Auto Insurance Basics – How to Choose the Right Insurance for You

If you don’t yet have car insurance, odds are you don't yet know what to look for. Alternatively, you might already have an auto insurance provider but feel like you can do better either in terms of rate or coverage. Either way, there's no reason you need to suffer from subpar auto insurance, especially when you pay so much to protect your wallet in the first place.

Whether you’re a beginner with their first car or an experienced driver, let’s go over the basics of auto insurance and point out some helpful strategies so you can choose the ideal insurance for your needs.

How to Pick Car Insurance

Right off the bat, the first thing you should do before finalizing an auto insurance decision is to research as much as possible. It’ll do you no good to pick the first choice that comes into your lap. You’ll need to check out what each insurance provider offers before making a real decision.

For instance, you’ll need to figure out what carriers offer the coverage you need. You’ll also need to figure out the state insurance requirements you need to cover so you are penalized in the event of an accident.

For these questions and more, you might benefit from contacting an insurance agent for one of the carriers in your area. They can usually give you specifics about what their employer provides and shorten the amount of time you spend on research.

Again, make sure that any insurance option you consider covers the requirements for your state. Most of the states and the US have similar requirements, but there are a few minor differences here and there.

Compare Quotes

Next, you’ll want to get actual quotes from any insurance providers you’re considering. This point is often the make or break moment for many, as there will be clear winners and losers depending on how much money each provider charges for similar amounts of coverage.

Don’t be embarrassed or feel like you’re betraying your provider by checking quotes from other insurance companies, either. Remember, the insurance companies need to be competing for your business, not the other way around. Even if you have coverage, it doesn’t hurt to do a yearly check of the competition and see if someone offers the same coverage you currently have for a lower rate.

Again, talk to an insurance agent if you want to get specific answers about the quotes available from a specific provider. Many times, they’ll be able to get you a special deal with either a discount for a particular kind of insurance or a discount on a bundle insurance option.

Examine Different Deductible Choices

Your “deductible” is the amount of money you’ll pay in an insurance claim before the insurance covers the rest of the cost for an accident. For instance, if your deductible is $1000, that means you’ll pay the first $1000 of costs in a car accident before the insurance company steps in. However, lower deductibles are not necessarily best for everyone.

Cheap deductibles are usually counterbalanced by higher premiums or monthly payments. For instance, an insurance company might offer a high deductible of around $1000 but have a low monthly payment of $100. This might work better for you if you're a safe driver and don’t usually get into accidents. On the other hand, you could go with an insurance deductible option with a limit of around $500 but with a much higher monthly payment of around $250.

Ultimately, there’s no right or wrong answer for everyone; it all depends on what you need and how much you can pay per month. Try to determine what your driving habits are and how much you can afford each month before settling on a deductible limit.

Determine What’s Actually Covered

Some auto insurance providers may try to confuse the issue and claim that they cover more than they actually do. Whether you are filling out a form online or talking to a live insurance agent, get clear answers about the types of coverage they offer and don’t be afraid to ask specific questions.

Asked them whether they cover bodily harm or if they only cover accidents with another automobile. Such questions could prevent you from being trapped in an insurance policy that doesn’t cover you when you need it.

Key Terms for Auto Insurance

If you’re new to shopping around for auto insurance, go over these key terms. The pop up again and again in various contracts and learning them will help you be able to negotiate a better rate with your insurance provider.

Deductible: Once again, this is the amount of money you pay out-of-pocket before the insurance provider covers the rest of the insurance claim. Higher deductibles are usually counterbalanced with low monthly payments and vice versa.

Premiums: These are the monthly payments you paid your insurance provider to keep your vehicle insured. Higher premiums are usually counterbalanced with low deductibles and vice versa.

Comprehensive Insurance/Coverage: This type of coverage describes an insurance policy that covers all damage to your vehicle, regardless of whether it occurred in an auto accident or from other events.

Gap Insurance/Coverage: This is a specialized kind of insurance that covers the remainder of your vehicle’s loan in the event of an accident. This is ideal if you have a high loan amount on a new vehicle and won’t be able to pay it off entirely anytime soon.

Claim: A claim is the documentation of an accident or incident that you file with your insurance company. This describes the events of the accident, the kind of damage sustained, and whether you or someone else was at fault. This helps the insurance company determine if they will cover the cost of your accident and how much.

Bodily Injury Insurance/Coverage: This is insurance for any bodily injuries you may sustain during an auto accident. Note that this is distinct from other types of auto insurance.

Conclusion

In the end, auto insurance doesn’t have to be a scary or stressful ordeal. With the right mindset and a willingness to ask questions, you’ll be able to find an ideal auto insurance policy for your needs.