When it came to car insurance my motto used to be “the cheaper the better.” I knew nothing other than I needed to have insurance in case I was involved in an accident.
I didn’t understand that the low premium that came with state minimum coverage could’ve destroyed me financially. (Especially since my state, Ohio, has ridiculously low state minimum requirements!) I didn’t know the difference between comprehensive and collision and I sure as hell didn’t know what my deductible actually meant.
Then, when I become an insurance agent I got a brand new outlook on insurance. It turns out the car accidents and the need to actually use insurance is much more prevalent than I had thought. It also turns out that the people who, like me, went for the cheapest price didn’t have enough coverage to pay for a seemingly minor accident and were left with quite a big bill to pay on their own.
Since this time my motto has changed to “get the best car insurance rates for the best coverage possible.” Here’s how you do that.
Understand Your Coverages
Every state will require you to have at least a certain amount of minimum coverage. This amount of minimum coverage varies greatly from state to state.
In trying to save money on car insurance it’s tempting to request the state minimums but doing this could have dire consequences, especially if you have any type of assets that you want to protect.
When it comes to understanding coverages your best bet is to make an appointment with an insurance agent to discuss the kinds of coverages you should have. An agent can help you understand the ideal liability insurances for you, the difference between collision and comprehensive and any other add-ons you might need.
Know How Your Premium is Calculated
There’s a lot that goes into your car insurance rate. While these factors can vary a little by state the main factors are:
- Your driving history
- Your credit score
- Your claims history
- Your age, sex and marital status
- The make, model and color of your car
- Your coverages
- Your deductible
The most important factor is your driving record. The more dings on your record the more of a “risk” you are to the insurance company. If you want to keep a reasonable rate you need to avoid getting traffic tickets and avoid accidents.
Aside from having a teenage driver in your household the next biggest issue I’ve personally seen is credit score. Again, your credit score is used as a measure of your responsibility. If it’s low a car insurance company may view you as risky and your rate could be significantly higher than that of someone with a good credit score.
Other important things to consider are the make and model of your car. The more expensive your car is to replace the more full coverage insurance will cost you. Likewise, if you have a sportier type of vehicle you might pay more all around.
The most important things you can do to keep your car insurance rates low are to keep a clean driving record and high credit score.
It’s becoming increasingly popular to build your own insurance policy online. I am very much against this.
The average Joe does not understand coverages and therefore does not have the ability to put together a policy that will be an asset to him. Instead the average Joe is going to whittle down on coverages to get the best price.
You DON’t want to do this.
Your best bet is to call an independent insurance agency who works with multiple insurance companies and who will be able to help you build a solid package at a fair price. Independent agencies can shop around on your behalf to help you find the best policy.