Car insurance companies spend a lot of money trying to catch your attention with cute animals, humorous mishaps and affable characters. But buying car insurance based on your favorite commercial can be an expensive mistake.
The best car insurance companies focus on good coverage and customer service at a fair price. Here’s what you should consider before buying car insurance.
Buy More Than Your State’s Minimum Requirements
Liability car insurance pays for property damage and injuries you accidentally cause to others. It also covers court judgments, settlements and legal defense if you’re sued because of a car accident.
But your state’s minimum liability requirement is insufficient. For example, California’s minimum car liability requirements are $15,000 for injury/death to one person, $30,000 for injury/death to more than one person, and $5,000 for property damage. Those minimum amounts won’t get you very far if you cause a major accident that results in multiple injuries or destroys someone else’s car. You could be stuck footing the bill for any expenses above your policy limits.
A general rule of thumb is to buy enough liability car insurance to cover your assets, such as your savings account and house.
Familiarize Yourself with the Basic Coverage Types
Liability car insurance is the foundation your policy is built upon. But there are several other essential car insurance types you should know.
- Uninsured motorist (UM) insurance and underinsured motorist (UIM) insurance. These coverage types pay for you and your passengers’ medical bills and other expenses if someone without liability car insurance or not enough liability car insurance crashes into you. UM is required in some states and optional in other states.
- Personal injury protection (PIP). PIP pays for you and your passengers medical expenses, no matter who is at fault for the accident. PIP is required in some states and optional or not offered in other states. Your state might offer MedPay, which is a similar coverage type.
- Collision and comprehensive insurance. These are two separate coverage types that are often sold together. They cover a wide range of problems, like car accidents, car theft, floods, fires, hail, collisions with animals and falling objects. You may be required to carry these coverage types if you have a car loan or lease.
Don’t Overpay for Coverage You Don’t Need
Car insurance companies offer many optional coverage types that can help you plug holes in your policy. But in some cases, you could end up buying coverage you already have or won’t actually use.
For example, roadside assistance insurance pays for car towing and other expenses if your car is disabled. But you might already have this coverage through your credit card, car manufacturer or an automobile club like AAA.
Another example is rental reimbursement insurance, which pays for substitute transportation while your car is being repaired following a car accident. If you don’t need a rental car or bus fare while your car is in the shop, it doesn’t make sense to pay for this coverage.
Get Car Insurance Quotes for the Vehicles You Are Considering
If you’re shopping for a new or used car, you should be aware that the model of car can play a significant role in how much you will pay for car insurance. Your auto insurance agent can run quotes for the vehicles you’re considering. That way you won’t be caught by surprise after you buy the car.
For example, a Tesla Model S Performance costs nearly $2,400 more per year to insure compared to a Honda CR-V LX, according to a Forbes Advisor analysis of car insurance rates for top-selling 2021 car models.
Insurance companies look at the claims history for models, including high liability claims that have been paid for injuries to others. Cars that are more expensive to repair tend to affect the cost of collision and comprehensive insurance.
Shop Around for Better Car Insurance Rates
Now that you have a firm understanding of how much coverage you need, the best way to get a good deal on car insurance is by comparing car insurance quotes among multiple insurance companies. That’s because prices for the same policy can vary by hundreds of dollars at different companies. You can get free quotes online or speak with an independent car insurance agent who can gather quotes from multiple companies on your behalf.
Nearly a third (31%) of consumers thought their car insurance rates were either “unfair” or “very unfair,” according to a survey by YouGov for Forbes Advisor. But only 34% got a car insurance quote from a different company in the last 12 months. Don’t make this mistake. You could potentially save hundreds of dollars per year just by switching to a new car insurance company.
Jason Metz is a Deputy Editor at Forbes Advisor. As a former claims handler and fraud investigator, he’s seen the inside workings of the insurance industry. He enjoys helping consumers navigate the complexities of insurance.