How to Buy Cheap Car Insurance: The top carriers, types of coverage and how to save

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Car insurance can feel like a painful expenditure, since you most likely have to carry it. The majority of U.S. states mandate that all car owners have basic auto insurance. Though laws vary, nearly every state requires car owners to carry bodily injury liability and property damage liability insurance. In addition, many states require drivers to carry personal injury protection and uninsured motorist coverage.

However, you have many options when it comes to buying car insurance. You can shop around at the top auto insurance carriers for the best price. Also, look for ways to cut rates through different insurer programs. Understanding the different types of coverage can also help you figure just how much insurance you need to carry. Read on to learn more about how to buy car insurance.

What goes into insurance rates

There’s a long list of options and coverages for purchasing car insurance today, but auto insurance rates vary by insurer and a number of factors. Your age, credit score, location, driving record and vehicle type all influence how to buy car insurance. Since age and driving record affect rates, your rates can be different from other drivers if you need to know how to get car insurance for the first time.

The average annual cost for auto insurance is $935.80, according to a 2018 report from the National Association of Insurance Commissioners, or NAIC.

Before you decide on an auto insurer, compare car insurance quotes for coverage by provider in your state. Comparison shopping could save you hundreds of dollars or more per year.

Learn more: Auto insurance quotes: How they are determined and what to look for

How to cut auto insurance costs

Here’s the number one rule for how to buy car insurance: comparison shopping for your area of the nation is crucial for finding cheap insurance. Prices vary by insurer. Some companies offer much more affordable options than their competitors.

There are some actions you can take, outside of comparison shopping, to slash your insurance costs. One way you can save is by understanding how much coverage you really need and purchasing accordingly. It also pays to look for discounts from auto insurers for things like maintaining a good driving record, taking a defensive driving course or putting a limited number of miles on your car annually. If you need to know how to get car insurance for the first time, you may be a student. Look into student discounts, as well.

Requesting higher deductibles can also lower your insurance costs substantially. In fact, you could lower your collision and comprehensive coverage cost by 15 to 30 percent by raising your deductible from $200 to $500, according to the Insurance Information Institute. Moving to a deductible that’s $1,000 could save you 40 percent or more.

Learn more: How to find the best cheap auto insurance

Auto insurance coverages

Broadly speaking, auto insurance provides coverage for property damage or theft, liability coverage for expenses related to the bodily injury or property damage of others, and medical coverage for the cost of injuries, rehabilitation, lost wages or funeral expenses.

Required auto insurance coverage varies by state, but nearly all states require drivers to purchase basic auto liability insurance.

A basic auto insurance policy includes six different coverages:

  • Bodily injury liability: When you (or someone driving your car) causes an accident, this pays for injuries to other people, including other drivers, passengers and pedestrians.
  • Personal injury protection: This covers treatment of injuries for the driver and passengers of the policyholder.
  • Property damage liability: This covers any damage to someone else’s property.
  • Collision: Helps pay to repair or replace your vehicle if it’s damaged in an accident with another vehicle or object. This coverage is typically afforded after paying a deductible.
  • Comprehensive: This covers any damage that happens outside of collision with another car or object, such as an earthquake, vandalism, hail, flood or accident involving an animal.
  • Uninsured or underinsured motorist bodily injury coverage: Helps pay the medical costs for you (or others hurt in your car) if you’re in an accident caused by an uninsured driver or by someone carrying bodily injury liability limits that are too low to cover the actual damages.
  • Uninsured and underinsured motorist property damage Coverage: Helps pay for your vehicle repairs (or replacement) if you’re in an accident caused by an uninsured driver or by a driver whose Property damage liability limits are too low to cover the actual damages.

Recommended Car Insurance by Type

As mentioned above, your state most likely has minimums on the different types of coverage that you need to carry. The NAIC actually has a chart detailing auto insurance coverage minimums by state.

You will commonly see ratios listed as minimums. For instance, it’s common to see 50/100/25. Those are simply the minimum types of coverage in thousands of dollars. So a 50/100/25 ratios for auto insurance means: $50,000 gets paid out max for one person’s injury, $100,000 is the max for one accident and $25,000 is the max payment for property damage. As per state law, you often must have these maximum payouts as your minimum coverage amount.

Commonly, the first number refers to the maximum amount paid out for one person’s bodily injury per accident. The second number usually refers to the maximum payout per accident. The third is usually property damage maximum payments.

However, an insurance agent may recommend that you carry more than the minimums. For instance, if your property is higher in value than the minimum coverage required by the state, you may need more coverage. An insurance agent can help you navigate how much coverage is right for you.

Auto insurance rates vary by region

How much you’ll pay for auto insurance, and how much coverage you’ll need, depends heavily on where you live. Your location is the largest factor affecting how to buy car insurance.

New Jersey drivers pay an annual average of $1,309.29 in 2016, the highest among U.S. states, according to a 2018 report from the NAIC. That’s well above the national average of $935.80. Louisiana, New York, Michigan and Florida round out the top five most expensive states for auto insurance, all with annual average cost of $1,250 or more.

Drivers in Idaho pay the least, spending an average of just $599.77 per year. Iowa, North Dakota, South Dakota and Maine round out the five least-expensive states for auto insurance, all with annual average cost of $650 or less.

The large majority of states mandate that drivers carry at least bodily injury and property damage liability. Each state has different required liability limits for all coverages as well.

Keep in mind that the minimum coverage required by your state may not be enough for your situation. It’s important to make sure you have enough protection in the case of an accident.

Gap insurance

Gap insurance is a type of optional car insurance that covers the “gap” between what you owe on the car and what it’s actually worth.

It pays if you lose your vehicle to collision or theft.

For example, let’s say you’re found not at fault in an accident where your vehicle is damaged beyond repair. You still owe $20,000 on your car loan, but the actual value of the car is only $15,000. Gap insurance covers the $5,000 difference.

Not everyone needs gap insurance, but it’s worth considering if you made less than a 20 percent down payment, leased the vehicle or financed for longer than 60 months.

Rental car insurance

Whether you rent also affects how to buy car insurance. The rise of peer-to-peer vehicle rental and car sharing alongside traditional car rental services has created a long list of options for consumers looking to rent. It’s also created more issues related to rental car insurance.

Before you purchase insurance through a rental service, it’s important to understand the coverage you may already have. Auto insurance coverages and deductibles that you have on your own car often apply to rental vehicles. Collision damage insurance purchased through your insurance company, for example, may cover you in a rental car.

In addition, your credit card company may provide some coverage, but benefits differ. It’s important to call and check with your credit card company before relying on it for rental insurance.

Traditional brick-and-mortar car rental services typically offer collision damage insurance, liability insurance, personal accident insurance and personal effects coverage. Car-sharing programs often include the insurance cost in the fee, and peer-to-peer services offer a wide range of options.

What do I need to buy car insurance?

If you’re looking for how to get car insurance for the first time, or haven’t set up a new policy in a while, you might be wondering, “What do I need to buy car insurance?”

Allstate outlines the documents that you typically need to show in order to get car insurance:

  • Driver’s Licence, both for you and for people you expect to be driving your vehicle(s)
  • Vehicle registration
  • Current declaration page: this outlines current insurance coverage on any vehicles you may be getting a quote for

Other factors can help you lower your insurance premiums, like a good driving record and a good credit score, according to the Insurance Information Institute.

How to file a claim

The process for filing claims is similar across car insurance companies. This is a request you make to the insurance company for compensation or representation after an accident, regardless of who is at fault.

Here’s the general process for filing claims:

  1. Call your insurance company as soon as possible after the accident. They will direct you on next steps.
  2. Gather the documentation needed to file your claim. Your insurance professional will provide you with this information, but it generally includes a “proof of claim” report and a copy of the police report.
  3. Monitor your claim progress through the insurance company and speak with your claim specialist.

You may want to ask your insurance company about deadlines for filing claims, time limits for resolving claim disputes and when you can expect the insurance company to get in touch with you.