How to Choose Your Car Insurance Coverage

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TL/DR

Before you choose a policy, you should think about how much coverage you and your car need and how much coverage you can afford.

Before choosing an auto insurance company, you should think about how they are known for customer service, including how they handle claims and how quickly they respond.

Before you choose a policy, get quotes from a few different car insurance companies. One of them might offer the same amount of coverage at a lower price.

Every two years, you should look for a new car insurance policy to get better rates.

In Depth

Price isn't the only thing to think about when picking the right car insurance. To choose the right car insurance, you need to know how your policy would protect you after an accident and how it wouldn't. You also need to get enough insurance to fully cover your car (and yourself) in case of a crash.

When you know how much coverage you need, you can shop around for insurance and choose the company that offers the types of coverage you need at a price you can afford.

How to figure out how much car insurance you need

Almost every state has a minimum amount of car insurance that you have to have, but this is just a starting point for figuring out how much insurance you really need.

State minimums for car insurance aren't enough to cover the real costs you could rack up if you cause an accident. For example, if you have a state-minimum policy that only covers damage caused by an at-fault driver up to $30,000, you might be allowed to drive, but you might be responsible for tens of thousands of dollars' worth of damage after a major car accident.

Instead of getting the least amount of coverage you can, you should get enough car insurance to fully protect you after an accident. Here are some things to think about when deciding how much of each type of car insurance coverage you need:

Coverage for liability

There are different kinds of coverage in a car insurance policy, but liability coverage is the most important one. This is what pays for damage that you cause in an accident.

There are two parts to liability coverage: bodily injury liability and property damage liability. Bodily injury liability pays for injuries to other people, and property damage liability pays to fix their cars. Don't forget that liability insurance doesn't pay for damage to your own car.

We suggest that you choose at least $100,000 in bodily injury liability coverage per person and $300,000 per accident, plus $100,000 in property damage liability coverage.

Injuries, lost wages, and property damage can cost a lot. In 2018, the CDC estimates that fatal crashes cost a total of $55 billion, and you don't want to have to pay tens of thousands of dollars out of your own pocket if the damage from an accident is more than your policy covers. [1] Why our sources can be trusted "State-Specific Costs of Motor Vehicle Crash Deaths," by the Centers for Disease Control. The 26th of September, 2022.

Coverage for uninsured and underinsured drivers

Uninsured and underinsured motorist coverage (UM/UIM) protects you if you're hit by someone who doesn't have car insurance or doesn't have enough.

Since your uninsured motorist coverage usually has to match the amount of your liability insurance, you have less control over how much you'll get. In some states, it's also a requirement.

But even if UM/UIM isn't required in your state, we still think you should add it. If you don't, and an uninsured driver hits you, you might have to pay for the damage yourself.

Coverage for personal injuries

Personal injury protection, or PIP insurance, pays for your injuries and medical bills after an accident, no matter who was at fault. It is sometimes called "no-fault" insurance because it is required in states with that name.

If you live in a place where PIP is required, you need to have at least the minimum amount. Whether or not you should get more depends on your situation. If you don't have health insurance, you may want to choose a policy with as much PIP as you can afford. If your health insurance is good, PIP may not be as important.

Comprehensive and collision coverage

Full-coverage insurance policies include both comprehensive and collision coverage. Together, they cover damage to your own car, whether it was caused by an accident or by something else, like theft, vandalism, or hurricanes.

You don't have to decide how much comprehensive and collision insurance to get like you do with other types of car insurance (instead of having a limit, like liability coverage, they just cover your car up to its value).

Instead, you just need to decide if you want them or not. But some drivers must have comprehensive and collision coverage even though the law doesn't require it.

You must have comprehensive and collision coverage if you bought your car with a loan or if you lease your car. Even if you own your car outright, adding them to your policy is still a good idea. So, if your car is stolen, damaged by weather, animals, or something else out of your control, you won't have to pay to fix it or buy a new one.

Additional Coverages

Besides these basics, there are some other coverages you might want to add to your car insurance. Some other car insurance coverages you might want to think about are:

• Roadside assistance coverage: Emergency roadside insurance is a good add-on if you don't already have AAA or another roadside service provider. So, you won't have to worry about being stuck on the side of the road.
• It's a good idea to add rental car reimbursement so that if your car gets damaged, you won't have to pay for a temporary replacement car.
• Gap insurance: If you have a loan or lease on your car, you may need gap insurance. It pays for the difference between how much your car is worth after it has lost value and how much you still owe on your loan or lease after the car is totaled.

Most of the time, you can only get a new car if you own a car that is at least two or three years old (or newer). It pays to replace your car with a brand-new one of the same make and model. This may be a good coverage to add if you're worried about totaling a new car and don't mind paying a little more for peace of mind.

How to choose your car insurance company

When looking for car insurance, the most important thing to make sure of is that the company you choose gives you all the coverage you need. Most likely, you'll have at least a few companies from which to choose.

When choosing an auto insurance company, price is important, but it's not the only thing that matters. Try to find an insurance company with reasonable prices, good customer service, a quick claims process, and a strong financial standing (our Policygenius reviews of the top insurance companies take all of this into account).

You can also check ratings with third-party rating agencies and the National Association of Insurance Commissioners, which publishes information about the complaints policyholders have about insurance companies.

Remember that you should get quotes from more than one insurance company. If you shop around, you could save hundreds of dollars per year because one company might charge less for the same amount of coverage as another.

Choosing how much car insurance to pay

Even though the same information is used by each company to figure out your price, rates can be different from one company to the next, even for the same driver.

Estimating the cost of the coverage you'll need is the best way to choose an insurance company that offers the right coverage for the right price.

You can get an idea of how much insurance costs for drivers like you by using an insurance coverage calculator. You can't choose exactly what your insurance rates will be, but if you know what insurance usually costs, you can choose a policy that isn't too expensive compared to the average.

Choosing a deductible for your car insurance

When you buy car insurance, you'll be asked to choose the amount of your deductible. Your deductible is the amount you'll have to pay out of pocket for each claim before the insurance company takes care of the rest. Comprehensive and collision insurance both have deductibles, but liability insurance doesn't.

Usually, deductibles are $500 or $1,000, but depending on the company, you may be able to choose a higher one. Your car insurance will be a little more expensive if you have lower deductibles. This is because the amount your insurance company has to pay for a claim will go up.

When choosing your deductible, look at how much each amount changes your costs and think about how much you'd be willing to pay out of pocket before you could use your insurance.

Discounts on car insurance

Most car insurance companies offer discounts that can help you save money on your premium.

When choosing a car insurance policy, discounts shouldn't be the deciding factor. However, it might make more sense to go with a company that gives you a lot of discounts instead of a similar company that gives you fewer discounts.

Some common discounts on car insurance are:

• Safety equipment discounts: You might get a discount if you own a car with safety features like an anti-theft system or crash protection tech.
• Association discounts: Some insurance companies offer discounts to people who belong to certain clubs, work for certain companies, or went to or graduated from certain schools.
• Most insurance companies will give drivers a discount if they take a driver's education course or have a history of safe driving.
• Good student discount: Drivers who are students and have a high grade-point average get a discount. This discount is for both full-time high school and college students.
• Paid-in-full discount: Most companies will give you a discount if you pay a full year's worth of premiums at the beginning of your policy.
• When you buy your auto insurance and home, renters, or condo insurance from the same company, you can save money.

When to get a new auto insurance plan

Once you choose a car insurance policy and finalize coverage, you should plan to do the same thing again in the future. When it's time to renew your policy, it's important to look over your coverage.

If your rates are going up, you might want to find a new car insurance company before your old policy is renewed. There is no cancellation fee for switching insurance companies, so if you think you're paying too much, don't be afraid to switch.

Some other times when you might want to look for a new car insurance policy are:

• You are adding a new driver to the insurance plan: When you add a new driver, especially one who just got their license, you should talk to your insurance company about your coverage and look around to see if you can find a better rate.
• You've been driving more safely. If you haven't had any accidents or tickets for a few years in a row, you might be able to get a discount for being a safe driver. Because safe-driver discounts vary by insurance company and number of years, you may find a better rate by shopping around.
• You just turned 25. Car insurance can be expensive for young drivers, but rates go down a lot when you turn 25. If you think you might be able to get cheaper car insurance because of your age, it won't hurt to shop around for a new policy.

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