How to Choose the Right Auto Insurance?

Choosing the right auto insurance is a balancing act that often comes down to needs and preferences versus costs. How do you choose the best auto insurance for your specific needs? In this article, we’ll go over Auto insurance coverage and give you some tips to help you get the most for your money.

The Basic Types of Coverage

Protecting your assets and your health are two of the primary benefits of car insurance. The following are the main types of car insurance coverage:

  • Liability Insurance: This coverage pays for third-party personal injury and death-related claims, as well as any damage to another person’s property that occurs as a result of your automobile accident. Liability coverage is required in all but a few states.
  • Collision Insurance: This coverage pays to repair your car after an accident. It is required if you have a loan against your vehicle because the car isn’t really yours in this case—it belongs to the bank, which wants to avoid getting stuck with a wrecked car.
  • Comprehensive Insurance: This coverage pays for damage incurred as a result of theft, vandalism, fire, water, etc. If you paid cash for your car or paid off your car loan, you may not need collision or comprehensive coverage, particularly if the blue book value of your car is less than $5,000. 

Additional Car Insurance Coverage

In addition to the coverage listed above, other optional coverage types include the following:

  • Full Tort/Limited Tort: You can reduce your insurance bill by a few dollars if you give up your right to sue in the event of an accident. However, giving up your rights is rarely a smart financial move.
  • Medical Payments/Personal Injury Protection: Personal injury protection pays the cost of medical bills for the policyholder and passengers. If you have good health insurance coverage, this may not be necessary. 
  • Uninsured/Underinsured Motorist Coverage: This option provides for medical and property damage coverage if you are involved in an accident with an uninsured or underinsured motorist.
  • Towing: Towing coverage pays for a tow if your vehicle cannot be driven after an accident. If you are a member of an automobile service, or if your vehicle comes with roadside assistance provided by the manufacturer, this coverage is unnecessary.
  • Glass Breakage: Some companies do not cover broken glass under their collision or comprehensive policies. In general, this coverage is not worth the long-term cost.
  • Rental: This insurance option covers the cost of a rental car, but rental cars are so inexpensive that it may not be worth paying for this coverage.
  • Gap: If you demolish that $35,000 sport utility vehicle 10 minutes after you drive it off the lot, the amount the insurance company pays is likely to leave you with no vehicle and a big bill. The same thing applies if your new set of wheels gets stolen. Gap insurance pays the difference between the blue book value of a vehicle and the amount of money still owed on the car. If you are leasing a vehicle or purchasing a vehicle with a low, or no, down payment, gap insurance is a great idea. 

Factors That Impact Your Rates

In addition to the specific coverage options that you select, other factors that affect your auto insurance rates include the following:

  • Your deductible: This is the amount of money that you pay out of your own pocket if you get in an accident. The higher your deductible, the lower your insurance bill. In general, a deductible of at least $500 is worth considering, as damage to your vehicle that comes in at less than $500 can often be paid without filing an insurance claim.
  • Age: Younger, less experienced drivers have higher insurance rates.
  • Gender: Men have higher rates than women.
  • Demographics: Though actual risk is determined by the zip code you live in, city residents statistically have more accidents, which drives their premiums higher than those who live in rural areas. Additionally, more people living in an area means more claims, which is reflected in the higher premium prices in such places. If you’ve recently taken up residence in New Mexico, Alabama, Oklahoma or Florida, expect to pay higher premiums. According to the Insurance Research Council, these states have the greatest concentrations of uninsured motorists, which ultimately seeps into insured drivers’ premiums.
  • Claims: Accident-prone drivers pay more. If you want to keep your rates low, keep the number of claims that you file to a minimum.
  • Moving Violations: Speeding and other moving violations all have a negative impact on your insurance bill. Obey the law to help keep your rates from rising.
  • Vehicle Choice: Sports cars cost more to insure than sedans, and expensive cars cost more to insure than cheap ones do. Looking into the cost of insurance before you purchase that new car could help you save a bundle on your car insurance.
  • Driving Habits: The number of miles that you drive, whether or not you use your car for work, and the distance between your home and work all play a role in determining your rates.
  • Theft Deterrent Systems: If you have an alarm on your car, you’ll pay less to insure your vehicle.
  • Safety Devices: Airbags and anti-lock brakes both work in your favor by keeping you safer and lowering your insurance bill.
  • Accident Prevention Training: Some companies offer discounts if you take a driver’s education training course.
  • Multiple Policies: If you have more than one car and/or also have homeowner or renter’s insurance, keep in mind that many insurance companies offer discounts based on the number of policies that you have with them.
  • Payment Plan: Some insurance companies offer discounts based on your payment plan. Paying your entire yearly bill at one time, instead of in installments, may lead to a discount.
  • Credit Score: Good credit lowers your car insurance rates. Bad credit increases them. 
  • Not having auto insurance: If you ditched your auto insurance in an effort to save some money, you’ve committed a classic case of being “penny smart and pound foolish.” Not having any auto insurance, even for just over 30 days, will cause your premiums to jump.

How to Choose Coverage and Set Deductibles

Your best policy strikes a balance between enough coverage and manageable cost. When contemplating coverages and deductibles, try thinking first about your financial resources. More assets might mean 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 in the case of an accident.

At the same time, money in the bank may also mean you can tolerate 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—say, $500. If not, you might be better off setting a higher deductible and pocketing the savings now.

You’d want to choose a lower deductible, however, if an unexpected car expense would pose a challenge for you. Although collision and comprehensive coverages will cost you upfront, they might be worth it if they spell the difference between getting back on the road quickly and going carless until you can save money for repairs or a replacement.

Also take into account the value of your vehicle. If your car is older, its payout value might 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 might be better off saving the extra money toward a new car.

What Do You Need to Start Shopping for Insurance?

Car insurance rate calculations are not 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(s) and yourself when getting a quote. When you’re ready to start shopping for a policy, it’s helpful to have some information handy:

  • 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 for all of 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, for reference

Additionally, the insurance company will factor in demographic and lifestyle information that will help them calculate your rate. For example, 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 records. And in most states, they’ll check your credit as well, using a special credit score for insurance. Preemptively checking your credit report and credit score in advance will help you be prepared—and take steps to improve your score if need be.

If you have auto insurance and like your current carrier, that may be a good place to start. Ask them to review your policy with you and suggest any opportunities to lower your premium—or adjust coverage if they can make a good case for doing so.

You can also contact any other insurance company or independent insurance agent for information, or get multiple quotes quickly by shopping online, where any number of sites can provide instant quotes from multiple carriers using a single form.

Once you have at least three viable quotes, do a side-by-side comparison. Rates can vary widely between carriers, but make sure the coverage and deductibles included in each quote match up to be sure you’re getting a true comparison.

How Can You Lower Your Insurance Costs?

Even after you’ve received your quotes, there may be several ways to lower your auto insurance costs. You can always sharpen your pencil and take another look at your coverage limits and deductibles. Also inquire directly with each company about discounts. These discounts vary from company to company, but here is a shortlist of typical options:

  • Good driver
  • Low/verified mileage
  • Good student
  • Multi-car
  • Multi-policy
  • Professional, occupational or alumni affiliation
  • New car
  • Car safety
  • Anti-theft

If you don’t drive your car much, you might investigate a special type of car insurance that’s based on your usage. Pay-per-mile insurance options, which include Metromile and Allstate Milewise, charge a low base rate plus a per-mile fee. A low monthly mileage could save you some dollars. Other policies require you to use a smartphone or third-party device to monitor your driving and reward you with low rates if your driving checks out. Progressive’s Snapshot is one example.

Which Insurance Company Is the Right Fit?

Once you’ve established the right policy components and discovered the best rates, your final consideration is which insurance carrier is right for you. Beyond the budget, it’s important to look for an insurance company that has a strong track record of financial stability. Rating companies like J.D. Power have information to share; referrals from family and friends are another excellent source of intelligence. Also check your own gut: Were your interactions with each company pleasant and professional? Do you think they would be helpful in the event of an accident or loss?


Shopping for car insurance wisely can help you protect your health, your assets, and your wallet, so make the effort to determine the type and amount of coverage that you need. Also, make sure that you review and understand your policy before you sign on the dotted line. If you plan well, you’ll be pleased with the results, should you ever find the need to put your policy to the test by making a claim.

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