Buying Car Insurance

October 29, 2020

Car insurance provides financial compensation when events such as accidents or theft occur. Without it, drivers could face full responsibility for repair or replacement of their own vehicle, damage to another person’s car or property, and medical bills for anyone injured.

Possessing car insurance is not just a good decision for peace of mind – it’s the law in most states. Requirements vary by state, but mandated auto coverage oftentimes includes:

• Property damage liability (covering damage to another person’s vehicle as well as any buildings or structures hit by your car)
• Bodily injury liability (covering injuries you cause to someone else)
• Medical payments/personal injury protection (covering injuries to you and passengers in your car as well as lost wages and other costs resulting from an accident)

About half of all states require carrying uninsured/underinsured motorist coverage. This compensation comes into play if you get hit by an at-fault driver with insufficient insurance or none at all. The National Association of Insurance Commissioners reports that roughly 1 in 8 drivers do not carry auto insurance, despite it being against the law.

Some items on a policy aren’t required by law but are still good choices. For individuals with a car loan, lenders may say you need to buy the following until finished paying back the borrowed money:

• Collision coverage (covering your car when it hits another vehicle, an object, or a pothole)
• Comprehensive coverage (covering repair or replacement of your vehicle due to theft, fire, falling objects, vandalism, contact with an animal, or other event besides a collision)

Each element of coverage has a corresponding numerical amount that tells how much the insurance company will pay up to for a given incident. States determine the minimal amounts people buying auto insurance there must possess.

Missouri, for example, requires $25,000 bodily injury liability per person, $50,000 bodily injury liability per accident, $25,000 property damage liability per accident, $25,000 uninsured motorist coverage per person, and $50,000 uninsured motorist coverage per accident. Drivers in that state may opt for higher amounts to lower their own potential financial burden should an unfortunate event occur, but they cannot choose anything less than those figures.

Ways to save money

Buying only what your state requires in terms of insurance certainly is one way to keep premiums down. You run the risk, of course, that something will happen that isn’t covered or costs much more than your limits allow. For instance, if you elect not to carry comprehensive coverage and your car gets stolen, you’re out of luck. If medical bills from an accident exceed your insurance limit, you’ll need to find other means to pay the difference.

Some alternate strategies for reducing premiums include:

• Opting for a higher deductible

  When a claim is made, a deductible is the amount you’re responsible for paying before any insurance coverage clicks in. Choosing a $500 deductible over, say, a $250 one will lower your annual premium. Remember, though, that it also means you’ll take more out of pocket each time a claim does get made.

• Bundling coverage

  Insurance companies often sell more than just car insurance and provide deals to those making multiple purchases. For example, buying both home insurance and auto insurance from the same provider could reduce costs.

• Looking for discounts

  Factors such as maintaining a clean driving record, being a low-mileage driver, and installing an alarm system can potentially save you money. The cost of putting your teenager on your policy may be reduced with proof of good grades. Ask your agent what possibilities exist for your given situation.

• Thinking before claiming

  Many policies include discounts for staying claim-free. If you have a small accident, erasing this discount may end up costing you more than assuming minor costs yourself. Definitely submit a claim when financial burden will be high – that’s why you have insurance – but evaluate the potential long-term effect before seeking compensation for lesser incidents.

• Shopping around

  Do not assume one insurer is just as good as the next. Prices can vary considerably, so get quotes from various places.