buying auto insurance

4 Key Questions to Ask Before Buying Auto Insurance

Unless you’re an insurance agent, you may not realize key questions to ask before buying auto insurance. After all, most of us aren’t insurance gurus.

To help you figure out what questions to ask before buying an auto insurance policy, we turned to Billy Wagner, owner of Brightway Insurance in Deland and Ponte Vedra Beach, Fla. We also consulted another insurance guru, the nonprofit Insurance Information Institute.

4 Key Questions to Ask Before Buying Auto Insurance

  1. How much coverage do I need, and can I afford the premium?
  2. What should my deductible be?
  3. How do I know whether an insurance company is good?
  4. What types of discounts are available?

The experts recommend getting the answers to these questions before purchasing auto insurance.

1. How much coverage do I need, and can I afford the premium?

As a general rule, Wagner suggests considering how much coverage you’d need if you were involved in a car crash. For instance, should you get coverage for a rental car in case your wrecked car ends up in the repair shop? Or do you have an extra vehicle as a backup?

In nearly every state, you must carry a minimum amount of liability coverage for your car. That coverage falls into two categories: bodily injury liability and property damage liability.

Optional types of coverage include comprehensive and collision. In many cases, if you have a car loan, your lender will require certain types of coverage. For instance, you may need to purchase comprehensive and collision coverages.

Comprehensive pays for damage caused by fires, falling objects, missiles, explosions, earthquakes, windstorms, hailstorms, floods, vandalism and contact with animals such as deer.

As its name suggests, collision coverage pays for damage when your car collides with another car or with an object like a tree or mailbox.

Once you’ve determined what kinds of coverage you should or must get, you then can work with an insurer or insurance agent to figure out the cost and decide whether that cost fits into your budget.

2. What should my deductible be?

The Insurance Information Institute points out that you can reduce your premium by raising your deductible. For instance, raising it from $500 to $1,000. However, be sure you could cover a high deductible in the event of a claim.

The deductible is the amount of money that you’re responsible for paying. It’s an amount “deducted” from your claim payout, according to the institute.

For example, the institute says, if your car insurance has a $500 deductible and your insured loss is $10,000, you’d receive a claims check for $9,500.

3. How do I know whether an insurance company is good?

Wagner recommends doing a Google search for an insurance company’s name and plugging in keywords like “policies,” “complaints” and “scams.”

“Your search results will give you a good idea of whether the company has a solid claims history or not,” Wagner says.

You also can hunt for information about an insurance company on the website of your state’s insurance department. To find your state’s insurance regulator online, visit the website of the National Association of Insurance Commissioners.

“Some states even maintain consumer complaint ratios so you know how many complaints a company receives per policy written,” Wagner says.

Other online resources to check out include the Better Business Bureau and AM Best. In addition, you can sift through ratings of car insurers on the website of market research company J.D. Power.

“Your insurance company and its representatives should answer your questions and handle your claims fairly, efficiently and quickly,” the Insurance Information Institute says. “You can get a feel for whether this is the case by talking to other customers who have used a particular company or agent.”

4. What types of discounts are available?

Inquiries about discounts are critical questions to ask before buying auto insurance. Don’t miss these potential ways to save:

  • Bundling discount. Many insurers offer a premium discount if you “bundle” your car insurance with a home or renters policy with the same company.
  • Good student discount. If you have a teen driver in your household and he or she earns good grades, you might be able to score a discount.
  • Low-mileage discount. Some insurers reduce your premium if you don’t drive much on an annual basis. Fewer miles driven decreases the risk that you’ll get into an accident.
  • Loyalty discount. A lot of insurers reward your repeat business by cutting your premium.