Category: Auto Insurance

Buying only the minimum required by your state keeps your premium low, but it can leave you personally responsible for thousands of dollars after a serious accident. Here is how to decide how much car insurance you actually need.

Start with your state’s minimum

Almost every state requires liability insurance, and the required limits vary widely. Some states also require uninsured motorist coverage or personal injury protection. Your state department of insurance or DMV lists the exact requirements.

Why the minimum is often not enough

Minimum limits can be as low as $25,000 per person for injuries. A hospital stay, surgery or lost wages after a serious crash can quickly exceed that amount. If the damages go beyond your limits, the injured person can seek the difference from you personally, including your savings and future income.

A practical way to choose liability limits

• Few assets: choose more than the minimum if you can afford it, such as 50/100/50.
• Homeowners and people with savings: many experts suggest at least 100/300/100.
• High net worth: consider 250/500/100 or higher, plus an umbrella policy.

Do you need collision and comprehensive?

If you lease or finance your car, your lender will almost certainly require both. If you own your car outright, ask yourself whether you could afford to repair or replace it without insurance. For newer or valuable cars, the answer is usually no, so keep the coverage.

Uninsured and underinsured motorist coverage

A significant share of U.S. drivers are uninsured, and many more carry only low limits. UM/UIM coverage protects you and your passengers in that situation and is usually inexpensive compared with the protection it offers. Many advisors suggest matching it to your own liability limits.

Useful extras

• Gap insurance: covers the difference between your car’s value and what you still owe on a loan or lease.
• Rental reimbursement: pays for a rental car while yours is being repaired after a covered claim.
• Roadside assistance: towing, jump-starts and lockouts, unless you already have it through another service.

Summary

Buy liability limits that protect what you own, keep physical damage coverage while your car is valuable, and add UM/UIM coverage. Then lower your cost with discounts and the right deductible. See our auto insurance guide for the basics.

This article is for general information only and is not insurance, legal or financial advice. Rules and prices vary by state and insurer. Check your policy and talk to a licensed agent before making changes.

Car insurance is one of the biggest recurring costs of owning a vehicle, and premiums have risen sharply in recent years in many states. The good news is that drivers have more control over their rate than they think. Here are twelve proven ways to pay less without giving up the protection you need.

1. Shop around every year

Insurers price risk differently, so the same driver can receive very different quotes for identical coverage. Compare at least three quotes at each renewal, and always compare the same limits and deductibles.

2. Bundle your policies

Buying auto and homeowners or renters insurance from the same company often unlocks a multi-policy discount.

3. Raise your deductible

Moving your collision and comprehensive deductibles from $500 to $1,000 can lower your premium noticeably. Only do it if you have enough savings to pay the deductible after a claim.

4. Ask about every discount

Common discounts include safe driver, good student, defensive driving course, multi-car, anti-theft device, paperless billing, automatic payments and paying the full term upfront.

5. Try usage-based insurance

Telematics programs track driving habits such as mileage, braking and time of day through an app or device. Safe, low-mileage drivers can earn significant savings, but risky driving can raise rates with some insurers.

6. Keep a clean driving record

Accidents, speeding tickets and DUIs can raise premiums for several years. Driving carefully is the most reliable long-term discount.

7. Improve your credit

In most states, insurers use a credit-based insurance score to set rates. Paying bills on time and reducing debt can help over time. California, Hawaii, Massachusetts and Michigan limit or ban the use of credit in auto insurance pricing.

8. Choose your next car wisely

Insurance costs vary by model. Vehicles with strong safety ratings, lower repair costs and low theft rates are usually cheaper to insure. Get a quote before you buy.

9. Drop collision and comprehensive on an older car

If your car is worth little, the cost of physical damage coverage may exceed what you could ever receive from a claim. A common guideline is to reconsider it when the annual cost exceeds about 10 percent of the car’s value.

10. Review your mileage and usage

If you now work from home or drive less, tell your insurer. Lower annual mileage can reduce your rate.

11. Add a teen driver carefully

Teen drivers are expensive to insure. Ask about good student and driver training discounts, and assign the teen to the least expensive car on the policy if your insurer allows it.

12. Do not cut liability to the minimum

Liability coverage protects your savings and income if you cause a serious accident. Reducing it to the state minimum is rarely a smart way to save. Cut costs with discounts and deductibles instead.

The bottom line

Combine two or three of these strategies, especially comparing quotes and asking about discounts, and most drivers can lower their premium. Learn more in our auto insurance guide.

This article is for general information only and is not insurance, legal or financial advice. Rules and prices vary by state and insurer. Check your policy and talk to a licensed agent before making changes.