If you're not an informed shopper, you will pay too much for your auto insurance. An intelligent auto insurance shopper knows what coverage is required and what elements are used to calculate their auto insurance quote.
Having auto insurance is required; you must have it!
Having some auto insurance coverage is required in every state in the US, and it's required by law in Canada.
So, the first thing you should do is find out the minimum amount of auto insurance required in your state. There's a free, easy-to-use website that will give you this information; it's called Value Penguin.
After you've checked this site, you know the minimum amount of insurance you must carry.
You might be wondering, why am I required to carry auto insurance?
We're all required to carry auto insurance because an accident can create a great deal of damage and expense. An auto accident can lead to vehicle damage, property damage, and physical injuries to people involved in the accident and bystanders.
In addition to the damages and injuries, auto accidents often involve legal actions to recover expenses associated with the accident.
So, if you're involved in an accident, particularly if you're at fault, the cost associated with the accident can be enormous! That's why insurance is so important.
Auto insurance can be confusing, so allow me to break things down for you, and you can decide what you need and what you don't.
That's why I've created this post so that you can be covered and protected!
Let's now look at how your Insurance rate is calculated.
There are lots of elements that go into calculating your insurance policy rate, but all those elements can be placed into one of two categories:
Underwriting
Rating
Underwriting is the term used for the process that an insurance company will go through to determine how risky it is to offer you auto insurance. Note that underwriting is used in all forms of insurance, including health, home, etc.
So, when you receive a quote for auto insurance, the company giving you that quote has determined how likely they believe you will be involved in an accident. If they think you're too much of a risk, they won't insure you!
So, each insurance company assigns a potential customer a rating after they've conducted the underwriting process. The most significant single element that impacts your rating is claim frequency.
This is accomplished by creating groups, tracking these groups, and then comparing every new potential customer against these groups.
Some of the most common elements that will impact your rate - the most common 'groups':
Make & Model of the Car
Your Age & Gender
Your Geographical Location
Your Marital Status
Prior Insurance History
Your Driving Record
For some, it makes sense to carry more than the state minimum amount of insurance. There are many reasons for this, including your financial status, your assets, and what might be at risk.
If this applies to you, you might want to consider upping your premiums and carrying an umbrella insurance policy. An Umbrella policy helps cover you in areas that are not covered by a traditional auto insurance policy, and it kicks in when your auto policy is maxed out.
Elements that might make you want to consider an umbrella policy include:
Do you own your own business
What's your net worth
Do you own multiple homes
Are you nearing retirement
Before getting auto insurance quotes, you should get a copy of your driving record, sometimes called your driving abstract. This document is issued by your state's department of motor vehicles, and it will show:
Your details
license details
driving history
conviction history
accident record
You want to make sure this information is correct, and if there's any outstanding tickets or conviction, you will want to either pay the fine or contest the conviction.
Things not included in your driving abstract include non-moving violations and expunged accidents.
You can get this document through your state's DMV, there are third-party companies that will do this for a fee, and an insurance agent can obtain it.
I would ask your present agent or the first agent you speak to for this document.
Now, let’s take a deeper look at auto insurance, so you’re able to understand a quote and determine what is right for you!
As a shopper, you need to understand auto insurance terms. The industry has its terminology, and you need to know the meaning of the terms to shop intelligently for auto insurance.
If I asked you these questions could you give me the answer, what is comprehensive coverage, what is collision coverage?
Without understanding the difference between comprehensive and collision coverage, you can not shop for car insurance correctly.
Auto Insurance Comprehensive vs. Collision [Plus Other Terms]
Do you know when most people realize there’s a problem with their auto insurance… it’s when they try and make a claim.
Yep, most people don’t realize that their auto insurance does not cover them until they try and get their car repaired.
Knowing what you’re buying is essential, especially if you’re going to be spending hundreds every year!
I’m going to help you get the best price possible!
First, let’s look at the two most common and misunderstood types of auto insurance:
Collision and Comprehensive coverage
Both coverage plans can protect your car, and having this coverage can cover the cost to repair your vehicle.
Comprehensive auto coverage is often described as auto insurance that will pay to repair your vehicle for damages that occur from an ‘act of God.’
Collision insurance covers you when you collide with another car or a fixed object. This represents the vast majority of insurance claims.
Let’s take a look at some examples to make sure you understand the differences.
If you own your car, you have much more flexibility in deciding the level of coverage you’d like to have. If you lease a vehicle or have a car loan, you may be required to have Comprehensive and Collision coverage.
When you combine both, you’re protected against having a costly car repair.
When you receive an auto insurance quote and sign a contract, you need to understand specific terms to know what you need, what you want, and what you don’t want in your policy.
It’s essential to know these terms so you understand precisely what’s covered by your policy.
Now, you’re in a position to determine what is and what is not a good auto insurance policy for you and your car!
I hope this helps!
Now, with the information we've covered, you're ready to start shopping for auto insurance!
There are two types of auto insurance shoppers looking for a new quote for their existing coverage and people who want to learn how to get cheaper car insurance for new drivers, and I'm sharing advice for both.
As we dive into pricing, I want to make sure you understand the difference between liability and full coverage car insurance.
This is the last bit of information needed to evaluate a quote.
Remember, auto insurance is a commodity, so you're shopping for the lowest price you can find for that commodity.
Here's the awful truth - too many people don't understand that the only thing that matters is what you pay and what coverage you're getting - everything else is window dressing. Forget lizards, birds, talking animals, and funny commercials.
All you should care about is the amount of coverage you're getting and how much you're paying!
You must contact an insurance company or an agent for a company to receive a quote. Note, somewhere in this conversation; you will be asked what type of coverage you want.
If you're leasing or have a car loan, the paperwork will tell you what they require; often, it's Full Coverage with means Comprehensive, Collision, and liability coverage.
There's no hard and fast rule regarding what's in a full coverage policy, but most states now want liability coverage, so that's the base. Then there's some level of Collision and Comprehensive coverage.
Many liability policies are 250/500/250. This liability policy would cover up to $250,000 for injuries per person and a total of $500,000 for all injured parties in an accident. Plus, up to $250,000 for property damage in an accident.
Note that most auto insurance policies require deductibles, a pre-agreed upon the amount you will pay for a claim. With Collision insurance, if you have a $250 deductible and hit a parked car doing $750 in damage, you will pay $250, and your insurance company will pay the remaining $500.
Now, let's look at some factors that can impact your premium; these are things you want to have factored into your auto insurance quote because they're hidden gems that can save you money!
Here are Some Often Overlooked Quote-Effecting Elements:
Do you own a home or multiple homes?
Did you graduate from college?
How much do you drive your car?
Do you take frequent long trips?
Is your vehicle equipped with an alarm system?
Are you married?
Did your teen driver take a driver's ed program?
Does your teen driver have good grades?
Are you a Veteran?
Do you regularly garage your vehicle?
Is your car going to be used for business purposes?
What's your occupation?
Would you make larger, less frequent premium payments?
Would you enroll in automatic premium payment deductions from your bank account?
Would you be willing to have paperless statements?
Is every driver in your household going to drive every vehicle, or are there exceptions?
Here's something essential; many of the above factors are not used if the traditional insurance website companies insure you!
Many online websites don't allow you to include some of the factors above, which prevents you from getting the best price possible.
That's why I recommend you have a conversation with your present and all future insurers, talk to the agent.
I know what you're going to say; you HATE the traditional, long, drawn-out way I had to buy insurance in the past!
I get it; it's a drag! But, you will want to talk to your present insurer to see if they will lower your current rate, or if you're buying a new car, what rate they will offer to you.
This, like every auto insurance quote, is free. If a company tried to make you pay for a quote, it's time to move on!
This digital-based system uses a concierge process to streamline the process while getting you multiple quotes fast!
So, Let's Review
You will only get your best rate by obtaining a quote from multiple companies, all of which are factoring in every possible element that could reduce your cost.
Be careful; make sure you're comparing apples to apples. I mean, make sure you're comparing the same amount of coverage and the same deductibles.
Don't overlook added benefits like lower deductibles, no-fault coverage, which means the first accident doesn't raise your premium, and perks like disappearing deductibles, which lower the deductible for long periods without a claim.
Make sure you're comparing quotes that offer the same level of coverage, and have the same deductible. At this point, you can then determine who's offering you the coverage you want, at the best price possible!