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Carole Walker
Carole WalkerExecutive Director, RMIIA
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If you are confused about which car insurance company to choose, you are not alone. How can you know which company will be the best one for you?

The best car insurance companies understand your needs and provide coverage you can feel confident about on the road. Consider a company's costs, available discounts, customer service reviews and the claim-filing process. Providing accurate information can help you find the best price and coverage for your needs. Car insurance companies may use your credit score, driving record, age and other factors to estimate your quote.

To help you make an educated decision when choosing the best auto coverage, MoneyGeek ranked the top 10 car insurance companies for 2020. Follow MoneyGeek's six steps to pinpoint the right car insurance company for you and find available coverage in your state.

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The Best Car Insurance Companies for 2020

MoneyGeek has ranked the best car insurance companies based on several factors, including J.D. Power customer satisfaction ratings, financial stability ratings from AM Best and affordability based on information provided by several reputable consumer agencies. These rankings can help you when shopping for car insurance for your personal needs.


1

GEICOScore: 92

5/5

Affordability

4.5/5

Claims Ratings

5/5

Discounts

3/5

User Satisfaction

5/5

Financial Stability


GEICO is typically among the cheapest insurance options in almost every state. They also offer instant online quotes and the ability to buy a policy at any time, day or night, without the help of an agent.

Read MoneyGeek's GEICO Auto Insurance Review

2

USAAScore: 90

5/5

Affordability

4.5/5

Claims Ratings

1/5

Discounts

5/5

User Satisfaction

5/5

Financial Stability


USAA* offers a wide variety of policies at affordable rates. They also have additional policies that are not typically offered by other auto insurance companies, such as health, dental, and vision insurance.

Read MoneyGeek's USAA Auto Insurance Review

3

ProgressiveScore: 86

3/5

Affordability

4/5

Claims Ratings

5/5

Discounts

3/5

User Satisfaction

4.5/5

Financial Stability


Progressive isn’t just a name; it also represents the company values. They were named the best workplace for women and diversity in 2018 and 2019 and recently donated $1,000,000 to end mass incarceration and racial injustice. They also provide an array of discount and coverage options for customers.

Read MoneyGeek's Progressive Auto Insurance Review

4

State FarmScore: 86

3/5

Affordability

3.5/5

Claims Ratings

5/5

Discounts

3/5

User Satisfaction

5/5

Financial Stability


State Farm offers accident forgiveness free to members. They also offer a safe vehicle discount, which means vehicles made after 1994 could potentially save 40% or more on their coverage depending on the safety features of the vehicle.

Read MoneyGeek's State Farm Auto Insurance Review

5

American FamilyScore: 84

2/5

Affordability

4.5/5

Claims Ratings

5/5

Discounts

3/5

User Satisfaction

4/5

Financial Stability


American Family offers a variety of unique coverages that you might not find elsewhere, such as landlord insurance and farm and ranch insurance. Bundling these with your auto coverage could save you money on your policy.

Read MoneyGeek's American Family Auto Insurance Review

6

TravelersScore: 84

2/5

Affordability

3.5/5

Claims Ratings

5/5

Discounts

3/5

User Satisfaction

5/5

Financial Stability


Travelers has an excellent record of paying claims and providing helpful service. They also offer some unique coverages, such as coverage for weddings or other big events.

Read MoneyGeek's Travelers Auto Insurance Review

7

NationwideScore: 82

2/5

Affordability

5/5

Claims Ratings

2/5

Discounts

3/5

User Satisfaction

4.5/5

Financial Stability


Nationwide is focused on protecting the environment, with goals towards reducing carbon emissions, increasing landfill diversion and reducing pounds of waste and water usage per employee by 2026.

Read MoneyGeek's Nationwide Auto Insurance Review

8

AllstateScore: 82

3/5

Affordability

4.5/5

Claims Ratings

2/5

Discounts

3/5

User Satisfaction

4.5/5

Financial Stability


Allstate offers a unique roadside assistance program called Good Hands Rescue, which is an app that provides pay-per-use, on-demand roadside assistance. This allows anyone to use the service, not just people who signed up for an annual contract.

Read MoneyGeek's Allstate Auto Insurance Review

9

Farmers InsuranceScore: 78

2/5

Affordability

4.5/5

Claims Ratings

2/5

Discounts

3/5

User Satisfaction

4/5

Financial Stability


While some companies have gone to online-only sales, Farmers continues to use local agents. This allows customers to have a one-on-one relationship with a Farmers representative to guide them through future insurance questions and claims.

Read MoneyGeek's Farmers Insurance Auto Insurance Review

10

Liberty MutualScore: 78

2/5

Affordability

3/5

Claims Ratings

5/5

Discounts

3/5

User Satisfaction

4/5

Financial Stability


Liberty Mutual is incredibly innovative. In addition to offering a variety of car insurance coverage options, they set up Solaria Labs to create products like tuition insurance that reimburse costs for tuition, housing, and other fees in the event a student needs to withdraw before the end of the semester.

Read MoneyGeek's Liberty Mutual Auto Insurance Review

*USAA is only available to military members, veterans and their families.

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Best Car Insurance Company for Drivers With Poor Credit: GEICO

Your credit rating can dramatically impact your insurance rates. A poor credit rating can cost you hundreds of dollars a year on your car insurance. Some states don't allow insurance companies to use your credit rating in setting your rates, but most states still allow this practice.

GEICO is the best auto insurance option for people with low credit scores for several reasons.

GEICO
  • GEICO is typically among the most affordable insurance options for drivers with poor credit in almost every state.
  • GEICO offers a wide variety of discounts to their customers.
  • GEICO does not use your financial credit score to determine your rates. Instead, it uses your credit-based insurance score, which considers a combination of factors to determine your rates.

Learn more about the best car insurance companies for drivers with poor credit.

Best Car Insurance Company for Drivers With a Ticket: State Farm

Tickets and accidents can dramatically increase the price of your insurance. Because so much of your insurance premium depends on your driving record, even a single ticket or a minor fender bender can cost you hundreds of dollars each year.

State Farm is the best car insurance company for drivers with a ticket on their record.

State Farm
  • State Farm offers accident forgiveness to customers who have been accident-free for three years or more, keeping a single accident from causing your premiums to increase.
  • While many companies charge extra to add accident forgiveness to your coverage, State Farm offers the benefit to their customers at no cost.

Learn more about the best car insurance companies for drivers with a ticket or accident on their record.

Best Car Insurance Company for Teen Drivers: Allstate

Any insurance company will tell you that the most expensive insurance policies almost always include a teen driver. Teens are more costly to insure because they have no driving experience and are more prone to reckless behavior behind the wheel, but there are still ways to save money on insuring your teen driver.

Allstate is the best insurance option for teen drivers because they offer a variety of discounts for teens. While many insurance companies only provide a good student discount for young drivers, Allstate has multiple discount options for young drivers.

Allstate
  • Allstate offers discounts for the successful completion of the teenSMART® driver education program.
  • College students attending school at least 100 miles away from where your car is garaged can enjoy a discount with Allstate.
  • Allstate has discounts for full-time students that earn good grades.

Learn more about the best car insurance companies for teen drivers.

Best Car Insurance Company for Military Members: USAA

Veterans, active members of the military and their families are typically offered discounts through almost every insurance company, but one company is specifically designed for this group.

USAA consistently offers the lowest insurance costs and best customer service across the board for military members, veterans and their families.

USAA
  • On average, USAA offers the lowest prices of any insurance company.
  • Military families can receive a 10% discount for bundling multiple insurance coverages.
  • USAA also offers additional coverages for their members that often aren’t available through other providers, including life insurance, health insurance and pet insurance.

Learn more about the best car insurance companies for military members, veterans and their families.

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Ensure you are getting the best rate for your car insurance. Compare quotes from the top insurance companies.

The Best Car Insurance Company in Your State

Insurance is regulated at the state level, which means that not all companies operate in every state. Even companies that offer coverage in all 50 states have products that vary significantly from state to state, depending on required insurance minimums and other limitations. This means that the best company in one state may not be the best company in another. Make sure you compare products and quotes based on your state and ZIP code.

Find Cheap Insurance by State

AlabamaGEICO is the cheapest in ALBirmingham

AlaskaGEICO is the cheapest in AKAnchorage

ArizonaGEICO is the cheapest in AZPhoenix, Tucson, Mesa, Chandler, Scottsdale, Glendale, Gilbert

ArkansasSouthern Farm Bureau is the cheapest in ARLittle Rock

ColoradoGEICO is the cheapest in CODenver, Colorado Springs, Aurora

ConnecticutGEICO is the cheapest in CTBridgeport

DelawareState Farm is the cheapest in DEWilmington

District Of ColumbiaGEICO is the cheapest in DC

GeorgiaNationwide is the cheapest in GAAtlanta

HawaiiGEICO is the cheapest in HIHonolulu

IdahoState Farm is the cheapest in IDBoise

IllinoisGEICO is the cheapest in ILChicago

IndianaErie is the cheapest in INIndianapolis, Fort Wayne

IowaGEICO is the cheapest in IADes Moines

KansasAmerican Family is the cheapest in KSWichita
KentuckyState Farm is the cheapest in KYLouisville, Lexington

LouisianaSouthern Farm Bureau is the cheapest in LANew Orleans, Baton Rouge

MaineGEICO is the cheapest in MEPortland

MarylandErie is the cheapest in MDBaltimore

MassachusettsSafety Group is the cheapest in MABoston

MichiganGEICO is the cheapest in MIDetroit

MinnesotaFarmers is the cheapest in MNMinneapolis, St. Paul

MississippiTravelers is the cheapest in MSJackson

MissouriAllstate is the cheapest in MOKansas City, St. Louis

MontanaState Farm is the cheapest in MTBillings

NebraskaGEICO is the cheapest in NEOmaha, Lincoln

NevadaGEICO is the cheapest in NVLas Vegas, Henderson, Reno, North Las Vegas

New HampshireProgressive is the cheapest in NHManchester

New JerseyGEICO is the cheapest in NJNewark, Jersey City

New MexicoMetLife is the cheapest in NMAlbuquerque

New YorkGEICO is the cheapest in NYBuffalo, New York

North DakotaNodak Mutual is the cheapest in NDFargo
OhioGEICO is the cheapest in OHColumbus, Cleveland, Cincinnati, Toledo

OklahomaGEICO is the cheapest in OKOklahoma City, Tulsa

OregonGEICO is the cheapest in ORPortland

PennsylvaniaErie is the cheapest in PAPhiladelphia, Pittsburgh

Rhode IslandState Farm is the cheapest in RIProvidence

South CarolinaGEICO is the cheapest in SCCharleston

South DakotaState Farm is the cheapest in SDSioux Falls

TennesseeGEICO is the cheapest in TNNashville, Memphis

UtahGEICO is the cheapest in UTSalt Lake City

VermontVermont Mutual is the cheapest in VTBurlington

VirginiaProgressive is the cheapest in VAVirginia Beach, Norfolk, Chesapeake, Richmond

WashingtonPEMCO is the cheapest in WASeattle, Spokane, Tacoma

West VirginiaErie is the cheapest in WVCharleston

WisconsinGEICO is the cheapest in WIMilwaukee, Madison

WyomingState Farm is the cheapest in WYCheyenne
AlabamaGEICO is the cheapest in ALBirmingham

AlaskaGEICO is the cheapest in AKAnchorage

ArizonaGEICO is the cheapest in AZPhoenix, Tucson, Mesa, Chandler, Scottsdale, Glendale, Gilbert

ArkansasSouthern Farm Bureau is the cheapest in ARLittle Rock

ColoradoGEICO is the cheapest in CODenver, Colorado Springs, Aurora

ConnecticutGEICO is the cheapest in CTBridgeport

DelawareState Farm is the cheapest in DEWilmington

District Of ColumbiaGEICO is the cheapest in DC

GeorgiaNationwide is the cheapest in GAAtlanta

HawaiiGEICO is the cheapest in HIHonolulu

IdahoState Farm is the cheapest in IDBoise

IllinoisGEICO is the cheapest in ILChicago

IndianaErie is the cheapest in INIndianapolis, Fort Wayne

IowaGEICO is the cheapest in IADes Moines

KansasAmerican Family is the cheapest in KSWichita

KentuckyState Farm is the cheapest in KYLouisville, Lexington

LouisianaSouthern Farm Bureau is the cheapest in LANew Orleans, Baton Rouge

MaineGEICO is the cheapest in MEPortland

MarylandErie is the cheapest in MDBaltimore

MassachusettsSafety Group is the cheapest in MABoston

MichiganGEICO is the cheapest in MIDetroit

MinnesotaFarmers is the cheapest in MNMinneapolis, St. Paul

MississippiTravelers is the cheapest in MSJackson

MissouriAllstate is the cheapest in MOKansas City, St. Louis
MontanaState Farm is the cheapest in MTBillings

NebraskaGEICO is the cheapest in NEOmaha, Lincoln

NevadaGEICO is the cheapest in NVLas Vegas, Henderson, Reno, North Las Vegas

New HampshireProgressive is the cheapest in NHManchester

New JerseyGEICO is the cheapest in NJNewark, Jersey City

New MexicoMetLife is the cheapest in NMAlbuquerque

New YorkGEICO is the cheapest in NYBuffalo, New York

North DakotaNodak Mutual is the cheapest in NDFargo

OhioGEICO is the cheapest in OHColumbus, Cleveland, Cincinnati, Toledo

OklahomaGEICO is the cheapest in OKOklahoma City, Tulsa

OregonGEICO is the cheapest in ORPortland

PennsylvaniaErie is the cheapest in PAPhiladelphia, Pittsburgh

Rhode IslandState Farm is the cheapest in RIProvidence

South CarolinaGEICO is the cheapest in SCCharleston

South DakotaState Farm is the cheapest in SDSioux Falls

TennesseeGEICO is the cheapest in TNNashville, Memphis

UtahGEICO is the cheapest in UTSalt Lake City

VermontVermont Mutual is the cheapest in VTBurlington

VirginiaProgressive is the cheapest in VAVirginia Beach, Norfolk, Chesapeake, Richmond

WashingtonPEMCO is the cheapest in WASeattle, Spokane, Tacoma

West VirginiaErie is the cheapest in WVCharleston

WisconsinGEICO is the cheapest in WIMilwaukee, Madison

WyomingState Farm is the cheapest in WYCheyenne
AlabamaGEICO is the cheapest in ALBirmingham

AlaskaGEICO is the cheapest in AKAnchorage

ArizonaGEICO is the cheapest in AZPhoenix, Tucson, Mesa, Chandler, Scottsdale, Glendale, Gilbert

ArkansasSouthern Farm Bureau is the cheapest in ARLittle Rock

ColoradoGEICO is the cheapest in CODenver, Colorado Springs, Aurora

ConnecticutGEICO is the cheapest in CTBridgeport

DelawareState Farm is the cheapest in DEWilmington

District Of ColumbiaGEICO is the cheapest in DC

6 Steps to Find the Best Car Insurance Coverage

Most of us spend little time thinking about our car insurance. The renewal notice for our policy comes, and we pay it, often with little thought for whether our coverage needs have changed or if other insurers might now offer a lower premium. With accidents rare, few of us discover how fairly the insurer might handle a claim. Many factors can impact your insurance rates. Your driving history, the type of vehicle you drive, your marital status and your ZIP code are just a few things that affect your insurance rates. Moving to a new neighborhood might lower your rates while adding additional coverages to your policy might increase your rates.

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Step 1: Understand the Types of Car Insurance and Requirements

Auto insurance policies typically consist of a bundle of mini-policies that address distinct driving perils. Insurance companies generally price each component of the policy separately. The most significant component, liability coverage, is mandatory in almost all states. Collision and comprehensive — along with several other elements — are optional by law and require you to decide whether they're worth getting and at what deductible levels.

The major types of coverage include:

Liability

Most states require drivers to hold liability coverage. It protects you against the damage you may cause while driving to people you hit (known as bodily injury coverage) and their property (known as property damage coverage). In addition to paying medical costs, liability coverage may also cover other expenses such as legal fees and wages lost due to injuries. Liability insurance doesn’t cover protection to you or your passengers.

Uninsured and Underinsured Motorist

Uninsured and underinsured coverage protects you if your vehicle is hit by motorists who are not insured or who have insufficient coverage to pay the full extent of the damage they caused. Along with covering repairs to your car or truck, this insurance also reimburses you for medical expenses and other health-related costs. Uninsured motorist (UM) insurance is required in nearly half of all states, including New York, Illinois, New Jersey and Michigan. Still, it isn't mandatory in the others, including California and Florida.

Collision

Collision insurance covers repair or replacement of your vehicle if you are at fault in an accident, whether you collide with another vehicle or hit a stationary object. If you're leasing or financing a new car, most lenders will require you to have this type of insurance and comprehensive coverage — with which collision coverage is often bundled.

Comprehensive

Comprehensive coverage protects against loss or damage to your vehicle caused by something other than a collision. Calamities it covers include theft, fire, storms, hitting an animal and natural disasters such as floods, earthquakes and hurricanes. Many insurers bundle comprehensive coverage with collision coverage.

Medical Payments

Medical payments insurance shields you from the cost of medical payments to care for injuries to you or your passengers. This coverage may also include lost wages due to the accident and funeral expenses. This coverage is required in some states.

Personal Injury Protection (PIP)

PIP provides protection similar to medical payments coverage but is available in the “no-fault” states that require it. Medical and related expenses are covered regardless of who may have caused the accident. In cases of severe injuries, you may be able to sue the driver who is at fault, depending on state regulations.

Step 2: Research Policy Details to Know What’s Covered

While state laws require drivers to carry specific minimum insurance coverage, these requirements may fall short of your actual needs. For these more significant components of your policy, assess whether you should buy more coverage than the state requires.

Minimum and Liability Protection

Liability coverage pays for injuries you cause to another driver and their passengers and damages their vehicle. Most states have relatively low liability coverage requirements, with some states requiring as little as $5,000 in property damage coverage. The vast majority of drivers would benefit from carrying higher liability coverage levels than are required by law.

Most drivers will need liability protection, so understanding how coverage amounts are presented can help you find the right amount of coverage.

Liability coverage is typically summarized in three numbers representing your coverage levels in thousands of dollars, such as 100/300/50.

What Does 100/300/50 Liability Insurance Mean?

  • 100: The first number is your per-person bodily injury coverage. In the 100/300/50 example, the 100 represents how much your insurance company will pay for one person's bodily injury. If you cause an accident and put the other driver in the hospital, they would be covered up to $100,000 worth of medical bills.

  • 300: The second number is the per-accident bodily injury coverage. In the 100/300/50 example, there is $300,000 coverage for bodily injury in an accident, with a per-person cap of $100,000. If you hit a car with five passengers and each required $50,000 worth of medical coverage, you would be covered in full. However, if you hit a car with only one person inside, and they had $250,000 worth of medical bills, you would only be covered up to the $100,000 amount because even though the total is less than your $300,000 per accident coverage levels, it goes beyond the $100,000 per person cap.

  • 50: The third number is property damage coverage. This is the amount of coverage for damage to the other vehicle and any other property you damage. In the 100/300/50 example, $50,000 is the maximum amount for repairing or replacing damaged property. If you total another driver's $100,000 car, this policy would only cover the first $50,000, leaving you personally responsible for the other half of the damages. This includes any property damage you cause, whether you hit another car or crash into a wall.

Adding Higher Levels of Coverage

While no state laws require it, generous collision and comprehensive coverage can be useful and is required by lenders and leasing companies. Even if the car isn't financed, you don't want to risk crashing your car and incurring a total loss, or the possibility of the vehicle being stolen or damaged in a flood or other "weather event."

On older cars, the logic of carrying collision and comprehensive coverage diminishes. As a vehicle's value depreciates, so does the financial hit you'd suffer were you to lose it; the impact remains painful but not catastrophic. A rule of thumb: Drop additional coverage if your car’s value has declined to 10 times or less your annual premium for collision and comprehensive.

Step 3: Examine Other Car Insurance Add-Ons

When most people think about car insurance, they only think about liability, comprehensive and collision coverage. However, most insurance companies offer additional insurance products, such as GAP insurance and emergency roadside assistance, to ensure you're completely covered.

Emergency Roadside Service

For a small additional monthly fee, emergency roadside service through your insurance company typically covers tire changes, jump-starts, fuel delivery, being locked out of your car and towing or extricating your car. Consider this coverage if you don't already have it from your automaker, credit card company or automobile club membership.

Mechanical Breakdown

Mechanical breakdown coverage is an alternative to an extended warranty when insuring a new car. The policy may provide broader coverage than a manufacturer's extended warranty, but it won't cover routine maintenance such as oil changes, tune-ups and replacing brake pads. Complete a price comparison if you are considering this or a manufacturer's extended warranty, and be sure you understand what's included or not in each option.

Modified Car

Like to tinker? People who modify their car or add custom or aftermarket parts may find their car is worth more than its book value. If you take this coverage, be sure to document enhancements to the vehicle with receipts and photographs, to aid in making the case that you've made it more valuable than the norm.

Gap Insurance

According to Carfax, new cars depreciate rapidly, sometimes shedding 10% of their value in the first month and as much as 20% over their first year. If you recently bought your vehicle with a loan or are leasing it, the balance you owe may exceed what insurance typically pays in a total loss. That payout is the current value an insurance company assigns to your car at the time of the accident. You might wind up wrecking a vehicle worth $20,000 and have to repay its $22,000 loan balance.

Carriers offer supplemental "gap insurance" to cover the shortfall. You should consider the size of the gap and your risk tolerance of covering it in the event of a total loss before adding this to your insurance.

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MONEYGEEK EXPERT TIP

Your car insurance rate is determined by a combination of factors including location, driving history and behavior, vehicle type, coverage level and more. Premiums costs vary, so getting quotes from different providers can help you find the best policy price.

Step 4. Find Coverage for Special Cars and Driver Circumstances

Whether you own a collectible car or drive for a ridesharing service such as Uber or Lyft, you may need special coverage.

Classic Car Insurance

If you own a classic or vintage car (anything older than 25 years), you should shop for specialized coverage. This allows you to insure your antique vehicle for an agreed-upon value with an insurer. Such a policy accommodates the fact that, while most cars depreciate in value, classic cars are likely to appreciate. They also tend to be driven differently from other cars and may require special insurance if displayed at shows.

Insurance for Ridesharing Drivers

People who earn money driving for ridesharing services may not be covered by their personal auto policy since those generally don't cover commercial use or "driving for hire." While ridesharing services offer some insurance to their drivers, those policies may fall short of providing sufficient protection. Some insurers have begun offering ridesharing insurance, so talk with your agent to see what you need to be fully covered.

Non-Owner Liability Insurance

This type of policy is for people who don't own a car, preferring to rent or use a car-sharing service such as Zipcar. This type of insurance often covers only liability, but that alone could be more cost-effective than paying extra for that coverage each time you rent or share a car.

Before buying such a policy, check if your credit card provides this coverage at no additional cost. Verifying card coverage is also useful if you have regular car insurance. Your car's policy customarily covers some aspects of insuring a rental car, but the right card can fill gaps in that coverage, such as covering the cost of repairs until your insurance can pay the claim.

Rental Car Insurance

Your car insurance should cover you against at least liability claims when you rent a vehicle for personal use. If you plan to rent for weeks or months, check for time restrictions, since a 30-day limit is standard. If you don't carry collision and comprehensive coverage for your car, you won't have it for the rental car either.

If you damage the rental car, you'll be responsible for meeting a deductible for the claim, as you would with your own vehicle. Especially when renting abroad, you may need to pay a hefty deposit to cover the repair cost until the rental agency receives reimbursement from your own rental company. Certain credit cards cover some or all of these expenses for you, along with other related perks. It pays to research the rental-car features for your cards before you leave home so that you can charge the rental to the one with the best coverage and support.

Insurance for Self-Driving Cars

Entirely driverless cars are still at the testing stage. Still, Tesla and other carmakers are increasingly adding self-driving settings to regular vehicles, along with features that intervene automatically if the car detects an impending collision or other threat. While these technologies are expected to reduce accidents and insurance costs, you may not yet enjoy reduced premiums for a car equipped with them in the long run.

In part, that's because such vehicles are expensive. Teslas cost as much as $124,000 and can be relatively costly to repair after an accident. Insurers consider these costs when they set premiums. The cars are also relatively small in number, limiting insurers' ability to determine if they are indeed less accident-prone.

The insurance marketplace for cars that self-drive is likely to improve, perhaps soon. For example, Avinew, a start-up that will specialize in insuring partially automated cars, promises to "reward customers for buying safer cars." If you're paying high rates to insure a Tesla or another self-driving vehicle, you may want to add that company to your list when you next shop around for insurance.

Step 5. Find Ways to Save on Car Insurance

Once you've settled on the coverage types and levels you need from your car insurance, it's time to pare down what you'll pay with these steps.

Shop Around

In 2017, Consumer Reports found more than half of their subscribers remained with the same auto insurer for at least 15 years. Some companies even reward such loyalty with discounts. But those discounts typically comprise only a few percentage points, and numerous studies reveal that rates between companies can vary far more than that.

For example, a recent MoneyGeek survey of premiums from five major insurers and four different kinds of households reveals you could pay nearly double for choosing the most expensive carrier rather than the cheapest (which was GEICO in every case).

It's prudent to get at least three quotes before making a purchase — one from your current carrier plus two others from competitors. Military families should also seek a quote from USAA, which stands out in many surveys for price and service.

Seek out friends and relatives for their auto insurer experiences, especially if they've filed a claim. Also, check MoneyGeek's reviews of major auto insurers along with the auto insurance customer satisfaction survey by J.D. Power. Check with your state department of insurance, which may offer price comparisons and track consumer complaints. You can also review social media sites, such as Yelp, for customer comments and ratings.

Consider Changing Your Car

Because your insurance will depend in part on the value of your vehicle, its safety record and potential cost to repair it, it's a good idea to price insurance before you buy a car to understand what different models might cost to insure.

If you own vehicles such as sports or muscle cars, the savings from switching to a different model and model year might alone prompt you to switch. For example, a 2017 MoneyGeek survey found Texans who own two 2008 Town and Country minivans instead of two 2014 Mustang GTs would save an average of $2,600 a year on their premiums.

Choose a Higher Deductible

A basic rule of thumb is the higher the deductible, the lower the premium. The deductible is the amount you will pay in the event of a claim before your insurance company puts up any money. This will cut your costs, but be sure you have enough money to pay the deductible if you have to.

Maintain Good Credit

Though your credit history may not seem to have anything to do with your risk behind the wheel, some insurance companies think otherwise. The Insurance Information Institute says that data reveals that people with good credit file fewer claims. Make sure your credit information is correct and take steps to improve your credit if you have problems.

Agree to Have Your Driving Monitored

Most major insurance companies now offer so-called telematics programs in which you agree to have your driving monitored, using either a device installed in your car or an app you download to your smartphone. The technology typically measures how far and how well you drive, including your typical driving speed and how rapidly you brake and accelerate.

The insurance company then uses this data to determine the risk you pose behind the wheel and uses it to calculate your premium. For good drivers, the result can be significant savings in rates. Of course, the opposite can apply if the monitoring finds your driving style less than ideal. However, many such programs allow you to set aside an unfavorable verdict and revert to the traditional method of determining your rate.

Step 6. Take Advantage of Discounts to Lower Your Premiums

The available discounts and the savings they produce vary from company to company, and the biggest discounts won't necessarily offer the lowest premiums overall.

Bundled Coverage

Many insurance companies offer a discount if you bundle your car insurance with your homeowner's policy. You can also get a discount if you insure more than one car in the household. Apart from the potential savings, such bundling can simplify paying premiums and your other interactions with the insurer.

Long-Time Customer

Staying years with the same insurer will earn you a loyalty discount from some companies. However, consumer advocate Bob Hunter warns that insurers may also see repeated renewals as a sign of complacency about your policy and may be emboldened to raise your rates. Before you renew with your longtime company, be sure to price check rates with at least a few other competitors.

Seniors

Some companies offer a senior driver discount based on the age of the driver. The age at which this discount kicks in varies from company to company, but some discounts start as early as 50. In many cases, senior drivers have to complete a defensive driving course to qualify for the discount.

Be aware, however, that your insurance rates may rise beginning in your late 60s. While claims decline overall for drivers in their 50s and 60s, they begin to edge up for drivers in their 70s and beyond. Insurance companies may pass those losses along to their oldest drivers in the form of higher premiums.

Good Driver

If you've gone more than three years without a moving violation or accident, you may qualify for discounts. You may also be eligible for a lower rate if you agree to have the quality of your driving monitored by the insurance company via an app or a device installed in the vehicle, and the data confirms that you're a low-risk driver.

Student

Teenage drivers are expensive to insure, so discounts here can deliver substantial savings. A good student discount is available from many insurers; however, your teen will need to meet their definition of a good student, which often means maintaining a grade-point average of 3.0 or better.

Drivers' Ed and Defensive Driving Classes

Some insurance companies will provide a discount if you complete an accredited driver's education program or a defensive driving course. Both types of training are evolving in the digital age. While driver's ed courses mostly still occur in actual vehicles, the use of simulators to train new drivers is on the upswing. Defensive driving courses are now also offered in online versions that you can complete at home, at your own pace.

Group Insurance

Some companies offer discounts to drivers who get car insurance through a group plan from their employers through professional organizations, alumni groups or other associations such as the AAA.

Low Mileage

If you drive less annually than the average car owner, you may be eligible for a low-mileage discount. The threshold varies greatly with companies. Some require you to drive less than 7,500 miles a year, while others offer discounts even to those who drive up to 15,000 miles a year.

These traditional discounts rely on self-reporting of annual mileage. Some companies have replaced or supplemented such discounts with programs that rely on smartphone apps or devices you install in your car. These monitors tally not only how far you drive but also capture data on your braking, accelerating and cornering to help determine your driving quality — all of which can be reflected in the eventual premium you pay.

Anti-Theft Devices

Some insurers still offer discounts for anti-theft devices, such as auto alarm systems and ignition-kill switches. Don't buy these items solely to earn discounts; the premium reduction may be negligible relative to their cost.

What If You Can't Get Car Insurance?

Although most states require vehicle owners to carry insurance, not everyone can get it, at least not through the regular channels. Because of their past driving records, some people may be unable to obtain insurance from a private company. Others may simply not be able to afford it. In these cases, there may be state programs available to help.

State-Sponsored Auto Insurance Programs for High-Risk Drivers

While some companies offer individual car insurance policies to high-risk drivers, many prefer not to. Instead, states require all insurance companies to participate in a program that pools these kinds of drivers. These pools are created to share the possible losses of insuring high-risk drivers; companies participate in proportion to the amount of business they do in the state. If your driving record is spotty, this program may help you obtain coverage. Your premiums are likely to be very high. Check with your state insurance department to learn more.

Low-Cost Insurance Programs

Some states, including California, Hawaii and New Jersey, provide affordable public insurance to people who can't afford to buy a private company's car insurance policy. These programs are designed to discourage uninsured motorists from taking to the road, which is a distressingly common occurrence. To qualify, vehicle owners must meet income-eligibility requirements. For further information, check with your state insurance department.

Frequently Asked Questions About Car Insurance With an Expert

Carole Walker has served as executive director of the Rocky Mountain Insurance Information Institute, a nonprofit trade organization covering Colorado, New Mexico, Utah and Wyoming since 1998. She is also a member of the Colorado Teen Driving Alliance.


Why do I need to buy car insurance?This is an icon

First and foremost, because it's required by law in most states. Also, it protects your assets. If you don't have insurance and cause an accident, that can put you into financial ruin if you are taken to court. Think of it as a small investment to cover a large risk.

How should consumers decide how much coverage they need?This is an icon

Look at your car insurance policy as six separate policies. Look at what's required by law, what's optional, then discuss what makes sense for you with your agent or another seller.

Consider things like your assets and how much medical coverage you already have. The minimum required by law is usually bare-bones and is very low if you look at the costs you could potentially face in a claim settlement. You should strongly consider more coverage if you can afford it.

Remember, the insurance isn't just for you; it is for your passengers as well. Think about your driving behavior. For example, are you a carpool mom or dad carrying around a lot of kids? You're responsible for them, too. Often people don't think about their type and level of coverage until they are filing a claim, and that's the last time you should be considering this. By then, it's too late.

Is uninsured motorist coverage worth buying?This is an icon

Uninsured or underinsured motorist coverage is optional in many states. But if you don't buy it, you're trusting that everyone else is carrying enough insurance — and we know that's not the case. If someone uninsured causes an accident, they might be responsible for your costs, and if they couldn't afford to buy insurance in the first place, your chances of getting paid are pretty slim.

When should I skip collision and comprehensive insurance?This is an icon

People consider dropping collision and comprehensive insurance on older vehicles, as they may consider that it's not worth the cost. Consider the risks in the state you live in. For example, do you get a lot of hail storms, car thefts, deer on the road? If you drop comprehensive coverage and a hail storm comes through, you will have to pay for your damages out of pocket. Think about whether you can afford to fix or replace your vehicle if you don't have comprehensive insurance.

Why would I need medical payments coverage if I have health insurance?This is an icon

First-party medical coverage is additional coverage you can purchase to have your insurance company pay your bills regardless of who caused the accident. It may pay for an ambulance ride, an ER visit and medical bills, for example. All too often, people expect their medical insurance to cover their bills after an accident. Of course, it's important to have good health insurance for any instance, but it's also important to understand what your health insurance covers. Even if someone else is at fault in a car accident, it may take a while to get your bills covered by your health insurance. This insurance might cover your initial medical costs.

Besides my age and gender, what do insurers look at when setting my premium?This is an icon

Obviously, you can't change your age or gender. But how you drive, what type of car you drive and your credit score are all things you can work on to improve your premium.

Insurers always consider your driving record. Moving violations and at-fault accidents will work against you and can lead to higher premiums. These can also cause an insurance company not to renew your policy because you are considered high risk. A good driving record is ultimately something you have control over. By driving safely, you can keep your premiums down and also make us all safer. Having a car that's safe and crashworthy is also very important and can lead to lower premiums.

If you have a good credit score, you may get a discount. Companies have been using these scores as a factor for many years. The initial reaction was, “what does my credit rating have to do with how I drive?” But study after study shows a strong correlation between how you manage your personal finances and whether you get in an accident.

How else can I keep my premiums down?This is an icon

There are so many different discounts out there, it's important to ask your insurer which you might be eligible for. For example, combining auto insurance with your homeowners or renters insurance might make sense. Ask for good driver discounts. If you have tickets, some insurance companies will offer a reduced premium if you take a defensive driving course. When you're looking at ways to save, having a higher out-of-pocket deductible can save you up to 20% on premiums. Look at your deductibles on all your different kinds of coverage. Of course, you'll have to pay out of pocket for the deductible if you have an accident.

How are insurers using technology to track our driving habits? Is this a good idea?This is an icon

In the olden days, insurers asked people about their driving habits and took their word for it. Better drivers have historically subsidized bad drivers because the risk was spread out more, and higher risk drivers were in the mix. Now, knowing how much you drive, how you drive and when you drive, insurers can measure your individual risk better. You may not be a good candidate for this program if you drive at odd hours or very many hours, but many consumers can reap a discount.

New vehicles all have the technology to do this. Most of the programs, like Progressive's Snapshot, are opt-in. The question for us as drivers is, how are they going to use the information? Even from a marketing standpoint, insurance companies understand that people want certain information to be private.

Is there an easy way for consumers to compare rates?This is an icon

The positive thing for consumers is the arrival of more ways to buy insurance than ever before. Savvy shoppers can go online and arm themselves with information, then compare rates.

It is important to shop around. Get at least three quotes, but don't just shop for price. Ask about their claims process, make sure that you can buy the kind of insurance you need, and consider a company that has a good rating.

Expert Advice on How to Get the Best Car Insurance

Many factors can affect your auto insurance rates. MoneyGeek gathered advice from professionals to help you make an informed decision when purchasing auto insurance.

  1. How does car insurance differ from other types of coverage and why is it so important for drivers?

    The basic premise behind all insurance is the ability to transfer losses from one person/organization to another. By participating in a pool, possible losses may be transferred to insurers who agree (for a price or premium) to compensate policyholders for any harms or losses to which they may be exposed. This ensures that the protected is restored to his/her approximate financial position prior to an event that results in a loss.

    Automobile insurance is different because unlike other types of insurance — for example, health, life and other property and casualty coverage — cars are driven on public roads and more frequently come into contact with people and property. For this reason, the state requires a certain level of insurance coverage to legally drive a vehicle.

    Unlike other types of insurance, car insurance is required in every U.S. state (except Vermont and New Hampshire). If you're caught driving without insurance, your car could be impounded and you'll likely pay a fine from $250 to $1,000. It gets worse. You could lose your car registration and license, and you might end up being sued by the other driver's insurance company. In addition, when trying to renew your lapsed policy, the new rates could be anywhere from 10–30% higher.

    Car insurance covers damages caused by theft of your car, accidents involving your car and damages caused to third parties due to the incident. At times, the biggest risk factor here is physical and mental injuries caused to another person. Say you hit a pedestrian by mistake and he becomes incapacitated for the rest of his life. You are looking at a huge compensation amount, one that can take away your life's earnings. Your car insurance helps cover the damages (up to the coverage amount) and legal fees.

    Even if somebody with no savings or income hits you, his insurance will pay the damages. In the absence of auto insurance, this becomes a huge financial burden on individuals who become victims and/or cause accidents.

    Unlike most other types of insurance that protect you or your property, such as homeowners, renters and medical, car insurance protects you against damage to your property or personal injury and also protects others you may injure. That is why most states require you have a minimum amount of car insurance to drive. How much and what types of auto insurance coverage you need to drive legally depend on the state you live in.

    Car insurance differs from other kinds of insurance because driving imposes on you the most severe potential liability of any of your activities. For example, health insurance, while important, doesn't expose you to lawsuits by others. But driving a car means you might be accused of dire acts.

    As a condition of driving on public streets, most states impose some form of financial responsibility upon their drivers, most commonly in the form of liability insurance or, in some states, some other manifestation of financial responsibility (e.g. posting of a bond or some other form of financial protection).

    Car insurance is so important for drivers because of the risks to other members of the public when driving a motor vehicle, requiring protection against liability to others. In addition, physical damage car insurance coverage protects a driver’s financial interest in the automobile itself, including any lienholder/lender’s interest, as well as protects drivers when other drivers on the road are either uninsured or underinsured.

    Auto insurance is of three basic types, which are collision, medical coverage and liability. Liability insurance is mandatory in most states, while the other two are not. The reason is that if one hurts someone else in an accident, liability insurance of the culprit will pay for the damage of the other.

    Car insurance is one of the most common types of insurance. And there are many types of coverage for car insurance for things like bodily injury, personal injury, property damage, running into a stationary object, damage from something other than a collision and if the other party doesn’t have insurance. Not everyone is a homeowner, and not everyone is a business owner, but most people own cars. And all but two states require coverage for bodily injury and property damage (the two states that don’t specifically require insurance, New Hampshire and Virginia, still legally require you to pay for damages caused by an accident).

    Other states require additional coverage for things like personal injury protection and uninsured motorist coverage. Carrying proof of insurance in the vehicle is required in most states as well, and some states will automatically suspend your driver’s license if your insurance lapses.

    Auto insurance is compulsory. Driving without coverage is a violation of law in most states. But auto insurance is also a wise investment, protecting not only your vehicle but also protecting you against lawsuits for any damage you are held responsible for in an accident — damage to both other persons (bodily injury) and their property.

    Auto insurance, in general, is definitely a voluminous form of coverage. It's one of the things I talk to my college students about. Many of them have experience with auto insurance, as opposed to some of the more sophisticated insurance policies out there that only a certain amount of people buy. The other common one is medical insurance, but college students’ experiences are usually limited because their parents deal with it. But when they get a car and they drive, they learn a little bit more about auto insurance.

    Auto insurance is individually underwritten. Basically, they are underwriting you the driver, so every insurance policy will have a car and a person that’s listed on the policy. Now, I could lend you my car. If you were my friend and you said, “My car's broken down. Can I borrow your car to drive to the market?” My policy follows you for that brief period. A policy itself has a car and has a person, so it starts to look at the general attributes of that individual.

    When you go out and buy auto insurance, especially if it is your first time, the best thing is to shop around. And the reason you shop around is that insurance companies underwrite you. Underwriting is the process by which the insurance company decides if they want your risk, and what kind of price they're going to put on it. All of these companies have what they believe is their own secret formula, so to speak. Some companies may amplify certain things more than others. And that's why you'll see variation.

    For example, one insurance company might only look at your driving record going back three years, while another might look at the last five years. That would be one of the reasons why one company’s pricing might come in much lower than another. You wouldn't know that unless you've shopped around, and they don't necessarily show what they deem as being the most important.

    There are a lot of factors that influence someone’s auto insurance. There are some that are in your control, and there are some that are not in your control. One of the things that they look at is where your car is located. If you have the same car and the same person, and you're insuring in Philadelphia, you might be paying triple what you would pay in a rural county somewhere in Pennsylvania. Where you live is a big factor.

    The other major factor is age. Age is a very big factor when it comes to your auto insurance, especially if you’re under 20, and then also when you get older. 18-year-olds have really expensive insurance because they don’t have a lot of experience. Your driving history matters too. If you get into a lot of accidents or you have a lot of speeding tickets, that matters. Also, the type of car you have matters. Whether you’re driving around in a Corvette or you have a Honda Accord sedan, your premium will vary.

    So, what can you control? You can control how you drive, and you can also control how you shop around. Beyond that, you can get one of those apps that tracks your car and looks at how quickly you brake, how fast you drive, what time of day you drive — those kinds of things.

    Those are sort of general in terms of how insurance companies set prices and what you can do to affect them. If you're 20 years old, you can't make yourself 30. You're in that bracket no matter what. But if you got one speeding ticket a year ago, you can then say, “You know what, I'm going to drive slower,” and then three or four years later, when you don’t have any speeding tickets, your premium might go down.

    Car insurance is necessary to legally drive your car. States require that all cars and drivers have insurance coverage. The minimum amount of insurance needed varies by state. Also, if you lease your automobile or finance your car, you must have insurance coverage. However, the minimum level of coverage is not sufficient. Various types of coverage are available for automobile insurance, and these coverages are based on insurable incidents.

    • Bodily Injury and Property Damage: You are required to carry your state’s minimum. For bodily injuries, you need at least $100,000 per person and $300,000 per accident, along with property damage coverage of $50,000 and a minimum of $300,000 on a single-limit policy.

    • Collision Insurance: This will repair your car if you hit another car or a stationary object. If you own the car, this coverage is optional.

    Comprehensive insurance: This covers damage not covered by collision. Some examples are a tree falling on your car, or a chip from a flying stone hitting your windshield. If you own the car, this coverage is optional. However, if you lease or finance your car, you will need this coverage. There are other coverages, such as uninsured motorist coverage, extended transportation expense coverage and first-party coverage. These are optional.

    Car insurance covers a driver in case of an accident for either legal liability or for damages to the driver’s and victim’s property. Unlike most types of insurance, car insurance is mandatory in the majority of states. The purpose of the mandate is mainly to protect a zero-fault victim from suffering huge financial losses from subsequent health care costs or property damage. It is important for any driver to have the appropriate amount of coverage in place to make sure they are protected and won’t be subject to litigation and/or financial bankruptcy.

    Before answering your questions, you must first understand what “insurance” is. Insurance is a formal transfer of Risk (by contract i.e. an insurance policy) to an insurance company. When you own an automobile you have the risk of having it damaged, destroyed, stolen etc. which is the Physical Risk to the Automobile. However, you also are liable for any damage you cause to other’s property or persons because of the use of this auto. For the comparatively small loss of the Premium you pay for this transfer, you protect yourself from the potential catastrophic loss of totally your auto, or being sued for damaging other’s autos or hurting innocent third parties. The Liability side of auto insurance is by far the greatest exposure, and should have the largest limit one can afford.

    Auto liability insurance is legally required to be purchased if you are operating a vehicle on the road. Lenders also require physical damage coverage if you borrow money to purchase the vehicle. Liability coverage is very important in the event you are deemed negligent and held responsible for damages. Otherwise, you'll have to use your own money to pay for the claims. We all have a responsibility to compensate other people we accidentally injure.

    Most people don’t realize how dangerous driving truly is. My favorite risk benchmark is the danger level of skydiving. Each year, roughly two million people jump out of perfectly good airplanes. The number of people who get killed doing so is usually a one-digit number—less than twenty each year. This amounts to less than 1 in 100,000 people lost to skydiving.

    Compare this to car accidents. Worldwide, there are about ten fatalities per billion miles traveled, equal to one skydiving jump per 1,000 miles traveled. How much do you drive in a year? It doesn’t matter: according to Injury Facts, the population motor-vehicle death rate is 12.0 per 100,000. Driving carries a greater risk of fatality for the general population—not just the drivers—than does skydiving for the people who actually go skydiving. How does this affect your bank account? It has the potential for catastrophic damages. Car insurance differs from other types of insurance because driving has unlimited potential for liability. If you get in an accident, you could be liable for the damages to other vehicles, private property, and personal injury—amounts much greater than the value of your vehicle.

    Now compare this to house insurance. If you own your home and it is damaged by flooding, for example, there might be extensive damage but it is damage that can be repaired. It will often be possible to borrow against the value of your home to cover the cost of repairs. Even if your home was razed by fire, you would lose your home but you could pick up and rent a new home. Although this would be a tragic loss that would set you back several years, it would not necessarily push you into bankruptcy.

    In contrast, a car accident could result in injuries that require expensive medical treatment and years of physiotherapy. This could cost you your net worth many times over, including your home and a large fraction of your future income. There is a big difference between losing your investment in your home and losing money that you have not yet made.

    Driving is most people’s largest exposure to both injury and liability. More than 5% of vehicles are involved in crashes each year. It is also illegal to drive without liability insurance.

    Car insurance is mandatory in almost every state. That makes it vital for drivers to have as a legal requirement. Beyond that, people tend to use their vehicles frequently and thus are more consistently exposed to risks from that activity. These risks include accidents involving property damage and bodily harm to the insured or others; it also includes the potential for crime such as vehicle break-in or theft. Cars are one of the more expensive items that people purchase. While people are currently driving less due to the global pandemic, the use of their vehicle is often part of their daily lives. For some people, their car is a necessary link to their source of income as they must drive to get to work. Driving also provides a sense of freedom as a primary source of conveyance; it’s how people get groceries, visit friends and family, and a host of other activities.

    Homeowner's insurance has a property and a liability section and most people have a certain amount of coverage under each. Auto insurance has one mandatory component, liability, and two potentially optional components, collision and comprehensive, AKA other than collision. The liability section protects the driver for bodily injury and property damage that they cause to other people. Collision protects the owner of the auto for collision damage to their vehicle that cannot be passed on to another third party. Comprehensive is the least expensive of the three sections and covers incidental damage to the auto like glass breakage, theft, vandalism, or flood damage.

    The legally required car insurance is not insurance on your car, but insurance if you cause damage to another vehicle, property, or person. Health insurance is money you spend to lower the cost of a doctor's visit when you get sick. Homeowners/rental insurance is purchased to cover items in your house/apartment if a pipe breaks, items are stolen, etc. Car insurance is different as it is primarily protecting you from having to pay out to repair another driver's vehicle, another person's hospital stays, etc. With the legally required car insurance, you are making sure you can afford the damage you cause. Whereas collision and comprehensive coverage are not legally required but pay to cover the cost of repair your vehicle if you are at fault, or other damage caused to your vehicle such as hail (non-crash damage). When purchasing car insurance consumers need to think both about the potential damage they could cause to other vehicles, property, and persons as well as the value of their current car (if they want collision and comprehensive coverage)

    You are legally required to purchase car insurance in most states across the USA, which is not the case for other types of insurance. Even after the enactment of the Affordable Care Act in 2010, people have the option of paying a penalty instead of buying health insurance if it makes financial sense. People buy all other types of insurance such as home insurance, renter insurance, etc. voluntarily, based on their needs. Drivers face serious penalties if they drive without car insurance, which is not the case for other categories of insurance. These penalties may include suspension of driver’s license and car registration, and in some cases, even jail time.

    For many people, car insurance may provide first-party protection for the biggest asset they own, their car via collision and comprehensive coverage. More importantly, the liability component of car insurance offers protection for the damage a driver's action causes to third parties. Those damages for property damage and/or bodily injury can easily exceed damages to one's own vehicle by orders of magnitude. And while laws vary by state, every state requires drivers to demonstrate financial responsibility which is most often satisfied by carrying liability insurance.

    Car insurance from the insurer’s perspective is a vanilla line. However, from the perspective of the insured it has unique features:

    It is often perceived to be mandated even though it is not in some states. Legally, however, all states have financial responsibility laws in place for drivers. It so happens that the easiest method to provide evidence that a driver meets the state’s financial responsibility laws is through the purchase of auto insurance. So for all practical purposes, one should behave as if auto-insurance is mandatory by law all over the country.

    Auto insurance is unique to the extent that its coverage limits keep changing as one drives through different states. Let me explain. We know that auto insurance coverage limits are mentioned in split terms. For example, MO has state-mandated minimum liability coverage limits as 25/50/10 that is: $25,000 for Bodily Injury per person per accident/$50,000 in the aggregate for Bodily Injury caused to all persons per accident, and $10,000 for property damage to others per accident. What happens if a resident driver of MO drives to Maine, where the limits are 50/100/25? The auto coverage limits are automatically raised to meet the State’s mandated minimums at the same premium. That is the driver of MO will be covered for the state of ME required limits. More importantly, if the person drives to Canada, then the driver may also be covered there (though not so in Mexico).

    Car insurance is required by law for autos to be registered and licensed. Other types of insurance, such as life, home, liability and health, all provide various protections, but these are (for the most part) personal decisions that an individual makes to protect assets or health, and are not mandated by law. Car insurance's primary function is to protect others from loss or injury caused by you, rather than protecting the insured themselves (additional coverages may also provide personal protection but not as a legal mandate).

    The major difference between auto insurance and other types of insurance is that it is the most common one required in all states. Along with that, auto insurance is one of the only types of insurance where you are not only protecting yourself but others' property as well.

    Another interesting that that is required is liability insurance. Liability insurance is what protects you if someone files a claim against you. And that is really crucial for a couple of reasons first, because you, you have to have it, although at a very low level. If someone can afford more, they should buy more as there's a lot of litigation in the country. Second, liability insurance will protect you in case you are found at fault. If its policyholder is found liable, it also pays for the attorney, and most of us, myself included, can't afford an extensive use of a private attorney.

    Car insurance differs in a couple of key ways from most other types of coverage. The first key difference is that most other types of insurance are elective, while car insurance is currently required by law in the majority of states in the U.S. While some states have alternative coverage options to car insurance, these alternatives usually require a financial investment that is similar to purchasing car insurance.

    The second key difference is that car insurance is one of the few types of insurance that is designed to protect multiple parties. Most types of insurance coverage are designed to cover the party that initiates the coverage. Car insurance, however, contains provisions that protect both the owner of the covered vehicle as well as external parties that interact with the vehicle. This could include drivers and passengers of other vehicles, pedestrians, and even other drivers and passengers of the covered vehicle.

    The legal requirements and breadth of coverage described above represent the importance of automotive coverage. Beyond that, however, car insurance simply represents a form of recourse for the affected parties. Without car insurance, the responsible party in an accident would be accountable for all damages. And, in the possible circumstance that the responsible party is financially unable to cover these damages, all affected parties would be left with potentially substantial financial burdens that are not of their doing. Car insurance ensures that at least some of this potential liability will be alleviated by the coverage.

    Car insurance is not that much different than some home policies when you think about it. They both cover medical when someone else gets hurt on your property and it also protects your property. It does differ from personal health insurance. Car insurance is very important to have to protect you especially if you have an accident that is your fault. It will pay for not only your car but the other parties too.

    Car insurance, life insurance, and health insurance all have the same underlying premise. The risk to the insurance company is pooled by selling millions of policies with payout claims in the thousands. That is, most drivers do not have accidents and hence do not claim anything per year. It is the law in the U.S. and every other country that you must have auto insurance. There are fines for driving without insurance. Depending on the policy that is bought, the coverage can include bodily harm (you, your passengers, and others, like a pedestrian or cyclist). It can also cover property damages (your auto, another person’s auto, or other property damaged) due to an accident. It is critical that you have auto insurance as the cost of an accident can be high. If you hit a person on a bicycle and cause severe injuries, you are liable for all reasonable costs to help make the person better. The cost of that person’s medical bills can be high and you may not have the savings or income to be able to meet those costs. This is where insurance is important.

  2. How should drivers balance risk management and affordability when it comes to car insurance?

    It is very important that policyholders do a cost-benefit analysis when purchasing car insurance. One should consider whether he/she should self-insure, where a person chooses to bear the risk for him/herself. However, different states require some basic levels of coverage. Some states require motorists to carry bodily injury and property damage liability insurance to help pay for damages they cause in an auto accident.

    In other states, coverage is included in the policy unless the insured voluntarily declines the protection by signing a written waiver. For example, if a policyholder or his/her immediate family members are negligent during the operation of an automobile, the auto liability insurance policy will pay any amounts that are legally obligated. The bottom line is that any mandatory insurance requirements must be purchased, but the policyholder has a choice to self-insure depending on the risk he/she is willing to undertake.

    When it comes to insurance, the more you have, the more it costs. Cars are no exception. How much do you need? Before getting behind the wheel, it's advisable to have at a minimum liability, comprehensive and collision coverage. After a crash, liability coverage protects you from the other party's medical costs, property damage or repair claims. Comprehensive coverage reimburses you in case of theft or damage not due to a collision. Collision covers repairs or replacement of your vehicle if you’re in an accident.

    We should balance the concern between saving a few additional dollars or losing your house. Let’s say you take the minimum coverage for $25,000. You might pay an additional $50 to get $200,000 worth of coverage. If you cause $100,000 in damages, then you lost $80,000 to save $50. That’s not a very wise decision at all.

    Balancing risk and affordability is always difficult. While we all want to eliminate any risk, most have a cap on how much they can afford. Most states set requirements for the type and amount of mandatory insurance. Usually, all that is required is a minimum amount of liability insurance that covers damages to other people and their property. But the state-mandated coverage usually does not protect you or your property.

    That’s why you should consider additional coverage based on your situation. For example, personal injury protection covers your medical expenses, collision coverage covers your vehicle, uninsured motorist coverage protects you if the person who causes an accident doesn’t have insurance and comprehensive coverage protects you against damage from incidents other than an accident. Some states require some additional coverage, but most do not.

    To research car insurance you obviously want to work with a highly rated company. You don't need to work with a human broker — you can definitely search through auto insurance offers online.

    The two major considerations for auto insurance are liability coverage and uninsured/underinsured motorists coverage.

    First, a driver should purchase as much liability insurance as they can afford because medical costs, pain and suffering costs and property damage costs are often enormous in today’s society. The minimum amounts of coverage required by a state are usually but a fraction of the actual risk. Usually, the next tier of liability coverage is not substantially more expensive than the lesser amounts that a driver might be tempted to purchase.

    Second, a driver should purchase as much uninsured/underinsured motorists coverage as possible. By doing so, a driver can protect herself or himself from the less responsible members of the public driving on public roads. Otherwise, the driver’s future may be dependent upon a stranger’s responsibility, which often is at a lesser level than the driver’s.

    To lower the cost of auto insurance, one has to think of having a high deductible. The insurance company will pay up to that level, but it will not pay the deductible. Thus, if the deductible is $1,200, the company will pay the costs above that amount, but not the first $1,200.

    Drivers should balance what they can afford now against what they could be liable for later. Rates are based on a number of factors, including where you live, what you drive, your driving record and your credit score, to name a few. When choosing coverage, it’s best to talk to a trusted insurance agent who puts your best interest first. They can consider all the facts and circumstances of your particular situation, and help you find the coverage you need.

    The United States is a very litigious country. Plaintiff attorneys specializing in personal injury cases advertise 24/7 on television, radio and roadside billboards. If you’re involved in an accident, there’s a very high probability you will be sued, so don’t skimp on insurance. Buy limits of coverage sufficient to protect your major assets, including your home. Many insurers have online tools that allow you to see how much coverage you can buy given a fixed budget for auto insurance. You can also ask an agent for quotes, or get quotes from multiple insurers online.

    Balancing risk management and affordability is kind of like betting on yourself. The most common deductible that you're going to see people have is probably $250–500. If somebody has a $1,000 deductible, some might say, “Oh my God, if you get into an accident, you have to pay the first $1,000.” But in my whole life of driving — 25 years — I’ve only been in one. And so, if you push up your deductible, you can save a couple hundred dollars. It all depends on a lot of factors. But it's not just a little bit of saving — it’s quite a bit.

    People tend to look at it from a one-year perspective, but guess what? If you go 10 years without an accident, you put more money in your pocket. You bet on yourself. If you don’t think you’re going to get into an accident, if you’re confident and you have money in the bank, I always encourage people to push the deductible up. Because you buy insurance for the big things. Your windshield cracks and it costs you $500 — that’s annoying, but it’s a small thing. You want to cover yourself for the big things, like if you’ve got a $30,000 car and a tree smashes it.

    The other thing is that people tend to focus on their car when they buy auto insurance. But you actually need to be worried about if you hit someone and you get sued. That's usually not small amounts. So, I think that the most important thing with auto insurance is insuring the liability of what you do with that car.

    Besides a good driving record, a key way of reducing insurance premiums is changing deductibles. The higher the deductible, the lower the premium. A higher deductible means you will pay more out of pocket on an accident claim. If you have $10,000 of damage to your car, and your deductible is $500, you will pay the first $500 and the insurance company will pay the other $9,500. If your deductible is $1,000, you will pay this first before the insurance company will pay on the claim.

    If you elect not to purchase collision coverage and comprehensive coverage, you will need to pay for damage to your car. What you need to evaluate is can you afford to pay the higher deductible — or pay the full amount of damage to your vehicle — if you have a claim, versus the lower premium?

    The amount of insurance coverage a person buys depends on the amount of wealth they have available in the case of an accident. You want to make sure you have enough to cover yourself for legal liability. The more coverage purchased, the more expensive the policy becomes, but the goal is to protect yourself from a worst-case scenario.

    To save money, you should always shop around, getting quotes from multiple different insurance providers, since different companies have different algorithms that affect the price of a policy. All insurance companies factor in driving records, moving violations, ZIP code, price of the insured vehicle, age, etc. However, the weight of each variable may differ across companies, resulting in different prices for the same coverage.

    Not having an accident in an automobile is the primary concern of Automobile Risk Management. Wearing seat belts, not TEXTING, staying within the speed limit, no driving while intoxicated, and other such measures are good Risk Management techniques. For younger drivers, taking driver training courses and having superior grades (A or B average) will get them reduced rates. Unfortunately, a great many factors come into play in determining an individual’s auto insurance rate- Age, Sex, driving record, type of auto, use of auto and others, some of which are not effected by Risk Management.

    In determining affordability of car insurance, one must first determine what one can afford to lose, if the worst possible scenario should occur. For example, some can afford a large physical damage deductible, which lowers the cost of the policy. Indeed, if the auto is old enough, one may decide not to carry physical damage coverage at all. (Caution should be used here as there are other ramifications for not carrying physical damage insurance especially if you rent a car on vacation).

    Drivers are required to purchase the minimum insurance required by law. If they can't afford it, they shouldn't be operating a vehicle.Instead, they should explore other options for transportation. The best way to get affordable liability coverage is to avoid speeding tickets, don't text and drive and improve credit scores. Some cost factors can't be controlled, though, like age and gender.

    Consumers can save money on physical damage coverage by owning an older, low-value vehicle. I strongly encourage people to purchase more than the minimum insurance required because the limits are low and are quickly exhausted following a loss with even minor injuries.

    Cover the big risks first: the damage to personal property and personal injury. Don’t just settle for the minimum coverage, either. The goal is to make sure that you are covered for expenses that you couldn’t cover yourself. The damage to vehicles, although quite expensive, is not the first priority— unless your bank requires it. You might not like the idea of downgrading your set of wheels if an accident should happen. But personal injuries, if not adequately covered, could lead to financial ruin.

    Buying the right amount of insurance can be tricky. As a general rule, people with a lot of money should buy high limits and high deductibles, and vice versa.

    Insured drivers pay regular premiums to the insurance company and then receive compensation and protection from the company in the case of a bad outcome such as an accident. Because the direct benefit of insurance is contingent on a bad outcome it can be hard for drivers to assess the probabilities of that outcome which is necessary for estimating the expected net value of the insurance policy. This makes the cost of insurance such as annual premiums more visible in the minds of drivers and any benefits more remote. Compounding that is that the probability of a bad outcome doesn’t just depend on the insured driver, it depends on the behaviors of other drivers that share the road among other factors outside the driver’s control. Further, there are many non-monetary costs and benefits involved as well. The mental and emotional trauma of an accident and the peace of mind that can come with insurance are hard to value. All of this perhaps suggests drivers should err on the side of mitigating risk because they may be prone to naturally emphasizing affordability. Consciously keeping risk management at the forefront can provide a more balanced assessment.

    Minimum liability limits for bodily injury and property damage to third parties are set by each state. Frequently, those minimum limits are set so low that they could be auto owners at risk of being underinsured. The risk management decision comes in when deciding whether you will just buy the mandatory limits or more. On collision, if the car is newer; then the owner would want to protect their investment as they have a lot more to lose than with a car that is seven or eight years old. If the car is financed, then collision coverage is usually required by the lender. The risk management decision on collision and comprehensive is deciding on what deductible level to select that will influence the premium.

    For risk management, a major consideration is the amount of assets you own. If your insurance does not cover the damage you caused assets, such as a home, could be part of a court settlement. It is suggested that homeowners get more liability insurance to prevent against these risks. Whereas collision and comprehensive insurance the main item to consider is the outstanding balance of your car loan or the terms of your lease. If you have a car loan or lease, are at fault in a crash, and without collision; not only do you not have a car, you still need to pay off the loan (or fulfill the terms of a lease). Having enough collision and comprehensive coverage to pay off a car loan or satisfy the terms of your lease is a good rule of thumb. Once the car is paid off, then each consumer can decide what level of risk (needing to buy a "new" car if there is a crash) is acceptable for the cost of the extra coverage.

    Every driver should do a basic risk assessment based on their location (the state and town), their driving history, the value of their vehicle, and several other factors. This will give them a good idea about the associated risk and the coverage required. They can then shop around for an affordable plan.

    Drivers need to remember that their needs for car insurance tend to change over time. If your car is leased or has a loan attached to it, you'll be required to carry "full coverage" which means covering the car itself as well as liability for damages to others. If you own the car outright, you may find that the cost for collision and comprehensive coverage is simply too high given the value of the car. As a middle ground, drivers may consider increasing their deductibles to allow for partial coverage while saving on premiums.

    Drivers should first apprise themselves of the state’s requirements, as the mandated requirements will vary by state. So underinsured motorist coverage is mandated in VA, not in MO. Other factors that determine the premiums include where the car is garaged at night, the number of miles driven, driving record, type of car and so on. While, where one lives and parks the car at night and the number of miles driven are determined exogenously to auto insurance considerations, the type of car and the driver’s driving record are key to determine rates. If one owns and drives a really old car, it may not be worthwhile to carry comprehensive insurance on that car. Similarly, auto insurance companies provide all sorts of discounts to drivers. One must ask for all the discounts that can be made available to a driver. For example, good driver discounts, good student discounts, and so on. It is really important to carry as high a liability limit as possible, along with as high a deductible as possible. The marginal cost of increasing the limits of coverage is not so high, as the likelihood of having the high limit loss is low, but the probability of having low dollar losses (fender benders) is very high. Which means full coverage is really expensive. So by choosing a deductible, especially a high deductible, one signals to the insurance company that one is willing to share in the losses with the insurer by bearing the cost of the first few hundred dollars oneself. The action of choosing a high deductible also signals to the insurance company that one is a cautious driver willing to bear low dollar losses oneself and a good risk worth having in the insurance pool. It is also well known that the insurance market suffers from adverse selection issues, and auto insurance is no exception. The best way to get better rates is by reducing the information asymmetry with the insurer that is by providing information. The other issue of information asymmetry is attitudinal hazard. In simple terms, it means that drivers become careless once they have insurance. But it must be remembered that insurance prices are set to exceed the cost of care. It is only the margin by which prices exceed the cost of care is what matters. If one is careful, for example, by driving within speed limits, not weaving in and out of traffic, driving responsibly, accumulating good driver points from the state, following rules – that margin of exceedance can be lowered. Nowadays, auto insurers are attempting to provide usage-based insurance (UBI). This involves picking up on a driver’s driving habits in order to customize the premiums. Miles driven every day is just one of those characteristics. The data is proprietary to the insurer and can reduce premiums for low-risk drivers. The downside is, that record cannot be carried over to another insurer should one switch insurers.

    Today there are often large awards to those who suffer injury or property loss from an automobile incident. The minimal levels of coverage required for vehicle registration rarely provide sufficient coverage for major incidents resulting from an accident. The challenge of affordability vs. risk is a hard personal decision so consider what level of coverage is reasonable and at what cost.

    A consumer should balance risk management with the cost when they are taking into account the assets they have and their ability to pay in the case of an accident and they are found at fault.

    For example, if there's any kind of significant accident and the person who allegedly negligent has the minimum liability insurance, 20 or 25, let's assume damages exceed that, which, you know, are, you know, very easy. If the person doesn't have any assets to get well, the value of the claim is actually what I'm going to know the value of the claim, not from a legal perspective, but from a practical perspective is going to be the value of insurance.

    Investing research literature asserts that there is a strong association between the risk of an investment and its potential return. The more risk you are willing to accept, the greater a return you could potentially realize. While car insurance is not traditionally viewed as an investment, this association still holds true. However, instead of trying to maximize your profits, you are trying to minimize your overall costs.

    There are two primary issues that you should consider when evaluating how much you should pay for car insurance. The first of these is the deductible on the car insurance. The term “deductible” is just a fancy way of saying how much you will have to pay before the insurance kicks in. Intuitively, lower deductibles generally require higher insurance premiums. Lower deductibles are certainly preferrable if you ever do get into an accident. However, if you are a safe driver with a fairly clean driving record, that low deductible often will translate into unnecessary additional costs on premiums. Aside from your driving record, you should also consider the following when choosing a deductible: 1) The value of your vehicle; and, 2) Whether you can afford to pay a higher deductible in the case of an accident. If your car is relatively new (meaning that it is likely more costly to insure); or you have enough money set aside that you could afford a higher deductible in the case of an accident, then you may want to consider a higher deductible on your car insurance to reduce the costs of your premiums.

    The second issue is the type of car insurance you are going to carry. Most states require liability insurance as a minimal level of coverage. Liability insurance is generally the least expensive form of car insurance in terms of premiums. However, it only covers damages on other vehicles if you are liable in an accident. So, any costs to your vehicle are not covered by your insurance. Opting for increased coverage in the form of comprehensive insurance is certainly safer. If you are currently paying on a loan for one of your vehicles, it is likely that you already have comprehensive insurance. The good news is that your car will be covered in the case of an accident. The bad news is that you are probably paying higher premiums. There are also additional insurance options that you can include – such as uninsured motorist, medical, and personal injury policies – to minimize the risk that you may be exposed to. However, reducing additional risks almost always results in increasing insurance premiums.

    When evaluating the tradeoff between risk management and affordability, it is important to take all of these factors into account.

    Risk management is when you look for example, at the age of your car, against the cost of getting it fixed. So if your car is an older model it may not pay to have a high amount of collision, because the car would not be worth fixing. The medical portion always needs to be carried at the highest rate you can afford because the risk is that medical care will most likely get more expensive with time.

    Auto insurance should always be bought - it is the law. The type of coverage is related to risk management (how much risk (loss) are you willing to take on from an auto accident?). If you have a leased auto, you have to get the minimum coverage required by the leasing company. This is usually a high coverage ($300,000/$100,000 or $300,000 per accident and $100,000 maximum per person). This also goes for a car that is purchased by installments. If you have an older car that runs excellently but is only worth a few thousand dollars, you may only purchase insurance for the ‘other’ person and his/her property. So your vehicle will not be covered if it got damaged. You absorb that risk. This is usually the cheapest form of insurance. If you have a vehicle worth more than a few thousand dollars, then you should purchase insurance that will cover all liabilities.

  3. What can consumers do to better educate themselves on car insurance policies, coverage and pricing?

    Do some research on what coverages your state requires, and what is voluntary in the areas of liability coverage, uninsured and underinsured motorist coverage, comprehensive coverage, collision coverage, medical payments coverage and personal injury protection. Evaluate the costs against what risks the policyholder is willing to bear. Recognize that completely eliminating risk may be too expensive to achieve.

    Whenever buying car insurance, look at the policy in terms of six areas of coverage. These include bodily injury, medical payments, personal injury protection, property damage, collision, comprehensive and uninsured (or underinsured) motorists. Each type of coverage is typically priced separately. A basic policy will pay for repairs, medical bills and property damage.

    Limits are specified in the policy (i.e. 25/50/25). The first number, 25 in this example, tells you that the maximum payout is $25,000 in bodily injury per person. The second number (50) indicates a maximum coverage of $50,000 per accident. The final number (25) places maximum property damage coverage at $25,000 per accident. The lower the coverage amounts and the higher your out-of-pocket deductible is before insurance kicks in, the lower your premiums.

    Talk to an insurance agent and go to websites of car insurance companies to learn the risks and rewards. Lots of neutral websites like III.org provide details about auto insurance.

    Everyone should be familiar with their state’s mandatory insurance requirements, the available types of auto insurance and dollar limits on the coverage they want before purchasing a policy. Research is easy on the internet, and you can then compare policies with the same coverage.

    Think carefully about your deductible. The higher it is, the lower your annual charge. But make sure the deductible is something you can live with.

    Education is a challenging endeavor in this context. Every insurance company places very entertaining and clever advertisements on television, but those ads do not show the reality of the claims process, when the driver needs the protection and assistance of her or his insurance company. The ads boast about saving the policyholder money on their premiums but there are so many variables involved, and saving some money may be costly in the long run if the claims service is poor and coverages are too limited for the premium paid.

    Consulting with consumer services about how insurance companies serve their customers and seeking information from the state’s Department of Insurance are two ways to obtain objective information. Sometimes, insurance agents can be helpful in the education process, but always remember that they are paid to sell insurance policies and thus may not always be objective in their evaluation of which company provides the best and most affordable insurance.

    Users of insurance may receive information from an insurance firm or by internet consultation

    The absolute best thing consumers can do to educate themselves is to talk to a trusted agent. These are experts who can consider everything about your situation. They can tell you what you need and what you don’t need, and they can help you get the best coverage for your situation. What you find on the internet is expressed, for the most part, in generalities that most people don’t understand. And sometimes, what you think is covered isn't actually covered by a cheap policy that you find online.

    For example, suppose you use your vehicle to drive for a ridesharing company. You won't necessarily be covered by your personal auto policy, unless specific coverage for ridesharing is purchased. These experts can help you understand what each type of car insurance covers, whether or not you need it and how much coverage you need to carry.

    Virtually all major auto insurers have detailed information available on their websites that describe what the various coverages are for and how they work. The National Association of Insurance Commissioners is also a great resource.

    There's lots of literature out there, so you could do research. I think that what you should be doing is not being intimidated and shopping around. You don't necessarily have to shop around every year. However, insurance companies compete to get new business. If you are a good risk, and if you can shop your business every two to three years, you will probably be able to lower that premium. Some people will say, “I stayed with this company for 30 years.” Well, yeah, and you probably paid for it.

    To start, you will need to understand the insurance coverage components. Look at not just the total premium on a policy, but the premium cost of each component of insurance coverage in the policy. By adjusting deductibles, you can save on your premium, but you must understand the consequences if you need to file a claim for the coverage.

    When getting comparative quotes on auto insurance coverage, do not just compare total price, but what coverages and coverage limits are included.

    You can self-educate by visiting multiple different insurance companies’ websites, entering your information and receiving electronic quotes via email. If you are uncomfortable getting quotes on your own through the internet, you can always use an insurance broker or agent, as it’s their job to shop for their clients’ best interests.

    Most reputable insurance companies will have sales brochures that will explain the various coverages that are offered by the insurance company. Not to throw cold water on Liberty Mutual insurance company adds but ALL insurance companies will give you a choice of coverage to purchase. The best advice I could give you in this area is to make sure you have a knowledgeable insurance agent to advise you on what you should buy (or not buy). An insurance agent with one or more of the following designations is an excellent place to start- C.P.C.U. (Chartered Property and Casualty Underwriter), ARM (Associate in Risk Management), CIC ( Certified Insurance Counselor) , CRM (Certified Risk Manager), and/or the CLU (Certified Life Underwriter) in the case of Life Insurance. All these designations require extensive study, passing comprehensive examinations, and, in some cases, an obligation to continually educate themselves in the field of insurance.

    The bottom line is READ your insurance policy, and ask questions of any area you do not understand. Be wary of any insurance company or insurance agent that says they can save you money and improve your insurance coverage without knowing what you currently have. In my experience, the lower premium offered is a result of lower COVERAGE offered. Unfortunately, this can be essential coverage.

    You can contact an insurance agent or company to walk you through a quote. I recommend contacting at least three different insurers so you can compare costs. An independent agent can do this for you if they represent multiple insurers.

    Most states have an insurance commissioner and department of insurance offices that can offer guidance to the public and objective information online. I find the Insurance Information Institute website helpful as well.

    A quick online search will reveal dozens of car insurance hacks that can lead to substantial savings. Just be careful to learn the regulations specific to your state because the rules differ across the country. Obtain quotes from many online calculators. The market is constantly changing and different providers use different methods of calculating premiums. You will often find large differences between online quotes (but be careful that you are comparing the same level of coverage). Insurance providers may have had different experiences with drivers who have characteristics like yours. Sometimes there will be pricing differences in your favor. Experiment with online pricing calculators to see insurance costs under various scenarios. For example, obtain a quote under a fictional scenario in which you got some tickets. When you see the change in price, multiplied over several years into the future, you will see the full cost of a traffic violation. Shop for insurance while you shop for a car: insurance is part of the true price tag on your next car.

    Shop around. If you don’t like the price from one insurance company, try another insurance company, but make sure you are comparing prices for the same coverage. Good insurance agents can be very helpful in this process. Not all insurance agents are good. Beware the agent who is offering a lower price but cannot explain the difference in coverage.

    Consumers need to familiarize themselves with the different elements of car insurance such as the different types of coverage and typical dollar amounts that coverage provides. They also need to understand the different elements of costs such as premiums and deductibles. Basic information about car insurance and what types of policies might best match a particular driver’s circumstance are readily available online; the key is to find reputable and informed opinions. Most states have an insurance commission that helps regulate the insurance industry and their website is usually a good starting point. As part of that role, the insurance commission provides information to consumers to help make the insurance process more transparent. Insurance commission websites typically cover basic information about the different types of insurance and the process of obtaining insurance including information about the minimum legal requirements. These sites will also often have tools that allow consumers to input general information about their circumstances and give some information about policy costs such as premiums. They also often have information for consumers that struggle with affordability.

    The most important step is to ready your auto policy or your auto quote so that you know what is covered and what is not. Shopping for your auto insurance online from at least three different sources helps ensure you are getting the best price.

    The simple answer is rate shop. Get multiple quotes for the same levels of coverage. Don't be afraid to ask for quotes from the same company on different levels of coverage; find out how much more a month the extra coverage costs. Concerning coverage, for car insurance, the limits for the type of liability (property, bodily injury, etc) are usually listed directly. However, it is always worthwhile to ask the insurance agent about specific cases.

    Consumers should read up about the types of risks they may face. They should always shop around for car insurance. Many drivers often end up paying much higher premiums because they don’t compare the cost of insurance. The Department of Motor Vehicle for each state has its own literature educating drivers in their states on this issue. Recently, many car insurance companies have started offering discounts on your insurance premium based on your driving behavior. This is usually done through a tracking app on your smartphone. Ignoring the privacy issues associated with these apps, if you are a low-risk driver, these apps may help you save a lot on your premium. On the other hand, if you are a high-risk driver, this app may end costing you much more.

    Luckily, state insurance regulators approve car insurance policy language and in many states, prices. This makes it less likely that consumers will find themselves with "gotcha" clauses in their policies making the insurance less valuable than they thought. Websites for the state insurance commissioners' offices often provide unbiased information with respect to auto insurance coverage. (Example: https://oci.georgia.gov/insurance-resources/auto) Further, drivers shopping for insurance should get quotes from several insurers because prices can vary a lot among insurers.

    The most important part is to read through authentic resources on the web. The web is a cheap resource and mostly places a search cost in terms of time spent on it. A good place to start is the official website of the state department of transportation which carries a ton of information, e.g. on limits, licensed insurers, etc. The Insurance Information Institute is another resource one can utilize to educate oneself. The greatest disservice one can do to oneself is to search the web and go for the cheapest insurance available. Remember if it is really cheap, there is a reason for it. So, definitely look for the financial strength rating of the insurance company one is going to buy insurance from. This rating is available for most insurers from A.M. Best company. After your search, if one is still not comfortable, try meeting with an insurance agent. There are many independent agents who sell policies for several insurers.

    Investigate options always. Request quotes from multiple sources which may include brokers, company direct, and online portals to compare levels of coverage (and non-coverage) so that each individual consumer can determine the best combination for their personal needs.

    Consumers should educate themselves on the state requirements. After doing this, a consumer could use multiple resources to understand their options including contacting a larger insurance company directly, insurance agents, state websites, and your state regulator. Not many people think to contact their state regulator because 50% of the people didn't know that that insurance was regulated by the State.

    There are a lot of factors to consider with respect to car insurance. But, because we live in the day and age of near-instantaneous access to information via the Internet, you should be able to find plenty of tools that can help you in this task. These tools – such as the car insurance guides at moneygeek.com – can provide you with a wide array of information to assist you in your decision-making process.

    Once you have taken into account your driving record, liability requirements, and risk preferences (discussed above), it is a good idea to learn more about the insurance providers themselves. Given that most Americans are required to have coverage on cars that they drive, insurance companies have recognized that there is a lot of money to be made on car insurance. While this means a near-constant barrage of increasingly clever car insurance commercials, it also means that there is a large market of providers to choose from.

    When shopping for an insurance company, be sure that you have determined ahead of time what your priorities are. With respect to the cost of car insurance, there are several insurance providers that literally advertise themselves as being the most affordable for car insurance. However, it is important to keep in mind that the insurance options from these companies may trade off other important qualities to provide such affordable insurance. If you are more concerned about whether an insurance claim will be paid in the case of an accident, then you may not want to choose the lowest-cost option.

    You should also take into geographic reputation into account. Just because an insurance company operates nationally does not mean that it provides the same level of service in every part of the country. Learning more about how different companies perform in your city and state can help you select car insurance that better fits your priorities. Additionally, look for insurance companies that accommodate specific demographics. If you are a military veteran, disabled, or even have a large family, you may find an insurance company that is tailored to meet your needs.

    There is excellent car insurance information on the web. Do your research and study all the parts of car insurance and compare the new car to used car insurance. In some cases, a used car would make more sense because of lower insurance rates. Also, look at accident records in your area and your age when you make decisions about coverage.

    You can take a personal financial literacy course, like the one that I teach. You will get knowledge on the different types of insurance. Also, you can do an internet search and find many sites that have information. Just make sure that the site is a credible source and the information is pertinent to your state. In Florida, you can go to the Florida Highway Safety and Motor Vehicles website (https://www.flhsmv.gov/) and find the insurance requirements. There are certain websites, like Bankrate.com, that compares auto insurance rates based on information that you provide. Shop around and ask family and friends for suggestions.

  4. Auto insurance premiums are set based on a variety of information such as driving record, location and credit history. What challenges do consumers face in this type of pricing structure? How can drivers meet or manage these challenges?

    Automobile insurance premiums are based on a variety of information, such as driving record, location and credit history. Policyholders should work diligently on becoming a safe driver, avoiding high-risk locations and building a good credit score.

    When it comes to auto insurance, low-risk drivers pay less. What makes you a low risk? You’re female, over age 25, drive a car with a small engine and have no history of accidents, traffic violations or bankruptcy. You also put low mileage on your car and the rates of vandalism, theft, litigation, accidents and insurance fraud are low in the area where you live.

    Clearly, the challenge of managing car insurance cost is many of these risk factors are outside your control. One way you can actively participate in lowering your premiums is by placing a Bluetooth-enabled device in your car to record your safe driving habits with your insurance company.

    At times, it is rewarding to stay with one company. At times, it helps if you switch. It depends on your risk profile. If you are new to driving, take an insurance policy that forgives the first accident. Otherwise, premiums can go up significantly after an accident.

    Establish a clean driving record. Drive safely. Don't buy auto insurance from companies that delay payments or processing of claims. Read online reviews of auto insurance companies and decide.

    Auto insurance is based on a number of factors about you and where you live. The cheapest states are those with the lowest population density and fewest uninsured motorists. There is not much you can do to change your current driving record, age and credit history (which cannot be used in some states), but you can shop around. Most companies will give a price quote on the internet or phone, but be sure to fully review the coverage and dollar limits before you buy. Also, after your first year, things may change. Be sure to discuss your rate with an agent and think about shopping around again. You could be entitled to a lower rate.

    When an insurance company issues a policy of auto insurance, it is essentially investing in the good faith, integrity and driving skills of the accepted policyholder. The policyholder must be completely truthful about her or his driving record when applying for insurance. If not, aside from the fact that most of the information is available in databases to which the insurer subscribes, the policyholder may not have coverage accepted at a time when it is most needed.

    Obviously, drivers must work to clean up their credit records and driving records to maximize their insurance protection at an affordable cost. As far as location, since premiums do vary depending upon where a driver lives or works, drivers must carefully consider the cost of insurance when choosing where to live, where to work and how long is the commute to work, in order to manage the challenge of maintaining affordable and meaningful insurance coverage.

    The three reasons that determine insurance costs need to be addressed. Improving one’s credit score shows one becoming more serious. The same applies to someone driving better. The improvement of responsibility in driving more carefully will be rewarded. It is difficult to decide the third determinant of cost. Where one lives is affected by many other issues.

    Remember, insurance is simply a form of managing risk. The companies that write policies agree that they will pay for certain perils in exchange for your premiums. Therefore, they will consider a number of metrics to determine how risky you are, and set your premium accordingly. Think about it: Would you be comfortable renting your house to a rock star with a history of trashing their hotel rooms? Probably not, unless you can get them to pay a higher security deposit. That’s a rather extreme example of how an insurance company might see you if you have a less than stellar driving record. But they don’t know you personally, and they don’t have the time and resources to get to know you personally. So, they’ll base your rates on what information they can reasonably gather about you.

    If you live in an area with a high accident rate, you’re going to have to pay more. No matter how good of a driver you are, you’re not the only one on the road, so it’s more likely that you’d have to use your policy. In addition, according to the Government Accountability Office, insurers use credit scores as one metric “to develop a fuller and more accurate picture of the risk presented by a given policyholder.” However, some states don’t allow insurers to use credit scores as a factor.

    To meet or manage these challenges, everyone needs to consider these factors against how they want to live. If you’re thinking about moving, get a quote as to how your policy might change if you make the move. Monitor your credit score, as one incorrect negative item could affect your car insurance premiums. When you are thinking of buying a car, get a quote for it. Maybe you’re willing to stretch your budget for the luxury or performance car, but did you think about the higher premium that you might be paying? Finally, drive safely. A clean driving record will likely lead to lower premiums down the road.

    Policyholders should consider the price of auto insurance before they purchase a car. The cost of insuring certain vehicles can be much higher than others. Factors such as driving record are entirely under the driver’s control. If you have a few blotches on your record, commit to becoming a safer driver. Many insurers have programs you can enroll in that will gauge your driving behaviors, provide safety pointers and reward you for good driving behaviors.

    If your credit is suffering, committing to improving your credit score by paying bills on time and reducing overall debt levels will not only help you lower your auto insurance costs but will also help you score better terms on loans and credit cards. In general, make a list of the factors you can control and start working to improve those factors.

    Shopping around is probably your best bet, and looking at what you can control. If you're 18 years old, there's nothing you can do about that. What can you control? You can drive better. You can not get in car accidents. You can avoid speeding tickets or other violations. You can think about what kind of car you buy or drive. A newer car or a sports car is more expensive to insure.

    Auto insurance these days is tricky because, realistically, younger people are tending not to want to drive as much because they tend to live in cities. That whole, “I’m 16 now and I want to go get a license.” The reality is that 40 years from now, I don't know how many humans will be driving cars. To me, I think auto insurance is an insurance area that is going to die at some point. We'll be looking at health insurance 50 years from now, because people are still going to get sick. But 50 years from now, I don't know how many humans there will be driving cars.

    The obvious answer is to have a good driving record. A good driving record includes no accidents, but also no moving violations. Your location also has an impact on your insurance premiums. If you live in the city, you may pay higher premiums because a city has more cars and thus a greater chance of having an accident.

    Your credit history plays a role. You are viewed to be a lower risk if you have a good credit rating. Your insurance premiums can also be impacted depending on the amount of miles you drive in a year. The lower the annual mileage, the lower the premium you should earn.

    Insurance premiums are based on a number of factors, but all factors that an insurance company uses must be cleared with the state insurance regulators. The best way to deal with varying factors is to shop around and find the best fit for your circumstances.

    In terms of driving record and all of those things, it just shows that you don't want to be arrested. You don't want to have accidents. So, don't drive drunk.

    I addressed some of this question in 2 above. As stated there, much of the rating criteria cannot be effected by improved Risk Management. Greater attention should be paid to the policy EXCLUSIONS. There is a complete section that will list what the insurance company will NOT cover. Much of the coverage offered by an insurance policy can be determined by what it says it will not cover. For example, using a personal automobile for business purposes is normally excluded. So, delivering Pizza in your personal auto is NOT going to be covered by your insurance policy.

    Some of the factors can be controlled (driving record and credit score), while others can't (age, where you live and gender). Auto insurance rates are state regulated, so insurers are required to justify why they charge certain premiums to drivers. It's remarkable how insurers rate drivers so differently and the premiums they charge. Auto insurance is highly competitive, so shop around and get quotes from multiple insurers. There is a wide range of prices, so an extra 20 minutes getting a quote could save you hundreds of dollars.

    Insurance companies have a highly automated approach to pricing. Statistical models are running on the computer systems that generate online quotes. This means an automatic price increase for a driving incident or a low credit score. It might seem unfair—if not just impersonal—but the insurance companies are not doing this to punish you: the numbers show that these behaviors indicate more accidents.

    You can use this to your advantage. When you know the mechanical relationship between insurance costs and your behavior, you can make changes in ways that reduce those costs. If you get your checkbook in order, you get a bonus in insurance savings. If you avoid getting a ticket, the savings in insurance costs can be several times the fine for the traffic ticket. Go a little lighter on the gas pedal and you could save yourself thousands over the years. Once you see the pricing difference, it is a little more incentive to drive carefully and wait for tickets to fall off your driving record.

    Armed with this information, you might think of these actions as gaming the system to trick insurance companies into offering you lower rates. They are happy to do so because careful driving saves them money. As I like to say, when you buy insurance you are asking the insurance company to bet that you will not get into an accident. Do whatever you need to do to make this a safe bet.

    Everyone can manage their own driving record. Be very careful 100% of the time you are driving – as if you were holding a loaded gun with your finger on the trigger. A small mistake can kill you, people you love, and others. Crashes don’t just happen, they are caused by people.

    Location and credit-based insurance scores are the two most accurate predictors of crashing. They identify the places where crashes are most likely and the people who are most likely to crash. If you live in a location that has a lot of crashes, or if your credit-based insurance score is low, you can do your part to lower both your rate and everyone else’s rate by being even more careful not to crash your vehicle.

    Insurance is the purchase of a product with a bundle of attributes including various protections for property damage, bodily harm, personal liability, and so on. The pricing structure also tends to be complicated as a consequence of that. Weighing the pros and cons of tradeoffs such as a higher deductible in exchange for lower premiums or a particular cap on out-of-pocket expenses is highly complex. Getting multiple quotes from different insurance companies as well as getting quotes for different policies from the same insurance company are good ideas. Consumers should not be afraid to ask as many questions as they want to an insurance agent that is trying to sell them a policy; nor should they feel pressured to buy a particular policy. Competition among insurance agents is high and a good insurance agent should be willing to provide as much information and answer as many questions as necessary to make a consumer feel comfortable about such an important purchase.

    Your driving record is reflective of how you drive, so you have some control over it. Driver safety courses can enable the insurance company to offer a discount. Location is a reality of where you live, so there is not much that can be done to manage it. Credit history may or may not represent how your auto claims will fare over time; so other than generally trying to maintain a good credit rating, you may not be able to prevent it from being used in an insurance underwriting decision on insurance.

    Again, rate shop. Also, ask if you are eligible for a discount if you take a defensive driving class. The class might take up a few hours of your time, but in some states will lower your insurance. Another thing drivers can do, if they recently received a ticket, is to call the court and see if they can plea down the ticket (or even protest the ticket in court). Having a "lesser" infraction could mean a smaller increase in your insurance.

    Short answer – be a good driver. One cannot control where they live or, in some cases, even your credit score, but you can control your own driving behavior. This will help you save a lot on car insurance costs. However, it is also important to note that the pricing structure in the insurance industry lacks transparency. Customers have limited options when it comes to understanding these prices. Hence, they should do more research, shop around for the lowest cost insurance based on their needs, and educate themselves as much as they can, given the information asymmetry in the market for car insurance.

    Driving record, location and credit history are all important factors in "underwriting", the process by which insurers decide whether they want to take you on as a customer and if so, at what price. Drivers should drive with care to reduce the likelihood of being at fault in an accident or being cited for moving violations. Paying all your bills on time and not overextending yourself with credit will have positive impacts on your credit score and, in turn, your car insurance premiums. One of the most significant things you can proactively do is find a vehicle that is relatively inexpensive to insure. Cars that are unlikely to be stolen, inexpensive to repair in the event of an accident and relatively slow will be those carrying the lowest premiums.

    The underwriting factors that are used by insurance companies are all approved by the law. Even controversial ones, like credit rating. However, one must realize that different states place restrictions on how insurance companies can use that information. While location, where the car is housed, is not typically determined by the auto insurance rates and one does not change location because of auto insurance, other factors can be managed. The best way to manage them is to periodically check one’s credit report and driving record. While credit reports by all three credit reporting agencies can be obtained for free, the driving record can be obtained for payment of single digits for most states.

    These are objective criteria that insurance companies put into their model to determine the level of risk to them in deciding what levels of coverage to offer and at what cost/premium. Hard facts are hard to debate. That said, different providers use different criteria at varying levels of importance, so comparing alternatives is a good step. The best step, be a safe driver without tickets or other infractions to get the best-offered rates.

    Given the sheer volume of talking geckos, animated generals, and exuberant insurance company employees in white aprons that I view in commercials on a regular basis (and I don’t even have cable), I naturally assume that car insurance is a lucrative industry. In order to be profitable, though, these companies have to effectively manage their own risks, which means adjusting their prices based on driving record, location, credit history, and other factors.

    To some degree, the costs you will bear for car insurance will be based on factors largely outside of your control. Your age, the population density in the area where you reside, the age of your car, and whether you financed the purchase of your vehicle are all factors that can affect how much you pay for insurance. While you can’t dramatically change these factors, you can take them into account when evaluating insurance options. It is also important to keep the cost of car insurance in mind when considering the purchase of a vehicle, as the cost of car insurance is a substantial expense related to this purchase. In some extreme cases, the periodic cost of insurance may be greater than the loan payments on the vehicle itself.

    However, there are some factors that are within your control. Obviously, your driving record will have a strong effect on the cost of your car insurance. Driving safely, obeying the rules of the road, and staying out of accidents will all reduce the amount that you have to pay for car insurance in the long-term. Beyond that, good credit also reflects favorably on you from an insurance perspective. Poor credit is a signal of high risk, which means that insurance companies will respond with higher premiums. To keep those costs down, it is important to pay your bills on time and develop a good history of responsible spending.

    Coverage varies area by area and most time you do not have a choice to move, so look at other things like multiple car discounts, non-smoker/drinker discounts, and when you find a good company stick with them for multiple years of service discount. Look at the age of the car in relation to how much coverage you choose. Also, look at the deductible to lower your overall cost. If you are a safe driver, you can afford a higher deductible.

    Auto insurance premiums are based on a variety of factors. Age is a key factor. Those under 25 years tend to get a much higher rate due to the higher likelihood of them getting into accidents. College students can get a discount if they have a high GPA. Check if your insurance company provides that discount. Where you live can impact your insurance rate. Areas with high auto theft will have higher insurance rates. The location of your residence compared to your work can impact the premium. If you are commuting long distances to work, you are more likely to have an accident. Credit history is also important. Those with high credit history will get a better rate. You can get a discount by insuring all your cars with one insurance company. If you include your house and cars with one company, you may be able to negotiate a better rate. I recommend that you call your insurance company to discuss what you can do to reduce your rates. Also, do shop around but always make sure that you are dealing with a company that is legal. With the present pandemic situation, if you have three cars and you are only using one for grocery shopping because you are working from home, contact your insurance company and see if you can get a reduction in premiums for your cars.


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    Sampath Kumar
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    Craig Seidelson
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    Sampath KumarProfessor of Marketing for the Austin E. Cofrin School of Business at UW-Green Bay
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    Joel MorseProfessor of Finance, Department of Finance and Economics at the University of Baltimore
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    Thomas Mark Spade
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    Robert Hartwig
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    Michael McCloskey
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    David Marlett
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    Lealand Morin
    Lealand MorinAssistant Professor of Economics at the University of Central Florida
    Dr. Lars Powell
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    Nick Kapatos
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    Dr. Puneet Prakash
    Dr. Puneet PrakashBaker Chair of Risk Management and Insurance at Missouri State University
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    Craig Seidelson
    Craig Seidelson Assistant Professor of Operations and Supply Chain Management at the School of Business, University of Indianapolis
    Sampath Kumar
    Sampath KumarProfessor of Marketing for the Austin E. Cofrin School of Business at UW-Green Bay
    Richard Alderman
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    Thomas Mark Spade
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    Robert Hartwig
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    Michael McCloskey
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    David Marlett
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    Lealand Morin
    Lealand MorinAssistant Professor of Economics at the University of Central Florida
    Dr. Lars Powell
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    Dr. Puneet Prakash
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    Dr. Michael BarnesAssistant Professor of Accounting at Truman State University
    Dr. Doris Sikora
    Dr. Doris SikoraOptional Retirement, Associate Professor, Family and Consumer Sciences Education at Western Kentucky University
    Albert Williams
    Albert WilliamsAssociate Professor of Finance at Nova Southeastern University

Methodology

Auto insurance company rankings and reviews are determined by evaluating a combination of data, including cost, availability, financial strength and customer satisfaction. Scores also take into account industry-leading evaluations such as J.D. Power, AM Best and the National Association of Insurance Commissioners (NAIC). Premium information is based on a sample driver profile for a 40-year-old male driving a Toyota Camry with a driving record without tickets or accidents. Average premiums are calculated for 50/100/50 comprehensive and collision coverage. Learn more about MoneyGeek’s Methodology.

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About the Author:

Rachael Brennan is a professional freelance writer. She has been published on a number of websites, including Adweek, Glamour and Cracked. She has also worked in the insurance industry for more than a decade, earning her P&C license in all 50 states and her life, health and AD&D license in New York and the surrounding states. You can follow her on Twitter @rachaelbwriter.

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