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How to choose the car insurance you need

Sean Patterson

Choosing auto insurance is like making any other purchase. You need to evaluate price, coverage, customer service, and a variety of other factors. With so many auto insurance plans out there, you need to do a little research to make sure that you get the minimum coverage you need by law, and also the coverage you need to protect your future income.

Everyone has unique needs and therefore everyone needs to consider an automotive insurance plan on an individual basis. In choosing the right insurance coverage, you should first familiarize yourself with the many types of insurance coverage out there.

Type What it does
Bodily Injury Liability Bodily injury covers the costs of injuries that the policyholder and policy members cause to others. Due to the risk of personal injury lawsuits, you may want to opt to purchase more than the state-required minimum to insure protection of personal assets.
Medical Payments or Personal Injury Protection PIP protection varies by carrier, but generally it covers all medical and lost wages costs incurred to the driver and passengers of a car. It can also cover funeral costs.
Property Damage Liability Covers any property damage that might result from an auto accident.
Collision As you might guess, this covers damage to the policyholder's car as the result of colliding with another car or object.
Comprehensive Comprehensive reimburses for loss due to theft or damage not caused by a collision. Examples may include fire, falling objects, missiles, explosions, earthquakes, windstorms, hail, flood, vandalism, and animals.
Uninsured and Underinsured Motorist Coverage Reimburses policyholder if hit by an uninsured, underinsured, or hit-and-run driver. Coverage also protects a policyholder who is hit while a pedestrian.
Gap insurance While it is not available in all states, you may be able to purchase gap insurance to pay off your car in the event that it is totaled before the loan is paid off.

See the Insurance Information Institute at http://www.iii.org for more information.

A lot of people make the assumption that they should choose the plan that is "cheapest." But as with automobile financing where you may pay more upfront but less in monthly payments (but more overall), you will find that coverage levels and monthly premiums are the key variables. As with deciding on any insurance plan, be sure to read the details! Sometimes the most important information is in the small print.

The Insurance Information Institute recommends you carry $100,000 of bodily injury protection per person and $300,000 per accident. If your net worth happens to be worth more than $300,000 be sure to buy extra insurance to cover you should a claim against you exceed that amount.

In addition to plan details and pricing, you should also consider the following factors:

  • Service - When you are in a car accident, the last thing you will want to deal with is red tape. An insurance company that quickly responds to your accident and shows up to inspect your car within 24 hours is critical. The job of the insurer is to get you back on the road as soon as possible.
  • Reputation - Check out independent ratings agencies and other online forums where users may submit their insurance experiences. Two sites to start with include: http://www.epinions.com and http://www.iii.org/individuals/life/buying/strength
  • Licensing - Not every company is licensed to operate in every state. You will need insurance in the state/zip code where your car spends most of its nights. Remember, zip code is a key consideration for insurance companies in setting their rates.

Choosing an insurance company involves performing some due diligence. Do you homework, set a budget, and ask family and friends for feedback on which insurers they use and their experiences with that insurer. For additional information, GradGuard can provide you with the information you need to make these important decisions.

Sources:

Insurance Information Institute, http://www.iii.org/individuals/auto/b/choosing/