When it comes down to it, auto insurance can be one of the most important things you purchase all year. But finding the right policy can feel like a daunting task.
Whether you’re buying your first car or trying to save money on your current policy, it’s important to explore your options.
With a little preparation, you can get a good policy with the amount of financial protection you need at an affordable price.
Our step-by-step guide breaks down everything you need to know before you shop for car insurance, including state minimum requirements, online comparison sites and ways to save money on your policy.
How to Shop for Car Insurance in 5 Steps
Car insurance can be expensive.
The average cost of auto insurance in the U.S. is around $137 per month, according to PolicyGenius, an online insurance marketplace.
Shopping around for car insurance is one of the best ways to save money while ensuring you have the coverage you need.
If you’re getting quotes without the help of an independent agent, it’s helpful to understand some car insurance basics before exploring your coverage options.
Step 1: Understand Car Insurance Terminology
First, let’s cover some car insurance terms you need to know before you begin shopping for quotes.
Premiums: The amount you pay for your insurance coverage — and how often you pay your premium — varies by insurance company. Your car insurance policy will generally accept monthly or even semi-monthly payments, but many offer discounts for paying upfront for the entire policy, which typically lasts six or 12 months.
Deductible: The out-of-pocket amount you must pay before your auto insurance starts paying for damage to your vehicle — not damage you cause to other people’s property. Say you hit a deer, causing $1,000 worth of damage to your vehicle, and your deductible is $500. You must pay the first $500, then your car insurance pays the remaining balance.
Coverage Limits: The maximum your auto insurance will pay. Any damage above these limits is your responsibility, so make sure you’re aware of your limits when you purchase an auto insurance policy. For example, suppose you were at fault in a crash that caused another driver $50,000 of injuries. Your car insurance policy has a $25,000 per-person bodily injury limit, so it pays out the first $25,000 — but you’re on the hook for the remaining $25,000.
Claims: These are filed when you or another person asks an insurance company to cover losses from an accident. Let’s say you’re in a crash that’s your fault, and you cause $1,000 worth of damage to your car and $2,000 worth of damage to someone’s fence. You would file a claim with your car insurance company to have your car repaired. The fence owner would also file a claim with your insurance company to have their fence repaired.
Step 2: Gather Your Information
To get an accurate auto insurance quote, you’ll need to provide some basic information about yourself and your car.
To save time, gather this information before you start shopping for quotes.
- Vehicle information: Vehicle identification number (VIN), date purchased, make, model and mileage. This information can be found in the vehicle or on your registration. If you haven’t bought the car yet, make sure to have the mileage, make, model and year of what you’re planning to buy.
- Drivers’ information: This should include all drivers who will be on the auto policy: Drivers license numbers, birthdates, addresses, occupations and marital status.
- Accident History: Include any tickets, violations and claims you’ve had over the past five years.
- Auto Insurance History: This helps you compare new policy features with your current coverage. Also, some insurers won’t cover you without some previous coverage history.
Step 3: Determine How Much Auto Insurance You Need
Minimum coverage requirements vary greatly by state, and that has a huge impact on what you pay for your policy.
If you shop for car insurance quotes online, website comparison tools should automatically pre-load your state’s minimum insurance requirements.
There are different types of coverage, and different requirements for each type. Here’s a simple breakdown.
Liability coverage is required by law in every state except New Hampshire. However specific coverage requirements and minimums vary by state.
Liability insurance protects your assets in the event of a crash. It’s the most important part of your auto insurance.
The more assets you have, the more liability insurance you should carry to protect yourself.
That’s why getting the minimum amount of coverage your state requires isn’t always a smart money move.
A good rule of thumb is to have coverage that equals the total value of your assets. Total assets include your home, car, savings and investments.
How to Figure Out Your Liability Limits
Liability coverage limits on policies are shown as three different numbers: like 50/100/50 up to 250/500/250. Each number is equal to the amount of money (in thousands) your insurance will payout for different types of damages.
- Individual injuries (bodily injury)
- Total injuries (total bodily injury)
- Property damage (damage liability)
Suppose your policy lists the numbers 50/100/25. The first number means one person injured is covered up to $50,000; the second number is the limit for injuries to all people in the same accident ($100,000). The third number ($25,000) is the coverage for property damage liability, which protects you if your car damages someone else’s property.
When shopping for liability car insurance coverage, you want that middle, highest number to be equal or greater than your net worth.
Uninsured and Underinsured Motorist Coverage
Uninsured and underinsured motorist coverage is required in some states and optional in others.
However, adding this type of coverage to your policy can save you a lot of money if you’re involved in a car crash with someone who doesn’t have insurance.
If you don’t have this coverage and something were to happen at the fault of an uninsured or underinsured driver, you could end up paying for some or all the damage yourself because your insurer wouldn’t have another insurance company to recover money from.
Personal Injury Protection (PIP) Insurance
Personal injury protection, also known as no-fault insurance, covers your medical expenses after an accident, regardless of who’s at fault.
It can cover things like ambulance bills, emergency room costs, follow-up medical appointments, lost wages and transportation to and from doctor visits.
It does not cover damage to your car, theft or damage to other people’s property.
No-fault insurance is mandatory in 18 states.
Collision and Comprehensive Coverage
If you want as much protection as possible, look for policies that include liability coverage, plus collision and comprehensive coverage. This is sometimes called full coverage car insurance.
No state requires drivers to carry collision or comprehensive insurance coverage. Adding this coverage can cost twice as much as your basic insurance requirements.
But if you can afford it, this extra coverage can be a smart move — especially if you have a new car.
Collision coverage pays for damage to your car when the accident involves an object or another vehicle. Owners of older cars without much value can consider dropping this coverage because it’s normally limited to the cash value of your car. This coverage is optional unless you finance your car.
Comprehensive coverage helps cover damage to your car from things like theft, fire, explosions, flood and vandalism. This coverage includes a deductible.
Step 4: Shop for Car Insurance Quotes
Rates vary considerably from one insurance provider to another, so it’s wise to get more than one or two quotes.
While you still have the option of making dozens of phone calls or working with independent agents or brokers, comparison shopping can be made even simpler by doing it online.
Make sure to compare the exact same coverage levels when shopping online for car insurance quotes to get an apples-to-apples comparison.
If you don’t know where to look, here are some providers that can find you a good rate with a reputable company:
- EverQuote is the largest online marketplace for insurance in the U.S. When you answer a few questions about yourself and your driving record, you’ll get the top options from more than 175 different carriers handed right to you.
- A digital marketplace called SmartFinancial can compare auto insurance quotes from dozens of different car insurance companies. It takes one minute to get quotes from multiple insurers, so you can see the best auto insurance rates side-by-side.
Step 5: Look for Discounts and Review Your Car Policy Regularly
When shopping for quotes, keep in mind that auto insurance companies consider specific factors when they determine your premiums.
Pricing Factors Car Insurance Companies Look at Generally Include:
- Type of car
- ZIP code
- Marital status
- Education and occupation
- Driving habits
You can’t really control these factors, but there are a few ways to get yourself a better deal on car insurance.
Shop and Compare Rates at Least Once a Year
A lot can change in a year — including your car insurance rates.
Experts recommend you shop around for car insurance at least once a year to make sure you’re getting the right coverage, service and of course pricing to suit your changing needs.
Check for Discounts
Most car insurance providers offer discounts for things like good grades or a clean driving record.
Some insurers may even offer you a discount for taking a defensive driving course.
To find out more about the discounts offered by your insurer, visit the insurance company’s website or call and speak to an agent.
Raise Your Deductible to Lower Your Monthly Premium
A higher deductible might be an option if you’re willing to save up your own financial buffer in case you’re in an accident.
But be careful and realistic about how much you could afford to pay out of pocket if you’re in an accident.
Just like a high-deductible health plan seems great until you get sick, lower monthly car insurance premiums may not mean much if you’re left with thousands of dollars in bills because your deductible is so high.
Ditch Miscellaneous Coverages
Roadside assistance and rental reimbursement should be the first car insurance policies you drop if you’re trying to lower your insurance bill.
However, you should never reduce your liability coverage to save money.
Forgo Comprehension and Collision Coverage on That Older Vehicle
If you drive an older vehicle that’s worth less than your deductible, you might skip comprehensive and collision insurance and save that money for a new car in case your current one gets totaled.
This article contains general information and explains options you may have, but it is not intended to be investment advice or a personal recommendation. We can’t personalize articles for our readers, so your situation may vary from the one discussed here. Please seek a licensed professional for tax advice, legal advice, financial planning advice or investment advice.
Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.