Even if you already own multiple vehicles, shopping for auto insurance requires some research and skill. it’s important to learn how to choose auto insurance that works for you. Narrowing down your options and finding the right insurance company can help you greatly reduce your overall insurance costs. Once you understand what makes premiums go up and down, you’ll be able to compare policies and find out how to save money.
Understanding types of insurance coverage
Become familiar with the types of insurance coverage available and what each does. focus on several basic types of coverage that you should focus on:
- medical or personal injury protection
- uninsured or underinsured driver
- Extended Coverage: Talk to your insurance agent about additional protection through an extended coverage policy. Experts like Dave Ramsey suggest that an emergency fund makes more sense than an extended coverage policy that you may never need.
- Guaranteed Auto Protection (Gap): Gap insurance can help cover you if something happens to your vehicle before it’s paid for. With the average cost of new vehicles rising and loans lasting six years or more, gap insurance is becoming more popular. If you have an expensive new vehicle added up, your insurance company will only pay actual market value. if that’s less than you owe, you’ll have to pay back the loan. that’s where your gap insurance would apply.
- Mechanical Breakdown: Some people buy mechanical breakdown coverage, but it’s not necessarily worth it. The advantage of this coverage is that it allows you to choose where you want your car repaired, as long as the mechanic has a license. You could achieve the same result by contributing to an emergency fund you use instead of paying a premium for something you may never use.
- oem endorsement: When your vehicle needs parts, insurance companies usually authorize the aftermarket just to save money. If you want original equipment manufacturer (OEM) parts, you have to pay for them. With an OEM endorsement, you can have the same manufacturer parts that were originally on your vehicle.
- vinyl numbers of all your vehicles.
- driver’s license numbers for all parties.
- estimates of how many miles you drive annually in each vehicle.
- Copy of your current auto insurance policy, if applicable.
- estimates of your monthly and annual insurance premiums.
- good driver
- student driver
- low mileage
- multiple cars
- car safety
- multiple policy
- work, professional, etc.
collision and comprehensive
Collision coverage covers damage to your own vehicle in the event of an accident. Collision is first-party coverage that will pay for repairs to your vehicle, not the other driver’s vehicle. In situations where repair costs or damage exceed the value of your vehicle, your insurance company may declare the vehicle a total loss. Instead of making the repairs, the adjuster will write you a check for the value of the vehicle. This coverage is essential when you own a new or relatively new vehicle.
comprehensive is also a first party coverage that covers other non-accident related damages. For example, if your vehicle is stolen or damaged by inclement weather, you may be able to file a claim under your comprehensive coverage.
medpay and pip
medical payments coverage, also called medpay, covers some reasonable medical expenses for you and any other passengers, regardless of fault. medpay applies whether or not you have your own health insurance that pays your medical expenses. Personal Injury Protection, or PIP, is similar to MedPay. pip differs in that you can have higher policy limits and more comprehensive coverage. however, that means you also have higher premiums and there is a deductible you must meet.
Personal Injury Protection coverage is not available in all states; only those who have no-fault laws. If you reside in a no-fault state where PIP is available, you should take full advantage of the coverage. pip can pay for more than just medical expenses, like a portion of your lost wages, funeral costs, and more.
liability coverage and um
In states without no-fault laws, you will need to purchase mandatory liability coverage. This insurance protects you when you cause an accident and injure another person or damage their property. Bodily injury liability insurance covers the other party’s medical expenses, lost wages, rehabilitation expenses, pain and suffering costs, and more. Liability coverage may extend to passengers in your vehicle, those in other vehicles, and any injured pedestrians. the minimum required policy limits will also vary by state. Property damage liability covers any damage to other vehicles and property, such as a fence, stop sign, etc. property damage will not apply to damage to your own vehicle; That’s what collision coverage is for.
Uninsured (UM) and Underinsured (UIM) motorist coverages are usually sold in a package. UM coverage could help pay for a portion of your damages when you are injured by an uninsured motorist. UIM coverage will apply when the other party’s liability limits are not high enough to cover all of your damages.
other types of insurance coverage available
The coverages listed above are the top products most people consider when shopping for auto insurance. Depending on your needs and situation, there are several other types of coverage you may want to consider.
be prepared when buying insurance
When you start shopping for a policy, it’s important to have information handy, including:
It’s also helpful to have a copy of your state’s insurance requirements.
how to choose your coverage and deductibles
experian suggests finding the right balance with as much coverage as you can comfortably afford. When deciding which coverages and amounts are best for you, consider your financial situation. Do you have many assets? if so, you may want higher liability limits. don’t put your assets at risk by not purchasing adequate insurance coverage.
When thinking about a deductible, consider your cash flow. Financial sites like Balance Sheet suggest asking yourself how much you can afford. can you afford a deductible of $1,000 or more? If so, opting for a higher deductible means you can save on your monthly premiums. consider a small repair for less than $1000. Would you like to make a claim for such a small amount? if not, consider the higher deductible and set aside the money you save to cover your deductible if necessary.
Before you buy a policy, Consumer Reports suggests looking into applicable discounts that can save you additional money, such as:
Not all insurance companies offer the same discounts, so take notes and compare policies. investopedia recommends that you shop around and request quotes from several insurance companies before you shop to find out which company offers the best coverage for your individual needs.
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