Choose the options that are the best fit for your needs and budget

Accidents happen. 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. But how much it helps is up to you. This is determined by the combination of options that comprise your insurance policy. In this article, we explore the nuances of car insurance as well as some of the tips for choosing coverage that may be right for you.

Key Takeways

  • Car insurance is designed to financially protect you if you're involved in an accident or if 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 except for New Hampshire.
  • Shopping around is important for finding the best deal on car insurance rates.
  • Consider deductibles and premiums as well as driving experience and track records when choosing an insurer.

What Car Insurance Do You Need?

Car insurance can come with a hefty price tag, especially if you live in certain states. But don't make the mistake of opting out just to save the extra money because leaving it up to fate may cost you more if you end up in a car crash or have damage to your vehicle that isn't your fault.

In order to protect yourself without overpaying, explore some of the factors you should consider when it comes to getting 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.

Liability Coverage

Personal injury or personal liability insurance coverage is one of the most important factors to consider when putting together an insurance package. Almost every state requires minimum amounts of liability insurance. Failing to get the necessary liability coverage could result in a suspension of your license and/or fines and jail time depending on where you live. New Hampshire has no mandatory coverage. You can choose to get insurance in Virginia or pay the state government's department of motor vehicles a $500 fee. But residents drive at their own risk and are responsible for any damage to their vehicle or someone else's.

Liability coverage encompasses liability for both bodily injury and property damage. One covers any costs associated with injuries following an accident while the other covers costs associated with damage to personal or business property. Both can protect you financially from personal lawsuits stemming from accidents.

Uninsured Drivers

An Insurance Research Council study released in 2021 suggested that as many as one in eight at-fault drivers on the road are uninsured. This equated to roughly 12.6% of the driving public in the United States. Total damage paid by uninsured motorists in 2016 amounted to $13 billion.

The lesson here is that you should 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 you choose your insurance coverage. 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. In those cases, you can only 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. This includes 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, so your coverage should kick in if a tree branch falls on your car or a hailstorm leads to damage

Getting Stranded

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 such 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. Your credit card's travel benefits may include roadside assistance and towing, so be sure to check the terms and conditions of your card.

Make sure you cancel your existing car insurance policy if you sell your car or switch insurance companies.

Car Insurance Costs

As mentioned earlier, car insurance is a necessary expense. But it's important to consider just what you're paying for when your insurance company collects your premiums. 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

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.

Even experienced drivers with past mistakes, such as moving violations or accidents, may also have to pay 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.

Driving Records and Insurance Rates

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.

When comparing car insurance options be sure to ask about safe driver or good student discounts that might be useful for lowering your 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.

Here are a few things to look out for when you're comparing the best car insurance companies:

  • Reliable and Reasonable: Insurance companies should be reliable and offer reasonable coverage for the prices they charge. There isn't much difference in price among insurance companies because of mandates in some states. But companies will quote different prices for similar coverage in other states.
  • Covers the Vehicle at all Times: Many small insurance companies offer low rates compared to bigger companies because of their lower overhead costs. But when there is an accident and an insurance claim is filed, these small companies may become difficult or uncooperative and tell you certain things aren't covered under your policy. That's not what you want to hear when you really need them after paying your premiums for months. And be sure you don't sign up with a 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.

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.

Article Sources
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