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Last updated on Oct 28, 2020

Car Insurance Buyer’s Guide

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Car insurance is a way to protect yourself financially from expenses resulting from car accidents. Unless you’re in New Hampshire or Virginia, state law also requires you to have car insurance.

When choosing the best insurance company and policy for your needs and budget, we recommend evaluating the company’s customer satisfaction rates, financial strength ratings, premiums, offerings, and discounts. You’ll find this information from independent reviewers like J.D. Power and AM Best, and on the providers’ websites. 

Shopping for Car Insurance

When Should You Review Your Car Insurance?

Rate increases, new vehicles, and major life changes are popular reasons why car insurance providers are re-evaluated by drivers. Renewal periods are also an excellent time to assess whether your insurance is still meeting your needs and at a competitive price. 

Any changes in your driving record are another opportunity to review your policy, as is becoming eligible for new or existing discounts. 

Car Insurance Coverage

Your requirements for minimum liability coverage varies by state, which are specified amounts for bodily injury liability per person and per accident and property damage liability per accident. 

For an accurate quote when comparing car insurance policies, you want to make sure that the quotes match your current policy limits and add-ons. 

Types of Car Insurance Coverage

  • Bodily injury liability – This coverage pays for the other person’s medical expenses and lost wages in an at-fault accident. It can also cover legal fees if you’re sued. 
  • Uninsured/underinsured motorist coverage – Some drivers don’t have insurance, or have limits not high enough to cover all damages. If you’re in an accident with one of these drivers, this coverage can compensate with additional payouts. 
  • Medical payments – These payouts go towards you and your passengers’ medical or funeral expenses, regardless of who’s at fault for the accident. Bodily injury liability protects people in the other vehicle, while medical payment insurance applies towards those in your car.
  • Collision coverage – This covers the cost to repair or replace your car if you hit another vehicle or object.
  • Gap coverage – Gap coverage addresses the remaining balance on your car’s loan if it’s totaled, so you don’t have to keep making payments on a vehicle that you don’t own or that no longer exists. 
  • Roadside assistance – This coverage comes in handy when you find yourself stranded because of car troubles. Coverage usually includes services like towing, flat tire, and battery.

Choosing a Provider

While you’re searching for a new insurer, be sure to keep your current policy active so you aren’t charged higher rates when you renew or purchase a new policy. This will also ensure you don’t get your license suspended for driving without insurance, and that you’re not left financially vulnerable in an accident. 

Before you make the switch to a new provider, we recommended you overlap your car insurance coverage by a few days in case you run into any issues.

Understanding Car Insurance Premiums

Car insurance premiums are generally set up as six-month or one-year premiums, which can be paid monthly or all at once. The benefit of a lengthier policy is that you can secure a lower rate for a longer period of time. You may get a discount if you pay in full as well. 

How much you pay for car insurance depends on a variety of factors, such as your driving record, car type and age, and where you live.

Car Insurance Premiums Factors

  • Driving history – The fewer accidents and traffic violations you have, the less risk you pose to insurers and the lower your premium will be.
  • Coverage level – Premiums increase as coverage levels rise.
  • Location – Driving in urban or high-crime areas increases the risk of claims, so rates are higher.
  • Credit score – Drivers with the lowest credit scores get the best prices.
  • Age and gender – Female drivers and drivers over 25 are statistically less likely to get into car accidents and therefore receive lower premiums.
  • Marital status – Married couples generally pay less because statistics show they don’t get into accidents as often.
  • Vehicle – Your car’s value, safety, and amount of damage it can do to another car all play a role in determining your policy price.
  • Mileage – Spending more time on the road results in higher premiums due to the increased odds of an accident occurring.
  • Safety features – Cars with safety features often have lower premiums because these features help prevent accidents and injury.

Car Insurance Shopping Tips

  • Use the same coverage levels for every quote – Selecting consistent coverage levels when comparing quotes gives a more accurate picture of which provider is a better value.
  • Look out for discounts – Car insurance companies often offer multiple discounts, and many of them are easy to qualify for.
  • Be honest – Insurance quotes and even premiums can increase if you leave out information, so be transparent about your circumstances to get an accurate price. 

Tips for Lowering Car Insurance Rates

  • Discount options – Providers usually have a website page listing all available discounts. Calling an agent directly also lets you know which specific discounts you qualify for, such as student, military, and driving courses.
  • Deductible – The higher your deductible, the cheaper your insurance because you’ll pay more out of pocket before your insurance steps in. If you prefer a lower deductible to reduce up-front costs in the event of an accident, you will have slightly higher premiums.
  • Bundling – Larger car insurance providers often offer other types of insurance, such as homeowners. If you bundle your insurance by getting an additional policy, you may qualify for an additional discount. 

What’s Next?

Read our review on the best car insurance companies for an easy starting place for comparing car insurance providers. Then request quotes online using the same parameters, and speak to an agent if you have questions.

If you’re ready to select a new or replacement provider, choose an effective date that guarantees you won’t have a coverage lapse and make your first payment to activate the policy. If you have a current insurer, all you have to do is send in a cancellation request with the same effective date. You will likely receive a cancellation notice for your records.

About the Authors

Lorraine Roberte

Lorraine Roberte Contributing Writer

Lorraine Roberte is a South Florida-based personal finance writer. Her work has been published on sites such as Thrive Global, Elephant Journal, Red Tricycle and Tweak Your Biz.