Shopping for Car Insurance Dos and Don’ts

Get as Much Coverage as You Need

You’ll need to meet your state’s minimum car insurance requirements to drive legally, but state minimums rarely provide enough coverage to keep you and your vehicles fully protected.

We recommend getting full coverage with the highest liability insurance, comprehensive insurance, and collision insurance limits that you can afford. Beyond that, how much insurance you need depends on several personal factors:

• How many people drive your car
• How much your vehicle is currently worth (otherwise known as its actual cash value)
• Whether you’re using your car for personal or commercial use
• How often you drive
• How much you can afford
• Your local crime rates, weather patterns, accident rates, and other regional factors
• The percentage of uninsured/underinsured motorists in your area

Talk to your agent, assess your personal needs, and determine the coverage options that meet those needs. Want to learn more? Check out this guide on car insurance coverage.

Ask Your Agent for Discounts

If you don’t ask your agent what car insurance discounts you’re eligible for, you may pay a lot more for your policy than you need to. Because discount types, percentages, and eligibility vary from state to state (even with the same provider), it’s important to ask your local agent to learn about your unique saving opportunities.

Here are some of the most common auto insurance discounts:

• Bundling or multicar discount
• Safe driver
• Homeowners’ or renters’ insurance when you bundle home and auto
• Safety driver course
• Student with good grades
• Taking a defensive driving course
• Vehicle equipment (seat belt, anti-theft devices, etc.)
• Military
• Senior

Make Sure You Can Afford Your Deductibles

Deductibles are a central part of your policy pricing because the higher your deductible is, the lower your monthly premiums will be.

The risk with a high deductible is that if you are in an at-fault accident, you’ll need enough cash or credit to pay the deductible in full before your provider starts contributing to repairs. Deductibles are a balancing act. Keep the following points in mind when finding the sweet spot of affordability:

• Be realistic. Regardless of how cheap your premiums could be, choose a deductible amount you know you can afford, so long as you can also pay the higher insurance cost.
• Avoid diminishing returns. Deductible amounts do reach diminishing returns. After a certain dollar amount, increasing your deductible may save you only a few dollars. Continuing to increase your deductible after this point would not be worthwhile.
• Get low deductibles for low-cost vehicles. The cheaper your vehicle is, the lower your deductible should be. A $1,000 deductible for a vehicle worth $2,000 means you’re splitting the costs with your provider if your vehicle gets totaled. A $1,000 deductible on a $30,000 vehicle, on the other hand, means your provider pays $29,000 if your car gets totaled.
• Increase your deductible to save. You never know when you might find yourself in an accident, but if you hardly drive your car or don’t think you’re likely to file an insurance claim, increasing your deductible may not be a bad idea.

Don’t Overpay for Car Insurance

While we recommend getting full coverage with the highest limits you can afford, that doesn’t mean you need every add-on or coverage option. Some forms of optional protection may not make sense for you, such as the following.

• Gap insurance: If you’re leasing a vehicle and what you owe on the vehicle is less than what the vehicle is worth, you can skip gap insurance (unless your lease requires gap insurance).
• Roadside assistance: If you already have a AAA membership or similar roadside service, you probably don’t need additional emergency roadside assistance.
• Uninsured/underinsured motorist coverage: In states like New Jersey or Massachusetts, where the uninsured motorist rate is lower than 5 percent, it may not make sense to prioritize uninsured/underinsured motorist insurance (especially if you’re on a budget).²