Fingers crossed that you don’t need to think about your car insurance unless it’s time to pay your premium. However, if you don’t regularly evaluate your coverage needs and obtain quotes from insurance agents in your area, then you might be paying too much for your car insurance. To ensure you’ve found the most cost-effective option for your circumstances, follow these five tips.
1. Become a knowledgeable consumer.
Before you obtain a quote for car insurance, you’ll need to know what car insurance usually covers, what it sometimes covers and what it usually doesn’t cover.
According to the National Association of Insurance Commissioners (NAIC), auto policies usually cover:
- Liability for injuries or damage to others for which you are responsible
- Injuries or damage to you caused by an uninsured motorist or hit-and-run driver
- Injuries or damage to you caused by an underinsured motorist (one who has coverage but not enough)
Auto policies sometimes cover:
- Physical damage to your car, which might include collision damage (damage caused by an accident) or comprehensive coverage (damage caused by events specified in your policy—e.g., fire, hail, theft, etc.)
- Medical expenses for car accident injuries
- Rental or towing expenses
- Injuries or damages arising from the use of a rental car
Policies generally don’t cover equipment not permanently installed in your car, car maintenance or driving your car in Mexico or for business purposes. Car insurance also does not cover paying off your car loan if you’re in an accident and the resulting market value of your vehicle is less than what you owe; however, you can generally purchase Guaranteed Auto Protection (GAP) insurance from your auto lender for that need.
NAIC offers “A Consumer’s Quick Guide to Auto Insurance,” a short PDF brochure that will help you understand the ins and outs of car insurance.
2. Familiarize yourself with the minimum coverage required in your state.
Each state has its own laws regarding the minimum levels of coverage the state’s drivers are required to carry. You can find this information on your state’s department of insurance website. The NAIC website offers a clickable map that will link you to your state’s respective insurance department website. Some states include online premium comparison tools on their websites.
3. Have information affecting your premium at the ready.
Multiple factors affect your premium, so make sure that the agent preparing your quote has an accurate picture of your situation. Your age, gender and marital status will affect your premium, as will your credit history. Also important are where you drive your car (are you taking it to work, or is it just for pleasure?) and your annual mileage.
In addition, the age, make and model of your car affect your premium, and if you’ve had the same vehicle for several years, you should see your premium go down.
It’s crucial to make sure your agent has accurate information. If your 24-year-old son is still listed on your policy but has moved several states away and never drives your car, make sure your agent knows.
4. Ask for discounts.
Remember: It never hurts to ask. Insurance companies offer discounts for good driving records, anti-theft devices, low mileage and more. You might get a discount for insuring your home and car with the same company or for insuring multiple vehicles with the same company.
5. Pay your premium in lump sums, not on a monthly basis.
If you can be disciplined enough to set money aside for your premium rather than pay a monthly bill, you will likely save yourself some money. Insurers usually charge you extra for the convenience of receiving monthly statements.
By doing your homework before you contact insurance agents in your area, you can ensure that you are purchasing the right level of car insurance coverage at the most cost-effective price. The dollars you’ll save will be well-worth the effort.