Selecting the right auto insurance policy is often a balancing act that mainly comes down to your needs and preferences versus the cost of the policy. It leads us to the question, “just how do you choose the right auto insurance policy for your specific needs?”It is possible to find a policy that fits your needs if you follow a few simple steps, which include determining adequate coverage for your situation, a manageable deductible, and a carrier that you can work with.
To help you, we will outline what you need to do to find the right auto insurance coverage for your specific needs. Here’s everything that you need to know:
Types and Amount of Coverage
You should make an apples-to-apples comparison when it comes to choosing your auto insurance policy. All the policies you review should have the same types and amounts of coverage. Comparing policies is difficult. For instance, one provides you with $50,000 in property damage liability coverage, another only $30,000, and a third $100,000.
Some coverages to consider, though some are optional, include:
- Primary liability, including bodily injury and property damage coverage
- Medical payment coverage
- Uninsured/underinsured motorist coverage
Check prospective policies and secondary options that could prove beneficial, like glass coverage, which often comes without a deductible and reimbursement for a rental car.
Price and Deductibles
It is only natural that when comparing insurance policies, that you take into consideration the cost of the policy. You may be surprised by how much the prices vary, so you will want to get several quotes. In addition to the price of the premium, i.e., the policy’s actual cost, you should look at the payment schedule. Are you going to incur an extra fee if you pay monthly? Can you get a discount if you pay for a full year at once?
When you compare the prices, be aware of the deductible amount, that is, how much you pay out of pocket before your insurance kicks in. In general, you can lower your premium if you opt for a higher deductible.
Evaluating Insurance Companies
Even though price and coverage may be the deciding factors when you purchase auto insurance, it’s worth considering the reputation and financial stability of prospective insurance providers as well. First, you should check to ensure that an insurer is licensed in your state by visiting the website of your state’s insurance regulatory body, where you can also review information about consumer complaints filed against insurance companies.
You can also check review websites and/or talk to family and friends about their experiences with insurers. Finally, you should take a moment to ensure your prospective insurers are in good financial standing. You can find this information from financial ratings agencies. One reliable source to gauge the financial strength of the insurance carrier is AM Best. Referencing an insurance carrier’s AM Best financial rating can reflect their ability to pay insurance claims and their likelihood of becoming insolvent.
How to Choose Coverage and Set Deductibles?
The best policy will strike a balance between having sufficient coverage and affordable rates. When contemplating coverages and deductibles, try thinking first about your financial resources. More assets mean that you should have more liability coverage. You don’t want to put your assets at risk by choosing too little coverage and exceeding your coverage limits if there is an accident.
However, if you have sufficient savings, you may be comfortable with a higher deductible. If you can afford $1,500 out of pocket to cover the cost of a major incident, you’ll save on premiums year after year. Also, ask yourself if you would need or want to use insurance to pay for a small repair, one that costs $500. If not, you may be better off setting a higher deductible and pocketing the savings.
You will want to choose a lower deductible; however, if incurring an unexpected bill arising from a car accident would pose a challenge for you. Collision and comprehensive coverage are elective coverages that will cost you more upfront; however, they might be worth the cost if they spell the difference between getting back on the road quickly and going carless until you can save up the money for repairs or a replacement.
You should also take into account your vehicle’s value. If your car is older, its payout value may not justify the cost of extra coverage. A 16-year old car worth $3,750 with a $1,500 deductible will only yield $2,250 if it’s totaled. Compare that with the cost of collision and comprehensive coverage month after month, and you may be better off saving the extra money towards a new car.
What You Need to Start Shopping for Insurance
Car insurance calculations aren’t simple. They take into account how much risk an insurance company believes you represent, so you can expect to answer a lot of questions about your vehicle and yourself when getting a quote. When you’re ready to start shopping for a policy, it’s helpful to have some information on hand, including:
- A copy of your current auto insurance policy; if you have one
- Quick calculations of your current yearly and monthly auto insurance costs
- Vehicle identification numbers (VIN)for all your cars
- An estimate of how many miles you drive each car per year, including how many miles you commute each day
- Driver’s license numbers for all drivers in your household
- Your state’s requirements for insurance coverage, though your insurance professional should know these requirements
Additionally, the insurance company will factor in demographic and lifestyle information to help them calculate your rate. For instance, they may want to know your age, whether you’re married or single, and whether you own or rent your home. They will also check your driving and claims record, and in most states, they’ll check your credit as well, using a special credit scoring system designed specifically for insurance. Preemptively checking your credit report and credit score in advance will help you prepare and take steps to improve your score if it is required.