Your car insurance rates can change drastically based on which type of coverage you buy and who you buy it from. Buying car insurance doesn’t need to be complicated, but it pays to ask a few questions of your insurer (and yourself) before signing a contract.
1. What Kind of Coverage Do I Need?
Car insurance comes in many forms. The most common types of vehicle coverage are liability, collision, comprehensive, uninsured or underinsured motorist coverage, and medical payments coverage (referred to as personal injury protection, or PIP, in some states).
On top of these types of vehicle coverage, many insurers offer optional add-ons. These include emergency roadside assistance, gap coverage, ride-sharing coverage for Uber drivers, rental reimbursement, and custom parts coverage.
Before purchasing car insurance, ask yourself: What kind of coverage do I need? And what kind of coverage and add-ons would I like to include in my policy?
The answer to the first question depends where you live. Each state sets its own laws concerning mandatory coverage, and there are often big differences. For example, New Jersey drivers must purchase bodily injury liability with a $15,000 limit per person; property damage liability with a $5,000 limit per person; uninsured motorist and underinsured motorist coverage with $15,000 limit per person; and personal injury protection with a $15,000 limit per person. New Hampshire drivers, on the other hand, aren’t legally required to purchase any auto insurance, although that doesn’t mean it’s a good idea to avoid coverage altogether.
2. Who is Covered to Drive Under My Policy?
The number of people you add to your policy makes a difference, as does the personal and driving profile of each person. One person pays less than multiple policy holders on the same policy, although you should expect to pay less per person when adding a second person or second vehicle. Interestingly, married couples typically pay about $80 less per person for car insurance, according to The Zebra’s State of Auto Insurance 2018 report.
Adding a teen driver can cause vehicle coverage to become very expensive. On average, it costs $6,573 per year to insure a 16-year-old driver, around 4.6 times more than for the average American driver, according to The Zebra. At age 17, the average premium falls to $5,704, at 18, to $4,940, and at 19, to $3,356. By age 23, the average rate falls to $1,990, and keeps dropping year-on-year until age 60, after which it gradually starts rising again.
Teen drivers cost more because they pose a higher risk. If you need to add a teen driver to your policy, the good news is that some insurers offer discounts if your teen takes a safe driving course or even maintains good grades. If you’re sceptical about the good grades part, don’t be—the idea is that teens that study hard in school also make for responsible drivers.
3. How Much Will My Deductible Be?
Like other types of insurance, agreeing to a higher deductible is one way of lowering your yearly premium. If you consider yourself a good driver and have faith in your ability to avoid costly accidents, a higher deductible might be a good idea.
Many auto insurers offer their customers the option of moving their deductible up and down. According to a 2016 report from InsuranceQuotes.com and Quadrant Information Services, increasing your auto insurance deductible from $500 to $1,000 reduces premiums by an average of about 8.5% across the United States. Increasing your deductible from $500 to $2,000 can save 15%.
4. Do You Have a 24-Hour Claims Service?
Unless you use your car solely for commuting to and from your day job, finding an insurer with a 24-hour claims service is a must. These days, all good insurers offer round-the-clock support for claims, glass and windshield coverage, and roadside assistance. If an insurer doesn’t offer this, it may be time to find an alternative provider.
Top insurers offer multiple options for filing a claim. Many car insurance providers still let their customers do things the traditional way, by phone, mail, or even fax. These days, most insurers let their customers file and upload documents online. In recent years, more providers have brought out apps for iOS and Android, letting customers request roadside assistance or file a claim whenever and wherever they get into trouble.
5. Do You Offer Any Discounts?
The most appealing thing about getting a car insurance quote is you can almost always knock the original price down by at least 5%. Most insurers offer a range of driver discounts and rewards based on your personal profile, driving history, and approach to driving. Some insurers offer customers as many as 12 different ways of lowering the cost of their premium.
When it comes to personal profile, many insurers offer discounts to military service people, students, and members of certain professions such as teachers or public service workers. Insurers also offer certain discounts aimed at specific demographics, such as rewards for teens or seniors who take a safe driving course.
With the emergence of online insurance providers, even seemingly simple actions can knock your annual premium down by 1 or 2%. For example, some insurers offer discounts for uploading documents online, paying the whole year upfront, or agreeing to autopay monthly payments. An increasing number of insurers are offering discounts for things like taking a safe driving course, taking a safety pledge, or installing a GPS tracking device in your vehicle.
Big insurers and small insurers both have their pros and cons, but one of the benefits of going with a big insurer is bundling. Bundling is a bit like those “buy one, get the second one at a discount” tactics. In the case of insurance companies, it involves getting a discount if you purchase car insurance together with another form of coverage such as property insurance or life insurance.
A Friendly Tip: Always Compare Policies
Shopping around is the key to getting rates, coverage and service. Even if the first offer from a car insurance provider beats your expectations, it’s always worth taking a couple more minutes to get quotes from other insurers.
