Experts often tell you to buy as much car / auto insurance as you can afford. That’s probably not helpful unless you know the basics on how auto insurance works and which coverage you can’t skimp on. Compare car insurance quotes only when you understand the coverage’s that are best for your age, in your state – choose, and what we recommend.
1) Some of the most helpful coverages are the cheapest
The coverage you are required by law to buy – liability insurance – typically is the most expensive. It should be. The most common coverage limits can mean your insurance carrier is on the hook for hundreds of thousands of dollars for any damage you do.
Most other coverages are capped by the value of your car, though.
While collision, roadside assistance, rental reimbursement, uninsured/under-insured motorist coverage, and comprehensive coverage can provide a lot of protection for a little price increase. Comprehensive coverage is usually the most expensive of these coverages, but is still usually about half the price of collision coverage and a third the price of liability coverage.
Uninsured motorist coverage is especially important, considering the benefits it offers and the number of uninsured drivers on the road. Take a look at your coverage options. Paying a little more now may save you a lot in the future.
2) Many factors can affect your car insurance rate
Auto insurance companies use many different criteria when evaluating an insurance application during a process called underwriting. Each car insurance company has many guidelines regarding which groups of drivers they want to accept and how much they will charge those groups they consider a greater risk. The guidelines are different for each company, meaning that two companies comparing the same driver can arrive at vastly different conclusions.
During the underwriting process, car insurance applications are placed in a group based on how much money and how many claims the insurance company believes it may have to pay. Underwriting is done automatically by software behind the scenes.
At this time, the insurance company will look at motor vehicle records to see how many accidents or tickets a driver has received. Many insurance companies also use an insurance history report to see if the driver has made any car insurance claims, and how much money was paid. Although accidents ans violations can only affect the rates you receive for three years, many companies will look back five or more years when deciding if they want to offer you insurance.
In addition, many auto insurance companies look at the credit history of the applicant. Drivers with bad or no credit history will pay more most places, but that means you can save money(quite a bit) by shopping around as your credit improves.
3) Insurance prices vary(a lot) by company
You’ve probably seen commercials saying you can save money by switching to a certain car insurance company. How can so many companies make this claim?
The reason is that “ auto insurance is a highly competitive business and one of the most effective ways to reduce insurance coast is simply to shop around,” according to Jeanne Salvatore, senior vice president of the Insurance Information Institute. “ Drivers should look for an insurance company that will provide a good price along with excellent service.”
Prices for the same policy from the same company, however, are set by law. They are approved by the state and can’t be changed by an agent, so you can’t get a better price for the same policy simply by going to a different agent or trying to negotiate the price. The best plan is to decide what coverage and options you need and compassion shop so you cheap auto insurance.
4) If you let your policy lapse, you’ll pay more in the long run
Most insurance companies view drivers who are licensed but don’t have insurance as risky or irresponsible. Because of this, if you let your policy lapse, you’ll probably pay more when you go to buy car insurance. To avoid this, if you don’t want to pay for insurance or planning to let your policy expire because you want to switch car insurance companies, make sure to purchase car insurance before your current policy is canceled.
5) Higher deductibles can lower your premium
Insurance prices are based on how much money the insurance company believes it could have to pay. If you agree to pay for a larger portion of your own damages by raising your deductibles, your car insurance company automatically knows they won’t have to pay as much for your claims. Because of this, they will usually give you a lower premium. If you decide to raise your deductibles to save money, be sure you can afford to pay the deductibles if you have to make a claim.
6) Insurance discounts can make a difference
Most insurance companies offer auto insurance discounts for things like a safe driving record, car safety features, anti-theft devices, electronic payments, payment in full, and more. Make sure you’re getting rewarded for being a safe driver and for having a safe car by shopping around for car insurance that appreciates your record.