How to Choose the Auto Insurance Company Right for You

When choosing an auto insurance company there are a few different terms you should familiarize yourself with and you should pay attention to how much coverage you are looking to buy in each area. For example, if you have an expensive car you may want to opt for more comprehensive coverage than if you have an old Celica.

Key takeaways

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• Auto insurance breaks down into five main coverage types: liability, collision, personal injury, comprehensive, and uninsured/underinsured motorist.
• State minimum liability limits are often lower than what you’d actually want in a serious accident.
• Lower your premium through a clean driving record, bundling policies, good grades, theft deterrents, and usage-based monitoring – up to 30% savings.
• Pay a year in advance, ask about loyalty discounts, and compare quotes at renewal to avoid overpaying.

Liability

The insurance that covers the damage caused by your vehicle. Note that this coverage does not cover damage to your vehicle, but covers anything that you hit. It’s usually split into bodily injury liability and property damage liability, and state minimums are often lower than what you’d actually want in a serious accident. Most states have a minimum liability coverage requirement and I strongly suggest considering buying some even if your state does not require it.

Collision

Collision insurance covers damage caused by you to your own vehicle. This would be the coverage needed if you were to crash your car into a tree on the side of the road. It usually comes with its own deductible, and lenders typically require it if you’re still financing the car. If you’re still financing your vehicle, it’s worth running the numbers through an auto loan calculator alongside your insurance costs, since lenders often require collision and comprehensive coverage until the loan is paid off.

Personal Injury

Personal Injury covers medical expenses of you and your passengers, up to the coverage amount. Some states require a version of this (often called PIP) regardless of who caused the accident.

Comprehensive

Covers your car against vandalism, theft, sharknados and other natural disasters. It also usually covers things like hitting an animal or fire damage – basically anything that isn’t a collision with another car.

Uninsured or Underinsured Motorist Insurance

This insurance covers you in the event of being hit by an uninsured motorist, or when you are hit by someone who does not have enough coverage for your medical bills. Let’s say you are sideswiped by a guy in a pickup truck and you break your back in the accident. Maybe this motorist has $300,000 of coverage but your medical bills pile up to $420,000. With this coverage, you are protected from situations like this.

9 Effective Ways to Lower Your Auto Insurance

Auto insurance is a necessity and most people already have a company that they like and trust. Here are some easy ways to save some hard earned dough.

Get married

Combining two policies into one is a good way to bring the premium down, and will save you time as you only need to stay on top of one premium instead of two. Married couples are also less likely to drive ‘recklessly’ and are given discounts based on the information insurers have collected.

Good grades

Most auto insurance companies give discounts to students for good grades, which can make a huge difference as young drivers often have the highest premiums. Insurance companies see youths as the demographic most likely to exhibit ‘reckless’ behavior and charge them accordingly. State farm advertises a discount of up to 25% and Geico offers “up to $200 off” for maintaining a ‘B’ average.

Clean driving record

This is not so much a ‘Save money today’ type tip, but I find it worth mentioning because it can save you an incredible amount of money over your lifetime. Most of your insurance premium is based on your age and driving record, and from those two factors there is only one you can do something about. Moving violations and accidents are two things that will make your premium spike, so drive defensively and at or under the speed limit. Come to a complete stop at signs and make sure the pedestrian is completely through the crosswalk before continuing on your journey. It is that simple.

Theft deterrents

When it comes to comprehensive coverage one of the easiest ways to save money is by having a car alarm. Car alarms deter thieves and vandals which in turn lowers the chance of your car being tampered with. The insurance company takes this into account when calculating your premium. The more your car is worth, the more you can save. If you have an older car that has a low blue book value then this is probably not worth pursuing.

Paying a year in advance

Some companies offer a discount if you pay for a year or more in advance. This would not be the primary reason for choosing an auto insurance company, but it is worth asking about if you have the money in a savings account making less than 0.5% interest. Once you’ve locked in a policy, it’s worth setting up a system to track your monthly budget so premium payments don’t quietly creep up on you at renewal.

Loyalty discount

Many companies offer a discount for being a loyal customer and sticking with them for a number of years. This can be an extremely easy way to get discount if you have already fulfilled the time requirements. But remember to check the numbers. Just because your company is giving you a loyalty discount does not mean it is the best deal. Make sure to still get quotes from other companies from time to time.

Changing companies

Comparing quotes from rival insurance companies is relatively painless with the internet, and doing so can save you hundreds of dollars a year. I have heard countless stories from friends and relatives about insurance companies that entice you with an extremely low premium, only to raise it over the next few years at renewal dates. I suggest getting a couple of quotes at renewal times to make sure you are not getting fleeced. If comparing quotes yourself feels like a hassle, tools that negotiate lower bills on your behalf can save you the back-and-forth while still getting you a better rate.

Higher deductible

Most insurance companies prefer you to take a higher deductible and will give you a discount on the premium for doing so. They offer this incentive because you are essentially self-insuring in the case of smaller accidents. This is a good choice if you are a cautious driver who has never been at fault in an accident and you have enough money to cover the deductible in the case of an accident.

Using a monitoring device

More and more auto insurance companies are giving their customers the opportunity to lower their insurance premiums by proving they are good drivers. Progressive‘s “Snapshot” program offers up to a 30% discount to drivers they deem safe. The “Snapshot” program consists of putting a little unit in your car that records the speed, acceleration, braking and distance of your average travels among other things. It should be noted it does not have a GPS so it will not track where you are going, just how you get there. If a premium increase catches you off guard, it’s worth taking the time to reset your budget rather than just absorbing the extra cost each month. 

At the end of the day, the cheapest policy isn’t always the best one – the right auto insurance company is the one that covers you properly and still leaves room in your budget for everything else. Take a few minutes to compare quotes, ask about these discounts, and you’ll likely find a policy that does both.

Featured image credit: Gratisography