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Whether you're a young driver or purchasing a vehicle later in life, use these tips to learn how to shop for car insurance.
Auto insurance isn't exactly an exciting topic. Nevertheless, it’s a necessary — and expensive — evil if you're planning to drive. If you’re purchasing car insurance for the first time, it’s important to know exactly what you’re paying for. Let’s explore the ins and outs of car insurance for first-time buyers.
It won’t take you long to realize shopping for car insurance quotes is a dull affair. To speed up your shopping experience, you’ll want to have the following information handy:
While you don’t necessarily need all of the above to get a quote, providing comprehensive info will result in the most accurate quote possible. Presenting inaccurate information — purposefully or otherwise — will eventually come up in your quoting process and your rates will change accordingly.
Car insurance is designed to reflect the risk you present to your car insurance company. By risk, we're referring to the likelihood you will get into an accident. While a number of things comprise your driving record, the primary factors that influence premiums are broken down below.
A history of at-fault accidents, citations, or moving violations is the biggest indicator of risk for an insurance company. Because the company would be on the hook for any damages you caused, they may seek to defray exposure by charging you higher premiums for coverage.
Average Annual Car Insurance Rate Increases by Violation History
|Accident/Violation||Average Annual Premium Increase|
|Driving too slowly||$287|
|Speeding 11 - 15 MPH Over Limit||$298|
|At-Fault Accident — Greater than $2,000||$687|
|Hit and Run||$1,218|
The more driving experience you have, the lower your premium will be. This is why younger drivers typically pay more for car insurance than do more experienced drivers.
Like a poor driving record, a poor credit score often leads to higher car insurance costs. Insurance companies base these decisions on data suggesting drivers with low credit scores are more likely to file a claim — and more likely to file a more costly claim than is a driver with an exemplary credit score.
Average Annual Car Insurance Premium by Credit Level
If you have a vehicle with off-road capabilities, a high MSRP, and/or a powerful engine, your car insurance costs will be higher than average. Since an insurance policy is designed to protect and replace your vehicle in a covered loss, a more valuable vehicle costs more to insure, which will be reflected in higher collision and comprehensive premiums.
Average Annual Car Insurance Premium by Vehicle Type
|Vehicle Type||Average Annual Premium|
Insurance is regulated at the state level, but often priced at the zip code level. If you live in a no-fault state such as Michigan, expect your premium to be higher. If you live in an urban area with a large number of claims — or near a coastal area prone to flooding — be prepared for high premiums.
Most Expensive and Cheapest States for Car Insurance
|Most Expensive States||Least Expensive States|
|Michigan — $2,610||North Carolina — $901|
|Louisiana — $2,225||Virginia — $901|
|Kentucky — $2,050||Maine — $927|
|Rhode Island —- $2,004||Iowa — $1,015|
|Florida — $1,878||Idaho — $1,018|
|Texas — $1,810||Vermont — $1,027|
|Nevada — $1,802||Ohio — $1,037|
|Mississippi — $1,800||Wisconsin — $1,040|
|California — $1,731||Hawaii — $1,079|
|Delaware — $1,700||New Hampshire — $1,083|
While you’re getting a quote, the insurance agent will ask what kind of coverage you want. If you’re not familiar with car insurance, this can be a daunting question. Consider the following options when building your first car insurance policy:
Every state — except Virginia and New Hampshire) — require bodily injury and property damage protection. These coverages are designed to protect other drivers from damage you cause, up to the policy limits of your policy. Broken down, the state limits for most states will look like this (although the amounts may vary): 50/100/50.
|50 /||100 /||50|
|$50,000 in bodily injury coverage per person||$100,000 in bodily injury coverage per incident||$50,000 in property damage per incident|
Unless otherwise stated in a loan or lease contract, you’re only required to meet your state’s minimum liability limits. It’s highly recommended to carry more than that. If you are involved in an accident in which your liability coverage's limit is exceeded, you’re on the hook for the remaining value.
If you live in California and carry the state-minimum coverage. If you total someone’s Ford F-150, with an MSRP of more than $27,000, your property damage liability coverage would only cover $5,000. Depending on your financial situation, this could cause some serious turmoil.
We recommend setting your liability limits as high as 100/300/100, if possible.
Unless you own your vehicle outright, you’ll probably be required to maintain collision and comprehensive coverage. These coverages, unlike liability, are designed to protect your car. Collision, as its name indicates, protects your car if you strike a fixed object such as a pole or wall. Comprehensive coverage is designed to handle any gaps, including damage caused by weather, theft, or animals.
Even if you don’t own your vehicle outright, we recommend collision and comprehensive insurance if your vehicle is worth more than $4,000. In the event your vehicle is totaled, this is the coverage that would provide compensation for your loss.
These coverages work by using a deductible: the amount you pay for a claim payout. Standard deductibles range between $500-$1,000. Because your premium and deductible are inversely related, the higher your deductible, the lower your premium. Keep this tip in mind when considering cost-cutting solutions.
In many states, uninsured motorist coverage is required. This coverage, broken down into bodily injury and property damage, protects you from uninsured or underinsured drivers. Underinsured drivers are potentially problematic in scenarios in which the value of the damage exceeds the at-fault party’s liability limits.
These coverages are recommended because they shield you from penalty when someone else makes a mistake. While your insurance agent might tell you collision coverage works the same as uninsured property damage coverage, be wary. Although they both have deductibles and protect your vehicle from collision damage, they’re often rated, i.e., charged differently on your insurance premium. Collision claims are often seen as at-fault accidents and can lead to premium increases. Uninsured Property Damage claims, by definition, are seen not-at-fault claims and are much less costly.
If you are leasing or have a loan on the vehicle, we recommend this coverage. Basically, gap insurance is designed to cover the difference between the value of the loan and what your insurance company will pay you if you total your vehicle. Because insurance companies factor depreciation into your claims payout, this coverage prevents you from ending up underwater on a loan.
Once you find the coverage you need, you’ll soon realize car insurance is pretty expensive. Let’s look at some ways to keep your premium as low as possible.
Car insurance is a double-edged sword. The more you use it, the more expensive it becomes. While we briefly touched on this above, filing a collision claim can drastically increase your premium for the next three years. If you’re thinking of filing a collision claim, consider our advice first.
While the premium increase you will face is dependent on your insurance company and location, below are average rate increases across the US after an at-fault claim.
Average Rate Increase after at At-Fault Claim
|Increase at 6 months||Increase at 12 months||Increase at 3 Years|
After all is said and done, you might be paying too much for car insurance because you’re with the wrong company. The best way to either confirm you’re getting the best rate — or to find a better rate — is to compare prices from as many companies as possible. Enter your zip code below to compare rates from more than 200 top insurance companies.
Still looking for answers? See our additional articles.