If you have just bought your first car, buying car insurance can be a daunting or tricky task. You’d probably have minimal idea of what it entails, and that is understandable. But that does not mean that you cannot get it right for the first time. With a little reading, analysis, phone calls, e-mails, and some patience, you can make a choice that you would be proud of. It is not as simple as it appears, but if you are willing to take time to understand car insurance, you would know it is not rocket science.
On the contrary, if you have been driving a car for quite a while, you would have an insurance policy or might have even claimed insurance. However, you may have made a poor decision and now contemplating a new insurance policy. If you are looking to make amends, this article can also help you start afresh and make amends.
Know what you want
You wouldn’t buy a shirt simply because of others like it. You would first check if the size fits you and the colors compliment your skin tone. The same holds for car insurance. Make sure you buy a policy that will provide you adequate coverage with precisely the components you need.
If you are willing to talk to an insurance company’s executive, you would be pleasantly surprised to find out that policies can be tweaked to suit your requirements. If you compare different policies, you will find that some will fulfil your requirements while many may only look attractive.
Know the average annual premium in your state.
A study of the annual premium by different insurers in different states has shown that it varies for different states. While the average annual premium can be much higher for some states, it is lower in some states.
The top five states with the most expensive premiums in 2020 were Michigan ($2,878), Louisiana ($2,389), Florida (2,239$), Texas ($2,050), and California ($1,968).
The top five states with the least expensive premiums in 2020 were Idaho($1,062), Wisconsin ($1,049), Ohio ($1,034), New Hampshire ($ 985), and Maine ($ 912).
Keep in mind that the average is not the exact cost of the annual average premium. If you would go shopping around, you would find that some insurers’ annual premium may be much higher than the state average and others lower than the state average.
Get quotes from different insurers and compare.
This procedure is perhaps the most crucial part of deciding on an insurance cover for your car. Most companies have quotes readily available and tailored to the different needs of drivers. There are three types of quotes you would be offered: the basic quote, which gives a lesser coverage limit, the standard option that gives you an average coverage limit, and the premium option with high coverage limit.
Taking the help of an independent agency is also the right way to get a quote as you get multiple quotes to compare quotes of different insurers.
Apart from taking the help of an independent agency, you can also find out the reviews on third-party sites and look-up the National Association of Insurance Commissioners (NAIC) to check if any complaints have been registered against them.
Understand the different components of your car insurance
This is one of the challenging parts of buying car insurance. You must understand that there are different components to car insurance, and you can lower the premium if you choose to limit some components depending on how often you drive or the risk factors involved.
The six primary components of car insurance are:
Collision coverage: This component covers the damage to your car if you meet with an accident. You are guaranteed a payment irrespective of who is at fault with this component.
Liability coverage: If you have caused an accident that has resulted in damage to property or bodily injury to someone, this component will help you cover that expense.
Comprehensive coverage: You can incur damages to your vehicle not only from an accident but also due to wear and tear of some parts, a breakdown during a long trip, objects falling on it, fire, floods, weather conditions, vandalism, or even theft. Some car insurance covers these factors as part of the package, and others may cover them as additional components.
If you have an expensive car, you may consider getting comprehensive coverage for it. However, if you are driving a car that costs just a few thousand dollars, comprehensive coverage will be an additional expense, and you could end up paying more insurance than the value of your car.
Personal injury protection: This component covers medical expenses caused by accident to you and even occupants in your car. It may also include loss of wages due to an accident.
This component is usually covered in the life insurance policy provided at the workplace or in case you have an existing policy. If you already have cover for an accident or death due to an accident, you can talk to the insurer and check if this component can be excluded to decrease the premium amount.
Uninsured or underinsured motorist coverage: There are instances where another driver causes an accident, and he/she does not have adequate cover or no insurance to pay for the damage caused to your car. This component covers that cost.
Gap insurance: If you have bought a car on a loan or lease, this is one crucial component your car insurance should include. If your car is damaged beyond repair, this component pays the difference between the Actual Car Value ( ACV) after depreciation and the amount you still owe on your car loan or lease. This way, you do not end up paying for a car after you no longer have one.
Find out the minimum requirement in your state.
It is essential to know the minimum requirement of your state. This is the minimum amount to be paid to you or another party for one or two components in case of an accident. Baring two states where car insurance is not mandatory; all the other states have a minimum amount of coverage required for the different components.
However, it would be best to keep in mind that the minimum requirement is not always a guarantee to cover loss due to an accident adequately. For instance, if the minimum collision coverage is $10,000, but the actual cost incurred during repair is 20,000, you would have to pay 50 per cent from your pocket. Before you sign up for insurance, it is always advised to do some research to find out if the minimum requirement adequately covers damages or loss inflicted.
Know your insurer
Is your insurer a new company? How many years has it been providing insurance? How many vehicles has it insured? These are some of the questions you would need to answer before deciding which insurer will provide insurance for your car. It is essential to know the company’s reputation in the market and find out reviews from other drivers who have availed their services.
One of the most important aspects you would need to be certain about is the claim-settlement ratio. This is the percentage of claims successfully settled out of the total number of claims the insurance company has received. A high ratio is ideal as it shows that customers have received payment for genuine cases.
Some of the most reputed car insurance companies in the US
Here are the top 10 car insurance companies in the US in terms of premium written and market share.
Insurance company Market percentage
| Rank | Auto insurance company | Market share |
|---|---|---|
| 1 | State Farm | 16% |
| 2 | Geico | 13% |
| 3 | Progressive | 12% |
| 4 | Allstate | 9% |
| 5 | USAA | 6% |
| 6 | Liberty Mutual | 5% |
| 7 | Farmers | 4% |
| 8 | Nationwide | 3% |
| 9 | American Family | 2% |
| 10 | Travelers | 2% |
Exclusions
Apart from accidents, there are other ways your car can suffer damages- like a breakdown, objects falling on it, fire, flood, or wear and tear of components. Some insurance companies do not pay for many of these damages as they only cover damages caused by accidents. However, in the case of comprehensive coverage, most of these factors are considered.
Also, there are certain parts of a car an insurer may not cover. It is always advised that you ask your insurer direct question not to receive a shock when claiming insurance cover.
Look for discounts.
If the likelihood of you getting into an accident is less, it is always advised to let your insurer know about it, and you can bargain for a reduction in the premium amount. Some of the ways you can convince your insurer is
- By apprising them of no record of traffic violations
- By installing anti-theft devices in your car
- Furnishing a record of renewing your car insurance policy on time
- Good grades (if you are a student),and other factors that make you less prone to accidents.
Some car insurance companies may give you a bonus if you have not made any claims in a year. Your age and occupation also play a vital role in availing of a discount. If your occupation requires you to drive only short distances and you are middle-aged or female, your chances of availing of a discount are greater.
Ad-on coverage for cars
They say the customer is the king. To attract customers, some insurance companies may go the extra mile in the form of add-on coverage.
Some of the ad-on coverage are:
1. Roadside assistance: This is when you are stuck in a desolate place and needs some technical assistance for your car. It also includes services like and towing and taxi. You would however, need to know the radius within which this service is provided.
2. Cover for engine: The engine is like the heart of your car. Standard car insurance usually covers damages to the car’s body and not damage to the engine caused by wear and tear, leakage of fuel, and water entering into it. Some insurers will however insure your engine apart from the body of the car.
3. Zero depreciation cover: With repairs and over a period, the value of your car depreciates. This can be a factor when the insurance company pays for the repair of your car. In zero depreciation cover, your car’s value does not depreciate and you get the full claim amount.
Keep all information readily available
When it comes to furnishing information to sign up for insurance, you should have the information of every member of your household ready. These include everyone’s names in the household, your complete address, the declaration page from a previous policy ( if you had one earlier), the date of birth of all family members, their license and vehicle information numbers, and the make and model of every vehicle in the household.
Canceling the previous policy (if applicable)
If you are contemplating buying a new policy and want to cancel your previous one, you must first decide on a new policy. After you have zeroed in on a policy, you can then set the effective date of your new policy and the old policy’s end date on the same day. This is because insurance policies begin and end at the same time of the day-12 am. This way, there are no gaps and overlapping of insurance cover.
Conclusion
Remember, haste makes waste. Take your time and don’t rush with an insurance cover for your car, or you could end up regretting your decision. Know all the companies that provide insurance and find out quotes from all of them. Next, check what you get on that quote. Sometimes, a cover that is a little more expensive can provide better coverage for a cheaper one.
Price is just one aspect; you must also fully know the limit of your coverage. Lastly, don’t delay the process of buying car insurance. It is one thing to take your time to choose the right insurance but quite another to delay getting insurance. Remember, it is a matter of cover for your car or yourself and a required document to possess to follow a state’s law.