How to buy Car Insurance

Kinds of Coverage

Everyone who drives needs car insurance and most states require it by law. When you purchase auto insurance, you are buying a policy.  The cost and coverage of any policy is based on a variety of factors including what kind of car you drive, your driving record, and what kind of insurance you want.  A Car insurance policy is actually a package of several different types of insurance.

Here are some of the  types of coverage car insurance companies offer. Some of these are required by state law and some of this coverage is optional.

• Liability - This pays for accidental property damages and bodily injury to others. Injury damages include medical expenses, lost wages, and pain plus suffering. Property damage includes damaged cars and property. This protection also pays for court costs and legal defense. State laws determine how much liability coverage you drivers must have, but one can always purchase more coverage than the state requires.
•  Comprehensive - This protection pays for damage or loss to a vehicle that doesn't occur in an auto accident. The types of damages insurance covered include loss caused by fire, hail, wind, flood, theft or vandalism.
• PIP - Personal Injury Protection (PIP) is required in many states. This protection compensates the insured for medical expenses, regardless of fault.
• Collision - This protection pays for damages to an owner’s vehicle caused by collision with another object.
• Medical Coverage - Pays medical expenses regardless of fault when the expenses are caused by an auto accident.
•  Underinsured Motorist – Covers your car repairs when an accident is caused by another party whose insurance cannot cover the bill.
• Uninsured Motorist – Covers your car repairs when an accident is caused by another party whose insurance cannot cover the bill.
• Rental Reimbursement - This coverage will pay for a rental car if your own car is damaged in an accident.

Most policies combine a several of these types of coverage. Before deciding on what insurance to buy you will want to  learn the laws in your state. Even if you plan to buy more than the mandatory level of insurance its nice to know the minimum insurance you need for your car.

Understanding Your Auto Insurance Needs

Please consider these four guidelines when attempting to understand your insurance needs.

The State Laws
Forty-seven states require that drivers to purchase liability insurance. Liability insurance covers bodily injury and property damage that a driver causes others. Fifteen states including Florida, Michigan, Maryland, New York, Massachusetts and New Jersey also require drivers to get Personal Injury Protection (PIP). This pays for medical expenses and lost wages in the event of an accident. No insurance company will let you buy less coverage than what is required by state law, so you don’t have to worry about accidentally buying too little insurance.

How Much Money To Spend
When you buy insurance you wil put together the different pieces of auto insurance coverage in one policy. The first piece of the policy is usually liability insurance. People often buy more than the minimum amount here because if you cause an accident and your insurance can’t cover all the damages the injured person’s attorney can go after your personal assets. So, you have a lot of assets you may want to get extra liability insurance, but if you have little to lose there is not much to be gained by buying more of this coverage.

Your Vehicle
If your car was suddenly totaled, could you afford to replace it? If not, you will want collision and comprehensive coverage. Most drivers would agree that if your car is worth less than $3,000, comprehensive and collision insurance won’t be worth the premium. However, if you have a $65,000 car though, it is worth it to pay an extra ~$200 every year so you can have your car replaced if you get it into an accident.

Other Insurance
Most drivers don't realize that other kinds of insurance (like health insurance and homeowners insurance) may pay for damages resulting from a car accident. For instance, if you have good health insurance, you won't need more than the minimum legally required Personal Injury Protection insurance. 

The Cost of Auto Insurance

There are dozens of factors that effect the cost of auto insurance. As with any other good, prices vary by company and you should compare prices before buying a coverage. The most important determinant of price is the vehicle. Obviously, a sports car costs more to insure than a minivan. If you own a vehicle that is frequently stolen your coverage will be more expensive and if it has a high safety rating the cost will be lowered.

Another factor is where you live. If there is are a lot of accidents or vandalism in your area, insurance will cost more. For example, since more cars are damaged in cities than in rural areas, city drivers pay more for insurance.

Frequency of usage also effects insurance costs. If you drive a lot, you increase the chances you get  in an accident. Drivers who have long commutes will pay more than people who live near their job. Also, if you only use your car on weekends, insurance rates should be lower than if you drove every day.

Demographis are the last major factor. Gender, marital status, age and past driving experiences are taken into account when policies are priced. Accident rates are higher for young drivers so if you are under 25 you should expect to pay a little more. Men are more likely than women to get into high cost accidents and women are likely to get into less costly accidents. While it may not seem fair an unmarried 19-year-old male with a perfect driving record will have to pay more than a married 25 year old woman with a perfect driving record.  Luckily performance is also taken into account so if your driving record is impeccable, you can get insurance at a lower price.

Bringing the Costs Down

There are four main ways to reduce the cost of car insurance:

1.      Buy a car that looks good to insurance companies. Insurance companies know what kinds of cars are prone to expensive claims. They know what cars are most often stolen and wrecked, neglected and broken into.

2.      Most companies offer discounts for good students, having multiple cars insured and accident-free driving are all. Ask insurance companies about discounts that may be available.

3.      Consider carpooling or using public transportation for your day to day commute. Fewer miles you drive your care the less your insurance will cost you.

4.      Drive carefully. Insurance companies have to charge more to insure accident-prone so if you don’t get into accidents you won’t have to pay as much for your insurance.

Deductibles

All car insurance policies have a deductible which is the part of your policy that you need to pay before your insurance coverage kicks in.  Deductibles vary by company, but amounts such as $100, $250, $500 or $1,000 are common. If you get in an accident that causes $3,000 worth of damage and your deductible is $250, you must pay the first $250 of the repairs and and the insurance company will take pay for of the remaining $2,750.

The premium (cost of coverage), will be lower if you choose a higher deductible. If you are willing to pay greater out-of-pocket costs, companies will not charge you as much for coverage.  Normally most users find the greatest benefit in setting high deductibles.