When you purchase a vehicle, determining how much car insurance you need to buy can be a long and winding road based on who you are, where you live, what you earn, what you owe and how you plan to use your new set of wheels.
For starters, each state has its own coverage requirements for motorists that typically include up to three types of auto insurance.
Common Auto Insurance Coverages You May Need
- Liability insurance is required in most states. It covers you for damages to other people and property if you cause an accident.
- Personal injury protection (aka PIP or no-fault insurance) is required in some states to cover you and your passengers for the medical expenses resulting from an accident, regardless of who caused it.
- Uninsured/underinsured motorist insurance provides coverage in case you’re involved in an accident with someone who lacks insurance.
Unfortunately for beginners, that’s just the first step in effectively insuring your ride, according to Lynne McChristian, Florida representative for the Insurance Information Institute (III), an industry consumer group.
“That minimum requirement is the basic, but people should not be misled into thinking that’s good enough. It is not,” says McChristian. “It’s not how little can I pay for auto insurance?; it’s how much car insurance you need to protect your finances?”
Toward that goal, although it’s not required, most drivers also purchase comprehensive coverage. This protects you in the event of collision, theft or natural disasters, including floods.
Comprehensive auto insurance covers you for damages not caused by an accident, such as:
- falling trees
What to Know About Insurance When You Lease a Vehicle
You may need to purchase additional comprehensive coverage if you lease your vehicle. If you lease, you’ll also likely be required to sign up for “gap” insurance as part of your lease package to cover your balance due should your leased car be damaged beyond repair.
Other popular motorist assistance policies provide for a loaner or rental vehicle when yours is in the shop, roadside assistance should your vehicle break down and new car replacement should yours be totaled in a wreck.
If you have a new driver in the family, it may also be prudent to add collision insurance to your mix to cover the scrapes and dings that often accompany learning to drive. Collision coverage has the added benefit of covering you in any car you drive, not just your own.
TAKE THE QUIZ: What Factors Impact Your Auto Insurance Rate?
How Much Car Insurance You Need
The answer to how much car insurance you need depends on many factors. They include:
- the number of drivers in your household
- how much you drive
- where you drive
- how many vehicles you have
- your financial vulnerability in the case of an auto accident.
The rates for the car insurance you need will likely vary based upon your age, education, occupation, credit score, driving record, the location of your residence and even your willingness to submit to a DUI test.
How to Reduce the Cost of Auto Insurance
There are numerous ways to whittle down your insurance premium until it fits your needs. Here are six popular ways to reduce the cost of auto insurance.
1. Shop around: Auto insurance prices vary company to company, whether sold by dedicated agents who sell for one company or independent agents who represent several different brands. Major Insurance makes it easy for you to compare auto insurance prices from the industry’s top providers.
2. Hunt for discounts: Insurers often offer discounts to close the deal. Most popular? Bundling allows you to save by getting home and auto insurance with the same company.
Insurers may also trim your quote if you’re a military veteran, work for a large company, belong to an employer group plan or hold membership in certain clubs or organizations. If you qualify, don’t forget to ask about a safe driver discount and credit for completing a defensive driving course.
3. Seek higher deductibles: The more you’re willing to pay for car repairs before your coverage kicks in, the lower your insurance premium can drop.
4. Shave coverage on older vehicles: If your older second or third car is worth less than 10 times its premium, consider cutting back its deductible, collision and comprehensive coverage.
5. Ask about low mileage discounts: If you drive less than the average motorist, take the bus or subway to work or live away at college without a vehicle, most insurers will cut you a break.
6. Maintain good credit: Insurance companies use discounts to land customers with good credit because research shows that those with solid credit have fewer claims.
Simply fill out our free auto insurance quote form and receive our top matches for you. Then check the financial stability of each finalist with rating companies A.M. Best and Standard & Poor’s. After all, you’re looking for a long-term partner.