You’ve been driving for years and somehow still don’t completely get car insurance. How much do you actually need? What does comprehensive coverage even mean? Don’t stress – you’re not the only one confused. Car insurance feels intentionally complicated, but protecting yourself (and your car) is too important to ignore. We’ll walk through the basics in simple terms so you can decide what coverage works for your situation. By the end, you’ll be the one explaining deductibles to your friends.
Understanding Car Insurance: Types of Coverage
When purchasing car insurance, you have several types of coverage to consider based on your needs and budget. The major types are:
Liability coverage
Liability coverage pays for damage and injuries to other parties in an accident that you cause. It comes in two parts: bodily injury liability and property damage liability.
- Bodily injury liability covers medical bills and other costs for injuries to people in the other vehicle.
- Property damage liability covers repairs to the other vehicle and any other property damaged in the accident.
Most states require at least a minimum amount of liability coverage to legally drive. For adequate protection, aim for at least 100/300/100 (liability coverage of $100,000 per person, $300,000 per accident, and $100,000 for property damage).
Collision coverage
Collision coverage pays to repair or replace your own vehicle after an accident. It covers the costs whether or not you’re at fault. While not legally required, collision coverage is a good idea if your vehicle is newer or has a lien against it. Consider dropping it for older vehicles that have little cash value.
Comprehensive coverage
Comprehensive coverage protects your vehicle from damage due to events other than collisions, such as fire, theft, vandalism, or natural disasters. Like collision coverage, comprehensive is optional but a good idea if your vehicle has significant value. The coverage will help pay to repair or replace your vehicle after damage from covered events.
Other coverages
You can also choose additional coverage options like uninsured motorist coverage, medical payments, and roadside assistance. The specific coverage and limits you choose will depend on your needs, driving habits, the age/value of your vehicle, and what risks you want to protect against. Talk to your insurance agent to determine the right mix of coverage for your situation.
How Much Car Insurance Do You Need?
Choosing the right amount of car insurance coverage can be tricky. You want to make sure you have enough to protect yourself financially in the event of an accident, but you don’t want to pay for more than you need. As a general rule of thumb, here are some guidelines to determine how much car insurance coverage you should buy:
•Liability coverage: This covers damages to other people and their property. Most states require at least a minimum amount of liability coverage, usually expressed as three numbers like 25/50/25. This means $25,000 per person for bodily injury, $50,000 per accident total, and $25,000 for property damage. For full protection, aim for at least 100/300/100.
•Collision coverage: This covers damages to your own vehicle after an accident. If your car is less than 10 years old or you still owe money on it, collision coverage is a must. For older cars, you’ll need to weigh the value of your vehicle versus the cost of coverage.
•Comprehensive coverage: This covers damages to your vehicle from events other than collisions, like fire, theft, vandalism or natural disasters. Again, you’ll need to determine if the value of your vehicle warrants the cost of coverage.
•Medical coverage: Known as personal injury protection (PIP) or medical payments (MedPay) coverage, this helps pay for medical bills for you and your passengers after an accident, regardless of fault. $5,000 per person is a typical amount, but more is better if you can afford it.
•Uninsured/underinsured motorist coverage: This covers damages caused by a driver with little or no insurance. Get at least the minimum required in your state, but higher limits are better.
•Extra coverage: Things like roadside assistance, rental car reimbursement and accident forgiveness are optional add-ons to consider if they fit your needs and budget.
The more coverage you buy, the more you’ll pay in premiums. But having adequate coverage gives you peace of mind and financial protection. Talk to your insurance agent to determine the right amount of coverage based on your situation. Better safe than sorry!
Ways to Save on Car Insurance Premiums
There are several actions you can take to lower your car insurance premiums. Insurance companies determine your rates based on the likelihood of you filing a claim, so anything that reduces risk will generally reduce your costs.
Increase your deductibles.
Choose higher deductibles, which is the amount you pay out of pocket before your insurance kicks in. The higher your deductibles, the lower your premiums. Just make sure you can afford to pay the deductibles in case of a claim.
Improve your credit score.
In most states, insurance companies consider your credit score when determining your premiums. A good score shows you are financially responsible, so work on paying bills on time and reducing debt. Check your credit report for any errors and dispute them. Even incremental score improvements can mean lower rates.
Reduce coverage on older vehicles.
If you have an older vehicle, consider dropping collision and comprehensive coverage, which covers damages from accidents and other events. The premiums often exceed the value of an older car. Keep liability coverage to protect against damages to other vehicles or property.
Bundle your policies.
Bundle your car insurance with other policies like home or life insurance. Insurance companies often provide a discount for bundling multiple plans together. Make sure the bundle still offers good coverage and competitive rates for each type of insurance.
Take a safe driving course.
Defensive driving or accident avoidance courses can earn you a discount of up to 10% on your premiums. The courses teach safe driving techniques and are available both online and in a classroom. Provide your insurance company with proof of completion to qualify for the discount.
Consider usage-based insurance.
If you don’t drive much, usage-based or pay-as-you-drive insurance can lower your rates. These types of plans track your driving using a device in your vehicle or a mobile app. Your rates are based on factors like miles driven, time of day, and braking/acceleration. Drive safely and less often to keep premiums down.
Top Car Insurance Companies in the US
When it comes to car insurance in America, you have many highly-rated companies to choose from. Some of the biggest and best include:
State Farm
The largest auto insurer in the US, State Farm provides standard coverage as well as usage-based insurance and rideshare coverage. They’re known for competitive rates, discounts, and a large network of agents across the country.
GEICO
GEICO is the second largest car insurance company and is known for low rates and creative marketing. They offer standard coverage as well as mechanical breakdown insurance. You can get a free quote on their website or mobile app in just a few minutes.
Progressive
Progressive is another leading low-cost carrier that offers standard coverage plus usage-based insurance, commercial auto, and motorcycle insurance. They’re an online and mobile-focused company so you can get a quote and manage your policy through their website or app.
Allstate
Allstate is one of the largest insurers in the US, offering standard coverage, accident forgiveness, roadside assistance, and safe driving bonuses. While rates tend to be a bit higher than competitors, Allstate receives high ratings for customer service and claims satisfaction.
USAA
USAA is a highly-rated insurer for military members and their families. Rates are typically very affordable and they offer standard coverage as well as accident forgiveness, roadside assistance, and military discounts. However, you must be in the military community to qualify for their insurance.
When shopping and comparing companies, be sure to get multiple quotes to find the right balance of service, coverage, and cost for your needs. And don’t forget to ask about available discounts which could help lower your premiums, such as safe driver, student, and bundling discounts if you have homeowners or renters insurance too. The right auto insurance is out there—you just have to find it!
Car Insurance FAQs: Get Answers to Common Questions
When it comes to car insurance, you probably have a lot of questions. Here are some of the most frequently asked questions to help you understand this important coverage.
How much car insurance do I need?
The minimum requirements vary by state, but you’ll typically need liability coverage to pay for injuries and damages to others. However, minimum coverage may not be enough. It’s best to match your coverage to your needs and risks. If you have a newer car, you may want collision and comprehensive coverage. Uninsured motorist coverage protects you from uninsured drivers.
How do I lower my car insurance premiums?
There are several ways to lower your premiums:
- Increase your deductibles. The higher your deductibles, the lower your premiums.
- Reduce coverage on older vehicles. Drop collision and comprehensive coverage on cars worth less than 10 times the premiums.
- Bundle your auto policy with other policies like home or life. You can save up to 20% by bundling.
- Improve your credit score. In most states, insurance companies consider your credit score when determining premiums.
- Ask about discounts. You may qualify for safe driver, good student, anti-theft device or senior citizen discounts.
- Shop around at different companies. Compare quotes to find the most affordable coverage.
When should I drop full coverage on my vehicle?
If your vehicle is worth less than 10 times the cost of your annual premiums for collision and comprehensive coverage, it may make sense to drop full coverage. For example, if your premiums are $1,000 per year and your vehicle is worth $8,000 or less, you’ll likely save money by dropping full coverage. However, you’ll be responsible for the full cost of any damages or losses.
Do I need uninsured motorist coverage?
Uninsured motorist coverage protects you in case of an accident with an uninsured driver. It covers your injuries and vehicle damages. Although not required in all states, uninsured motorist coverage is a good idea. According to estimates, about 13% of drivers are uninsured. Without this coverage, you would have to pay costs out of pocket if hit by an uninsured driver.
Conclusion
So there you have it – a crash course on car insurance and how to navigate getting the coverage you need without overpaying. Whether you just got your license or have been driving for decades, make sure to regularly review your policy limits and shop around to find the best rate. Driving defensively and keeping a clean record will also score you discounts. And if you do get into an accident, stay calm and know exactly what to do – call the police, exchange info, take photos, and contact your provider ASAP. following these tips will ensure you cruise along with peace of mind that you and your wheels are protected in case the unexpected happens.
