Vanessa and I recently bought a car to replace our 1996 Saturn. In the process, we decided to reconsider our auto insurance coverage in an attempt to cut our monthly premium. That process motivated me to write a post about finding and comparing auto insurance.
Most individuals (or couples) obtain auto insurance, then forget about it. As a result, they often stay with the same insurance provider for many years. But shopping around can be extremely rewarding, because premium quotes can vary a considerable amount within the auto insurance industry.
The problem is the traditional insurance shopping process. You apply for one quote at a time, filling in all your personal information, only to receive an outlandish quote. Then, after you exit the quote process, you are bombarded with calls and voicemails from Joe the Insurance salesman. It’s a tedious, aggravating, unrewarding process.
A Better Way to Compare Car Insurance Quotes
Luckily, the market has opened up in the last few years. A new online service website – The Zebra – allows you to compare quotes from more than 200 auto insurers across all 50 states. They provide quotes from more than 97% of available auto insurers, and you can do the entire process online.
The Zebra updates your quotes in real time as you input information such as automobile make/model, zip code, birthdate, gender and expected miles driven. It will even include bundle discounts if you are looking to insure your home and car at the same time. After inputting the basics, it will ask you to choose a coverage level: State Minimum, Basic, Better or Best. Each one includes higher amounts of coverage, and of course, higher premiums.
After selecting your desired amount of coverage, you will see quotes from all the insurers available in your state. You can then click a little arrow beside each insurer to see available features and ratings from JD Power and the Better Business Bureau. For example, below is a screenshot showing Nationwide (learn more) and the associated ratings:
At this point the you can go directly to the insurer to finish the process online, or call one of The Zebra’s licensed agents and purchase. The Zebra, which launched at the end of 2013, claims that the average user saves $614 a year through the service. In my experience, I received very competitive quotes.
How to Choose the Correct Amount of Insurance Coverage
As I mentioned above, all insurance providers require that you select a certain amount of liability coverage. Liability coverage covers the other driver’s personal injury and property damage in a crash where you’re at fault. It does not cover your own injuries or property damage. You must at least purchase the minimum required by your state, but you can choose higher coverage limits if you desire.
For example, in Texas, $30k / $60k / $25k is the State minimum coverage.
You only need the state minimum to legally drive, but many people opt for additional coverage. The reason is that one bad accident can easily surpass the bodily injury or property damage minimums. If that happens, many states allow the injured individual to seek additional compensation through the legal system.
Do You Only Need Liability? What About Additional Coverage?
Buying only liability insurance is always going to result in the cheapest monthly premiums. Beyond basic liability coverage, there are many additional coverage options. Some of the most important options include:
- Collision: Unlike liability insurance—which covers the other party’s damages—collision insurance covers your damages should you be involved in an accident.
- Comprehensive: Comprehensive insurance covers loss and damages to your vehicle unrelated to traffic accidents. Covered events usually include theft, vandalism, weather conditions, and natural disasters.
- Uninsured and Underinsured Motorist (UM/UIM): These types of coverages protect you should you be involved in an accident with a driver who doesn’t have enough—or any—car insurance. In that event, your own insurance will cover the accident. This is now required in some states.
- Personal Injury Protection (PIP): PIP covers your medical expenses, lost wages, and funeral expenses if the other party’s liability coverage isn’t enough, regardless of who was at fault for the accident. Some states now require PIP coverage by law.
It’s typically wise to choose uninsured and underinsured motorist coverage. The reason is simple – Many drivers are uninsured or underinsured – and many of them are accident prone.
Personal injury protection (PIP) is really useful to cover lost wages and medical expenses for all passengers inside of your vehicle, and some States require PIP by law. There are some who argue that PIP is unnecessary if each person has medical insurance (and an emergency fund).
Collision and/or Comprehensive coverage is much more expensive than liability only. The value of your car is an important consideration when determining whether you need collision and comprehensive coverage. If you car is older and/or low-value, it may not be worth purchasing these coverages, since the insurance company will only pay up to the estimated fair market value of your car. If your car is newer and/or high-value, having these coverages can save you from paying out significant costs to repair or replace your car.
Other, less common coverages are available as well. Some of these include:
- Roadside Assistance
- Towing Coverage
- Rental Car Coverage
These can be convenient, but also costly. If you have family in the area, or access to another vehicle, you might not need to pay a monthly premium for these add-ons.
Choosing the Correct Deductible
A deductible is the amount towards a claim that you are responsible for out of pocket before your insurance pays out. Collision and comprehensive insurance coverages require you to pay a deductible whenever you claim a loss, and the insurance company often allows you to set your own deductible (typically up to $1,000) . An important note about deductibles is that they occur on each claim made for auto insurance, not on an annual basis like health insurance.
All else equal, a higher deductible results in lower monthly premiums.
You should set the deductible as high as possible, given your situation. If you don’t have cash stashed away to pay the higher deductible in case of an accident, raising your deductible isn’t the wisest move. If you have the funds available, raising your deductible will result in significantly lower premiums. Remember, insurance is a risk protection tool that is meant to protect against high severity, low probability events. If you rarely get into an accident, you want to minimize your monthly premium cost.
The Zebra is a great tool for comparing car and auto insurance. You can take it a bit further and compare Zebra quotes to personalized quotes from individual insurers. With that information, you can choose a reliable, low-cost insurer that fits your needs.
After you’ve made your choice, don’t let inertia take hold. Comparison shop for new rates every year because companies constantly change their policies and rates.