Several personal factors, both inside and outside of your control, affect how much you pay for car insurance. Liability coverage, required in most states, pays for others’ medical and property damage bills up to a specified limit. Collision and comprehensive coverages pay for damage to your vehicle, independent of who’s at fault.
Your car insurance policy should be tailored to fit your specific needs and budget. Several factors determine the type and amount of coverage you should buy, including state minimums, optional coverage, and deductible amounts. To get an accurate car insurance quote, you need to know your vehicle information (make, model and year) and driving history. A recent accident, tickets or claims will raise your rates, while good driving can lower them. The value of your assets, including your home, investments and retirement funds, may also factor in. Visit https://www.nicholsoninsurance.com to learn more.
Liability insurance, a required minimum in most states, pays for injuries to others and damage to their property caused by accidents you cause. It typically covers medical expenses, vehicle repair or replacement and other costs. Collision insurance, another optional coverage, reimburses you for the damage to your car from an accident, regardless of who caused it. Comprehensive coverage is an add-on that protects you from damage to your car by events other than collision, such as hail, theft, fire, vandalism and falling objects.
Some policies include accidental death and dismemberment coverage, which pays a set amount if you or a passenger are seriously injured or killed in an accident, regardless of who is at fault. You can also buy additional coverage to protect yourself and your passengers against uninsured/underinsured drivers, a common problem. This coverage pays up to your policy’s limits if the other driver is uninsured or has insurance that doesn’t cover enough of the damages.
Other optional coverage types include personal injury protection (PIP) or medical payments (MedPay), which pays for your and your passengers’ medical bills no matter who is at fault in a crash. It may also pay for lost wages, child care and other services if you are injured in an accident. Supplementary uninsured/underinsured motorist coverage is an add-on that provides increased limits of your own uninsured/underinsured coverage, sometimes up to $250,000. You can usually buy higher limits for an additional premium. Some insurers offer a la carte pricing for each coverage type, allowing you to select individual limits to match your needs and budget.
Deductibles
The deductible is one of the ways that insurance companies mitigate some of their risk. By making the policyholder responsible for a smaller portion of any claims, they can offer more competitive rates. For instance, if you file a claim for $2,000 worth of damage, you would have to pay $500 before the insurer pays anything. Your agent can help you decide which deductible amount makes the most sense for your budget and your risk tolerance.
Deductibles can apply to any of the coverage types on your policy, including collision and comprehensive. MoneyGeek notes that a collision deductible applies to any incidents that result in your car being damaged and can be triggered by things like running into another vehicle or hitting an object, while a comprehensive deductible applies to events such as severe weather, animal collisions, and theft.
Raising your deductible will lower your premium, but make sure you’re comfortable with the amount you’d be responsible for in the event of a claim. You should also consider how often you file insurance claims and the average cost of a claim in the past, as these can help determine whether a high or low deductible makes more financial sense for your situation.
It’s important to remember that even if you choose a high deductible, you may be able to save on your annual premium by being accident-free for many years. That being said, it’s not a good idea to go too long without filing a claim as the cost of doing so can add up quickly.
It’s best to work with your agent to find a deductible that works for you and your lifestyle, taking into account your likelihood of needing to file a claim and the amount you can comfortably afford to pay in the event of a loss. They’re always happy to crunch the numbers and help you come up with a plan that makes sense for your unique situation. Contact us to get started. We can provide you with quotes from multiple insurers and find a solution that fits your needs, budget, and lifestyle.
Limits
Your car insurance policy limits determine how much your insurer will pay for a covered claim. Limits are expressed in a format such as “$25,000/$50,000/$10,000.” The first number refers to the amount your insurer will pay for bodily injury per person. The second number refers to the total amount your insurer will pay for bodily injuries in one accident. The third number indicates the maximum amount your insurer will pay for property damage in a single accident. Some insurers offer a combined limit for both property and bodily injury. This is typically more expensive than having separate limits, but it provides flexibility and more coverage in the event of a major crash.
Most states require some level of liability coverage for car accidents. However, the minimum limits vary from state to state. At NerdWallet, we’ve assembled a list of state requirements so you can compare minimum coverage limits to your own financial situation and the value of your car.
For example, the New York minimum requirement for car insurance is $25,000 per person and $50,000 per accident for bodily injury liability. The state also requires $10,000 for property damage liability. These are the minimum coverage amounts, but you can choose higher limits. A higher limit protects your savings and other assets from the risk of large claims for damages caused by an accident that you cause.
If you have a high net worth, it’s a good idea to get more than the minimum liability limits for your car insurance policy. This is because if you are found at fault for a crash, the other driver could sue you for the balance of what their insurance covers. In this case, you can use your personal assets to cover the difference.
You can also purchase extra insurance called umbrella coverage to supplement your regular auto policy’s liability limits. Umbrella policies add additional liability coverage in $1 million increments, which can be very helpful if you’re found responsible for a serious crash. This type of additional coverage is available from most car insurance companies, but you’ll likely need to have a good driving record and substantial equity in your home in order to qualify for a policy with high liability limits.
Shopping
Shopping for car insurance isn’t the most exciting facet of vehicle ownership, but it’s one of the most important. A comprehensive policy protects you from financial calamity in the event of a crash, and it’s required by most states if you want to register your car. It’s also recommended that you shop for a new policy every few years to ensure you’re getting the best rate available.
Whether you shop online or with an agent, price is the top priority for consumers in their search for a car insurance policy, according to a report released today by J.D. Power. A significant percentage of car insurance shoppers are looking to save money on their premiums, while the majority of those who are shopping for a new policy are interested in a new coverage option, such as usage-based insurance (UBI).
When comparing prices, be sure to compare apples-to-apples. A comparison tool should display quotes for policies with identical coverage, including deductibles and limits, from several companies. This ensures you’re evaluating the most accurate information available and comparing the cheapest rates.
A good car insurance agent will have specialized knowledge about discounts, bundling options and insurance requirements specific to your location and situation. They can offer you advice when it comes to analyzing and selecting the right coverage for your needs, as well as introduce you to insurers that you might not have considered on your own.
If you choose to work with an independent agent, they can help you find the right coverage at a competitive price by offering you multiple policy options from a range of providers. In contrast, captive agents are employed by a single company and can only sell that insurer’s products to you.
Most people who switch insurers do so because they believe their current provider isn’t offering them a good value or they are unhappy with the service provided. Consumers who are satisfied with their current provider should consider their loyalty benefits, which can include discounts for bundling home and auto insurance; a discount for safe driving behaviors; lower annual mileage; and credits for having a clean driving record or taking a driver’s safety course.