driving courses help to offset some of the cost, but not all of it, so drive carefully and consciously to avoid paying higher premiums.
How to Buy Car Insurance
Choosing the right coverage is the first step to buying car insurance. The next is selecting a good insurance company. This can ensure that you're able to get the coverage you need at the rates you want while maximizing the chances that your claims will be paid.
When comparing the best car insurance companies, here are a few things to look out for.
Reliable and Reasonable. Insurance companies should be reliable and offer reasonable coverage for the prices they charge. In some states, there isn't much difference in price among insurance companies because of state mandates. In most states, however, companies will quote different prices for similar coverage.
Covers the Vehicle at All Times. Many small insurance companies offer low rates compared to the big ones because of their lower overhead costs. But when there is an accident and an insurance claim is filed, these small companies can sometimes be difficult or uncooperative. They may respond with, "It's not covered under your policy." That's not what you want to hear when you really need them after paying your premiums for months. Also, don't go with a local insurance company that doesn't cover out-of-state accidents.
Getting quotes from multiple companies can give you a basis for comparison. From there, you can decide which insurer is the best fit in terms of coverage, deductibles and premiums.
When comparing car insurance options be sure to ask about safe driver or good student discounts that might be useful for lowering your premiums.
The Bottom Line
Having ample and reliable insurance coverage is a very important component of auto ownership: You don't want to experience money problems when you are already going through the trauma of an accident. Be a smart buyer, do the proper research, compare quotes, and create a package that suits both your coverage needs and your budget.