With very few exceptions, car insurance is required to get your car on the road—and it's an ongoing expense you'll deal with throughout your life. Balancing the right coverage with a great auto insurance rate can be challenging.
But beyond the requirements, it’s important to determine what kind of insurance coverage is best for you. Without the right shopping approach, you could end up with too much coverage, too little coverage, or coverage that is wrong for you altogether.
- To get the best coverage, you need to understand the different types of coverage available and what you need versus minimum requirements.
- As a general rule of thumb, buy more than the state’s minimum liability coverage requirement if you have assets (a home, income, etc.) that you want to protect.
- Compare pricing—but also compare company reputations and complaints.
- Raising your deductibles can be one way to tweak pricing without lowering your coverage limits.
- The “best” coverage may change with your circumstances, but shop for coverage every two to three years, even if your circumstances don’t change.
Determine How Much Auto Insurance You Need
First, ensure you have at least enough liability insurance to meet your state's minimum requirements, said Tasha Carter, the Insurance Consumer Advocate within the Florida Department of Financial Services.
Then, think about how much you'll need to protect yourself and cover the value of your assets.
Liability coverage covers injuries, death, and damage you cause to others and is required for auto owners in most of the U.S. Three types of liability coverage are required:
- Bodily injury liability: The maximum your insurer pays for one person’s bodily injuries or death you cause
- Total bodily injury liability: The maximum your insurer pays for all bodily injuries or death you cause per accident
- Property damage: The maximum your insurer will pay for property damage you cause
The minimums in these three categories differ by state. For example, California’s minimums are $15,000 for bodily injury, $30,000 for total injuries, and $5,000 for property damage. But in Alaska, the car’s owner or driver must be insured for $50,000 per injury, $100,000 for total bodily injury, and $25,000 for property damage.
"If you're in an accident, your liability insurance covers expenses up to the policy limits, but you're responsible for any expenses above those limits," Carter said. "If someone sues you, your assets could be taken or wages garnished to cover the outstanding balance."
A 100/300/100 liability policy could be a good starting place, according to both Carter and Derek Ross, president and chief operating officer at Kulchin Ross Insurance Services. This policy would pay:
- $100,000 for injuries or deaths you cause to each person in the car
- $300,000 for all total bodily injuries per accident
- $100,000 in property damage to other people’s property
Kulchin Ross Insurance Services won't even sell a policy at California’s minimum limits to a potential customer. "It's just not enough coverage," said Ross. "If you rear-end a middle-of-the-road Mercedes Benz, you'll do more than $5,000 worth of damage."
For those with more to protect, $1 million in coverage is often a "sweet spot," Ross said. This will require a combination of liability coverage and umbrella insurance, which steps in when auto liability maximums are reached. Some people even get policies that can cover up to $10 million or more. "If you've got deep pockets, liability coverage protects you from the other party diving into those deep pockets," he said.
Ross suggested imagining a worst-case scenario: "If you're driving a car and hit a car with four people who die, and the car is totaled, what would that do to you financially? Identify how much protection feels OK and how much could be taken from you."
No-Fault/Personal Injury Protection
In some states, you’re required to carry insurance to pay for injuries caused to you, no matter who is at fault. These are called “no-fault” states, and while they all work a little differently, this coverage will be required at a minimum amount, much like liability insurance. In other states, personal injury protection may be optional or not available.
If you live in a no-fault state, you may be required to purchase medical payments coverage, but it’s not common.
Uninsured/Underinsured Motorist Coverage
This insurance helps pay for damage caused to your car by another driver who either doesn't have enough insurance for the damage they've caused to you or doesn't have insurance at all. This type of coverage is required in some states.
Lender-Required and Optional Coverages
If you don’t have a loan or a lease, these coverages are optional. If you do, your lender may require you to carry them.
While liability coverage helps pay for damage you cause to others, it does not help repair your car’s damages from an accident. When your car comes into contact with an object or another vehicle, collision insurance can repair it no matter who is at fault. This coverage may be required by your auto lease or lender.
Comprehensive insurance steps in when your car is damaged by anything but an accident—for example, a flood, fire, or even hitting a guardrail. This insurance is not required at the state level, but it may be required in your auto lease or by your financial lender.
Other Auto Insurance Coverages
There are many other types of coverage, ranging from relatively common to specialized. Think about where and what you drive and your tolerance for risk. Other optional coverages may appeal depending on your personal circumstances, including (but not limited to):
- Medical: Covers your medical expenses
- Car rental: Covers a rental car when your car is in the shop for repairs
- Roadside assistance: Covers towing, battery jumps, and other assistance
- Gap insurance: Covers the “gap” between what you owe on a car you’re leasing
- Ridesharing coverage: Covers any gaps between your own insurance policy and a ridesharing policy
- Auto glass insurance/windshield repair: Covers repairs to your auto glass
- OEM coverage: Requires original equipment manufacturer parts to be used on any repairs
- Mexico coverage: Covers your car when driving into Mexico
- Classic car coverage: Covers cars older than 25 years
- Mileage-based coverage: Covers drivers on a pay-per-mile basis, generally good for those who spend a limited time behind the wheel
Compare Car Insurance Rates and Coverage
When shopping for insurance, always compare quotes from at least three companies, Carter suggested. Use the same liability limits, other coverages, and deductibles to ensure you're comparing apples to apples.
Price isn’t the only aspect to consider and compare. If you have an issue, you want the insurance company to perform well. "Your expectation is that an insurance claim will be handled fairly, efficiently, and quickly," she said.
Carter recommends investigating and comparing:
- The company's history and reputation, including how long it’s been in business.
- Any complaints with the state's insurance regulatory agency, including the ratio of consumer complaints to the policies it covers in your state—a good way to compare similarly sized companies.
- Levels of policyholder engagement and communication options. Is the company responsive by email or app? Is the website mobile-friendly? Can you pay bills or make changes to your policy online?
Ask about standard discounts such as bundling renters and auto insurance or insuring more than one vehicle. But also ask your agent to detail all available discounts to make sure you’re leaving nothing on the table.
Tweak Your Rates
To get the best coverage at the best rate, consider moving the dials on a few prices, including coverage, limits, deductibles, and your circumstances.
Once you know which types of coverage you’re required to have, and what limits you want, consider optional coverages that you might or might not need. For example, if you already have health insurance, you may want to skip additional medical coverage on your auto policy. Also, consider forgoing collision and comprehensive coverage if your car isn’t worth much. Perhaps pass on roadside assistance if you’re a member of AAA or another auto club.
But if you’ve recently paid off your $20,000 vehicle, for example, and are no longer required to carry comprehensive and collision, you still probably want to—especially if you’d struggle to replace the car if it were totaled in an accident.
Deductibles are the portion you pay before insurance steps in. They can range from as little as $50 to $1,000 or more. Make sure the quotes you compare have the same deductible.
Always weigh deductible changes against how much you're really saving, Ross pointed out. If you raise a deductible from $500 to $1,000, make sure the savings add up. A small difference in your deductible, such as $8, may not be worth coming up with an extra $500 after an accident.
"A lot of people think it's better to stay with an insurance company for an extended period of time to build a history, but when factors and circumstances change, compare rates," Carter said.
She recommends doing so every two to three years, especially if you've added drivers, filed a claim, received a driving violation, or experienced other factors used to calculate your auto insurance rate.
The practice of price optimization can raise your rates based on whether the insurer thinks you’ll shop around for new rates; this makes shopping around even more important.
Purchase Coverage and Cancel Your Old Policy
Whether you request new coverage from the same insurer or a new one, it can be effective immediately—even the same day. However, you normally need to make a payment to activate the new policy, so expect upfront costs, Ross said.
If you're switching to a new insurance company, get the new policy first, and then cancel the old one. This way, you can make sure you’re not without insurance coverage, even for a day.
Frequently Asked Questions (FAQs)
How can I reduce my premium without reducing my coverage?
If you need to lower your premium but don’t want to reduce your coverage, ask your insurer about available discounts. Consider bundling policies you have with different insurance companies. Ask if taking a defensive-driving course will lower your premium. If your insurer doesn’t offer attractive discounts, shop around for a better rate. To reduce your premium long term, improve your credit score; insurers consider it when setting your rate.
Is car insurance lower when you’re married?
If you get married, there’s a great chance your car insurance premium will be lower. Insurers take your marital status into account when setting your premium because, statistically, married people make fewer claims. Call your carrier to deliver the good news and ask how it changes your rate.