How To Shop For Car Insurance
With so many different insurance companies out there, you may feel overwhelmed by the idea of picking one. Luckily, comparing carriers with PolicyPilot is simple and free.
Types of car insurance
Auto insurers offer different kinds of coverage to help protect you financially in various scenarios. Here’s a rundown of six common insurance options so you can understand what type of coverage you need:
- Liability insurance covers the bills for property damage or injuries that you cause in an accident.
- Collision insurance helps you pay to repair or replace your car if it’s damaged in an accident with another vehicle or object.
- Comprehensive insurance covers the costs to repair or replace your car if it’s stolen or damaged in an incident outside of your control, like vandalism and natural disasters.
- Medical payments coverage takes care of the hospital bills for treating injuries sustained by you or your passengers in an accident.
- Personal injury protection reimburses you and your passengers for medical costs from an accident. PIP can also cover lost income, childcare, and other expenses resulting from your injuries.
- Uninsured and underinsured motorist coverage takes care of your bills if you’re the victim of a hit-and-run or hit by a driver whose insurance can’t cover the total amount of your medical expenses and vehicle repairs.
How Much Is Car Insurance?
According to AAA, the average cost of auto insurance for a new car is $1,202 per year. So, how much is car insurance per month? You’re looking at a monthly cost of about $100, though this number can change depending on several factors. For example, your age, gender, location, credit, driving record, and mileage — as well as the type of car you drive — can all influence your auto insurance premium.
To ensure you’re getting a competitive rate, you should compare car insurance by age, location, credit, driving record, and more.
Auto Insurance Basics
Learn the basics of car insurance, so you know what to expect if you get into an accident.
What is auto insurance?
Auto insurance is a financial safety net that protects you from having to cover the full cost of car repairs or medical expenses from an accident. Most states require drivers to carry a minimum amount of auto insurance in the form of liability coverage. If you have additional types of insurance, like collision or comprehensive coverage, you’ll be covered in more scenarios.
How does car insurance work?
Insurance helps pay to repair or replace damaged vehicles and reimburse medical expenses after an accident. Let’s walk through how car insurance works:
- You purchase a policy from an auto insurance company. Depending on where you live, certain coverages are required by law.
- Your policy has deductible and coverage limits. Your deductible is the minimum amount that you pay out of pocket before insurance kicks in, while a coverage limit is the maximum amount that your insurer will pay for a claim.
- If you get into an accident, file an insurance claim as soon as possible. The circumstances of the accident and whether you’re at fault will help determine which — and whose — coverage is used.
- After filing a claim, your premium may increase for the next three years if the accident was primarily your fault.
Auto Insurance FAQ
Check out the answers to common questions about how to compare car insurance.
Do I need comprehensive auto insurance?
Comprehensive auto insurance is not required by law. However, if you’re financing or leasing a car, then your lender or dealership will typically require that you purchase comprehensive as well as collision insurance. Even if you’re not asked to buy it, maintaining comprehensive coverage may be a good idea, especially if your car’s market value is high. Comprehensive insurance can provide a significant financial cushion in the event of theft, vandalism, and other incidents outside of your control.
What is the cheapest car insurance?
The least expensive auto insurance option would be purchasing the minimum amount of liability coverage required in your state. While this decision may be economical in the short term, it could prove to be more expensive in the long run. If you purchase the cheapest insurance option and cause an accident, then you’ll be on the hook for any car repairs or medical bills that exceed your coverage limits. You’ll also be fully responsible for fixing your car if you hit another vehicle or object or if your vehicle is stolen or damaged by something other than a collision.
What car insurance is required by law?
The minimum amount of car insurance you must maintain by law depends on the state you live in. In Alaska, for instance, you’re required to purchase liability coverage with limits of at least $25,000 for property damage and $100,000 for bodily injuries, capped at $50,000 per individual. In Arizona, on the other hand, you’re only required to buy coverage with a property damage liability limit of $10,000 and bodily injury liability limits of $30,000 per accident and $15,000 per individual.
Will car insurance cover theft?
Your auto insurance policy would cover vehicle theft if you purchased comprehensive coverage. Liability and collision coverages won’t cover you if your car or certain parts are stolen.
How much car insurance do I need?
Beyond purchasing the minimum amount of car insurance required in your state, you need to ensure that your assets are protected legally and financially if you get into a serious accident. Start by totaling the value of your car, home, savings, and investments, then deduct your debts to get your net worth. The liability limits of your policy should cover that amount.
Additionally, purchasing collision and comprehensive insurance is wise if you can’t afford to replace your car after it’s totaled or stolen. You could consider dropping collision and comprehensive insurance if your car is older and has depreciated significantly to under a few thousand dollars.
What do I need to know before buying car insurance?
Here are some auto insurance tips to keep in mind before purchasing a policy:
- Good driving habits can help you save money. Your driving record partially determines the cost of your premium. Having a clean record can help you score a better rate as well as driver safety discounts.
- A higher deductible usually means a lower premium — but there’s a catch. Choosing a higher deductible can help you save money on car insurance premiums because your insurer won’t have to cover as much in the event of an accident. However, this means you’ll pay more out of pocket if you need to file a claim.
- Your ZIP code matters. Drivers who live in areas with higher rates of accidents, theft, and vandalism might pay more for car insurance. Similarly, you may have a higher premium if you don’t have access to secure parking.
- Get a discount by bundling insurance policies. You can save money by purchasing different types of insurance — such as homeowners, renters, or life insurance — from the same company.
Should I purchase my policy with an agent or online?
For convenience, major insurance companies generally offer a quote and online transactions. This process allows you to quickly compare auto insurance rates between different insurers and find a good deal. However, there are benefits to working with an agent, including personalized customer service and the opportunity to ask specific questions about your coverage, the laws in your state, and which discounts are eligible for you.
What auto insurance discounts apply to me?
Car insurance companies offer many different types of discounts that can help lower your premium. For example, you could get rewarded for driving accident-free for several years, maintaining good grades at school, having an anti-theft device or system installed in your car, or being a homeowner. Make sure to run through the list of discounts available from your insurer so you can maximize your savings.
What is uninsured and underinsured motorist coverage?
Other drivers might not carry sufficient liability insurance to cover damages from any accidents that they cause. Uninsured and underinsured motorist coverage reimburses you for medical bills, car repairs, and lost wages if you’re hit by an uninsured or underinsured driver, respectively. This coverage also applies if you’re the victim of a hit-and-run.