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Ultimate Guide to Buying Car Insurance

ultimate-guide

Auto Insurance Guide

Car insurance is a necessity in the United States. According to the Insurance Institute of Highway Safety, over ten million vehicle crashes and accidents occur every single year. This translates to a large number of insurance claims. You only have to imagine the frenzy that would ensue if the car insurance system didn’t exist.

Here’s the thing: car insurance isn’t universal. A myriad of different companies offer insurance. However, the types of insurance they offer aren’t always the same. Suffice it to say, it’s very complicated. The goal today, therefore, is to try to uncover this mystery by presenting to you the three most important aspects of car insurance:

  • Choosing A Provider
  • Choosing A Type
  • Reducing Your Premiums

Choosing a Provider

Choosing a provider requires a lot more than just picking up the phone and dialing GEICO after watching a funny commercial. Some people actually do that, but we recommend you think a little harder.

Check With Your State’s Dept. Of Insurance

Every single state in the United States operates a Department of Insurance. Many also operate websites on which they periodically publish ‘consumer complaint ratios’ for those companies practicing within their borders. This ratio points to the number of complaints filed as per every thousand or so claims processed by the provider.

It’s a really good idea to review these ratios and then select only those companies whose ratios are on the lower end. Remember also that just because a particular insurer is popular doesn’t mean it’s the best one in your particular area. Think objectively, not subjectively.

Check with Local Body/Repair Shops 

After you piece together a list of providers with decent complaint scores, it’s time to speak with local repair shops. Repair shop managers frequently deal with insurance adjusters, so they can tell you which particular companies offer the most efficient claims process. Furthermore, repair shops can tell you whether the provider is cheap or not — whether or not it goes after low-quality replacement parts or original equipment manufacturer parts.

Compare Prices 

By this point in time, you should have a list of the best providers in your area. It’s time to call each provider and learn more. Find out what plans the provider offers. Get quotes for different types of coverage. Also pay attention to the service you receive during the quote process. Is the representative kind, helpful and forthcoming?

Choosing a Type

This seems like the most opportune time to jump into types. Like we mentioned earlier, many types of car insurance exist, and not all insurance providers offer the same coverage plans. However, those listed below are fairly universal, which is why we chose to mention them.

Liability Insurance 

Liability coverage is the most basic form of car insurance. It concerns those crashes that occur as a result of a mistake made by you. Furthermore, liability insurance covers harm caused both to other humans and their vehicles. It is a mandatory type of insurance in all 50 states.

Collision Insurance 

Collision coverage is optional in many states, but it is highly recommended that you purchase it. This type of insurance provides you payment for those accidents and crashes that cause damage to your vehicle. Typically, you must pay a deductible, after which the insurance kicks in and covers the remainder of the damage.

Comprehensive Insurance 

Comprehensive coverage is a luxury-grade insurance that protects you from damage to your vehicle caused by anything but a collision. The list of things it covers is fairly extensive, but a few examples have been provided below:

  • Natural Disasters
  • Vandalism/Theft
  • Broken Windows/Windshield
  • Animal Damage
  • Falling Objects

Keep in mind that comprehensive coverage does not cover stuff like towing/labor, battery services and lockout services.

Personal Injury Protection 

Also known as ‘no-fault’ coverage, P.I.P. is an optional “extension” of basic insurance that covers lost wages, medical expenses, child-care expenses and more. It’s a rather complicated type of insurance, but it is mandatory in the following states:

  • Delaware
  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Oregon
  • Pennsylvania
  • Texas
  • Utah
  • Washington

It is referred to as ‘no-fault’ because you receive compensation regardless of fault. This is a more ambiguous type of insurance, so you should check with individual providers to learn more.

Uninsured Motorist Protection 

This is another optional form of coverage that protects you against those fools who drive without proper insurance or just not enough insurance. The amount of coverage available tends to range from $20,000 to $1,000,000. In deciding how much to pursue, consider the value of your car, the type of medical insurance you have and whether disability options are available through your employer.

Gap Insurance 

Guarantee Auto Protection (G.A.P.) provides cover between what you owe on your vehicle and its actual worth. It’s useful in the following scenarios:

  • You have leased your vehicle.
  • You financed your vehicle for 60+ months.
  • You paid less than 20% on your down payment.
  • You transferred negative equity from another vehicle onto a new one.
  • You drive up and beyond 15,000 miles each year.
  • You bought a vehicle with extraordinarily high depreciation rates.

It’s most optimal for you if you just bought an expensive new vehicle using a loan.

Reducing Your Premiums

Piecing together a fulfilling car insurance plan is step one of the process. The next step — and one that will make sense as more time passes — entails finding ways to reduce your premiums. For clarification, a premium is the monthly rate you pay for your insurance plan.

Request Higher Deductibles

The easiest way to reduce your premiums involves just requesting higher deductibles. This means you will have to pay a higher out-of-pocket dollar amount if and when you get into a car crash.

In fact, upping your deductible by anywhere from $250 to $500 can knock your premiums down by up to 25%. Just be prepared to drive extra defensively in case you do this, because you’ll have to pay more in case anything happens.

Stick It Out For the Long-term

Loyalty means a lot in the car insurance industry. If you stick with a provider for 10 or more years, you can usually ask for significant reductions in your premiums. Some providers also offer discounts if you insure multiple cars and/or bring in referrals.

Work On Your Credit Score

Credit score also plays a pertinent role when it comes to insurance. Those with really bad credit scores oftentimes wind up paying anywhere from 25% to 50% more in their premiums. Avoid this by maintaining proper credit, i.e., paying your bills on time, avoiding debts and being responsible.

Pay Upfront

Never break your bill up into installments. In fact, try to pay your whole annual bill upfront if possible. Its okay to pay on a monthly basis, but you will receive the most discounts and advantages if you just pay everything upfront.

Drive Less

A few select providers offer devices for tracking your mileage. They basically lower your premium if you drive fewer miles. Some companies even work by a pay-by-the-mile program, meaning your premium gradually increases for every certain number of miles you travel.

Final Tips

Now that we covered the three basics, we’re going to finish up with some essential tips.

Don’t Overdo It 

Insurance providers are businesses, not your friends. They care about the bottom line first and foremost. As a result, when you speak with agents, don’t let them fool you into signing up for more coverage and services than you genuinely need. Also remember the golden rule: the more expensive the vehicle, the more coverage you generally need. Seriously, it makes absolutely zero sense to go overboard with a clunky car from 1982. On the other hand, if you buy a brand new Maserati, then it wouldn’t hurt to throw every form of coverage possible at it.

Do Proper Research 

Do your homework beforehand. You should check out at least 15 insurance companies — both local and nationwide — before making your decision. Also, be wary of local companies that offer rates that are too good to be true. Sometimes local companies lure you in with low rates, but then screw you over when it comes time to process a claim. This is why you need to follow all the steps outlined before: you need to check with the state insurance department, local auto shops and of course the agent.

Weigh the Deductible against the Premium 

Don’t necessarily just keep an eye out on low premiums. Yeah, it sounds really nice to pay barely anything each month, but what happens when you experience a car crash? You have to pay a deductible before you can get any additional coverage, and if you don’t have that type of money on hand, you’re out of luck, period. The key is to select a deductible that you can afford to pay.

Know Your Laws 

Try to familiarize with state/federal laws before you even begin searching for suitable car insurance. We realize it’s a boring process, but it’s also a smart one. For instance, as of 2011, underinsured motorist coverage is no longer required. Did you know that? If you live in Wisconsin, we sure hope you did.

Familiarize Yourself with the Claims Process 

The last thing we want to impart is that you should familiarize yourself with the claims process for whichever insurance provider you choose. Claims processes tend to be very similar between providers, but it never hurts to do your homework. In general, though, the process works like this:

  • Call the police immediately after an accident and file an official police report, even if it’s just a minor incident.
  • Obtain as much information as possible, including the other person’s name and address, the names/addresses of witnesses, the year/make of the vehicles involved and the time, date and location of the accident.
  • Contact your agent and answer all questions to the best of your knowledge. Also be on the lookout for whether or not you need to file any official forms of documents.
  • Keep detailed records of everything involving the crash, i.e., records of what happened, receipts from expenses occurred, etc.

Conclusion

We realize how you feel. You want to get on the road and start driving. We don’t blame you a single bit. However, driving is a lot like getting married. If you rush into things and don’t take your time, you’re apt to find yourself in a sticky situation. That you made it through this whole document certainly bodes well for you, but we hope you take the additional steps of also following through on your research. That said, we wish you the best of luck. Stay safe out there!

Guide To Different Types of Car Insurance