Quoted’s Car Insurance Buying Guide

How to protect yourself without overpaying.

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It’s a fact of life that might elicit a groan or two: Everyone must purchase car insurance to drive legally. No car insurance policy is one-size-fits-all, but that doesn’t mean the buying process needs to be daunting. Below, a guide to everything you should know to choose the insurance you need–at the price you want.

Understanding Your Coverage Options

First things first: You’ll need to decide what type of coverage best fits your situation. The more information you have on what options exist, the better equipped you’ll be when it comes to deciding your coverage level.

Liability insurance is often referred to as the state-minimum because it is the minimum amount of insurance that every driver in every state (with the exception of New Hampshire) is required to carry. Liability insurance covers the other driver (both injury and property damage) in the event of a car collision that’s your fault.

Most helpful: Always. (And compulsory.)

Collision insurance covers damage to your vehicle in the event of an accident, no matter who is at fault.

Most helpful if: You want to protect yourself from the hassle and expense of paying out-of-pocket for any damage done to your car in a collision. If you drive a nice car that is worth a pretty penny, collision insurance is even more important.

Personal Injury Insurance (PIP) covers you and your passengers in the event of collision-related injuries. Regardless of who is at fault, PIP will cover the cost of medical expenses, such as medical treatment, ambulance fees, and medication, for you and your passengers up to the policy’s limit. In some cases, PIP can be used to recover lost wages and rehabilitation services.

Most helpful if: Your health insurance leaves you feeling less-than-reassured.

Comprehensive insurance covers damage to your vehicle caused by non-collision incidents such as severe weather like flash floods and hurricanes, theft, and fire.

Most helpful if: You hold your car near and dear to your heart, and generally like to play it safe. You live somewhere with inclement or unpredictable weather. Note: To finance a vehicle you’ll need both comprehensive and collision to drive off the lot.

Uninsured/Underinsured Motorist Coverage (UI/UIM) protects you from personal injury and/or property damage (depending on the policy you elect) caused by a person without insurance, or a person without the necessary amount of insurance. UI/UIM also acts as protection against hit-and-run drivers.

Most helpful if: You live somewhere with a high percentage of uninsured motorists. (Oklahoma, Florida, Mississippi, New Mexico and Michigan, for instance.) And/or you don’t like the odds that an estimated 30 million uninsured drivers are on the road, according to the Insurance Research Council.

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Demystifying the Deductible

A deductible is the amount you agree to be financially responsible for if you use your car insurance to cover vehicle repairs. In other words: your deductible is the amount of money you are required to pay in order for your car insurance company to take care of the rest. Generally, the higher the deductible, the lower your policy rates will be. Use caution when setting your deductible.The lure of lower rates will actually cost you more out-of-pocket cash in the event of a claim.

The Discount Game

With new discounts added over the years, and the many company-specific discounts, it’s likely there are ways to shave a few dollars off your monthly car insurance bill that you haven’t yet considered. And while not every discount is created equal— Consumer Reports notes that in their research anti-theft equipment discounts resulted in only $2 savings on an average annual premium— some discounts can add up. According to Consumer Reports, a multi-policy discount had an average savings of $97 a year.

In our research on popular discounts from the top 16 rated car insurance carriers, a few of the most common discounts were:

  • Multi-Vehicle—Applied to two or more vehicles insured on one policy.
  • Multi-Policy—Applied to bundling your car insurance with your homeowner’s, renter’s or life insurance through the same company.
  • Good Student—Applied to young drivers who maintain a high GPA (usually a 3.0 or higher) as full-time students.
  • New Vehicle—Applied to new cars or cars less than two to three years old.
  • Defensive Driving—Applied to drivers who have completed a defensive driving course.
  • Safety Features—Applied to vehicles that have anti-lock brakes, air bag systems, motorized seatbelts, daytime running lights and/or anti-theft devices.
  • Low Mileage—Applied to vehicles based on low annual mileage. Average mileage is roughly 12,000 miles per year, but it can be easier to lower this number than you’d guess. Cut just six miles from your daily commute with a job closer to home and you could reduce your annual miles by 3,000 and save on your premium.

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What Affects Your Rates

Ever wondered what determines the price of car insurance? Driving history is an easy guess—and a big part of it, but that’s not the whole story. Most companies use a variety of additional factors like age, gender, ZIP code, vehicle make and model, vehicle use, prior insurance history, marital status, and credit score to calculate your premium.

Since insurance is regulated state by state, these factors can vary. For example, in Hawaii, Massachusetts, and California credit scores are not permitted to be used as a rating factor, and in California a driver’s ZIP code can only be used as a secondary rating factor. Perhaps more states will adopt this practice considering the recent disturbing findings that good drivers in predominately African American ZIP codes pay unfairly high rates.

A note on car insurance companies that do not check credit scores: The use of credit scores in underwriting decisions is a contentious matter, but roughly 90% of car insurance companies do use credit scores when determining policy rates. (Excluding companies in the states where the practice is banned.) It is possible to find a company that does not require a credit check, but these policies are sold by high-risk insurers and come with a higher-than-average rate.

How to Choose a Reliable Company

A car insurance policy is about more than price. It’s about protection. And ideally, that protection should come with minimal hassle and maximum customer service. A little research can go a long way in revealing how a company stacks up when it comes to reliable, trustworthy practices.

Before purchasing car insurance, you can look at the insurer’s A.M. Best rating, which is an unbiased measure of a company’s financial strength. Steer clear of a low rating which is a sign that the company may not be able to fulfill their insurance obligations. For an inside look at how well an insurer is known to handle claims (AKA do they cut corners and lowball estimates or do they go above and beyond to help?), look to J.D. Power ratings. And the last box to tick in your research? The Better Business Bureau, to fill you in on an insurer’s reputation for customer service and business practices.

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Money Saving Tips

When switching to a new carrier: the most important tip to know is to never cancel your insurance policy until you have purchased a new one. A lapse in coverage for a single day can hike up the prices you see. Some insurance companies even offer discounts if you switch your policy seven days before your next premium is due.

When considering a new car: keep in mind that your vehicle make and model is a major component in how much you pay for your car insurance. Premiums vary by auto model based, in part, on how much damage can be statistically expected if a car crash were to occur. Each year the National Highway Traffic Safety Administration releases a “Relative Collision Insurance Cost Information Booklet,” which every car dealer is legally required to make available to prospective buyers. Insurance companies often create their own vehicle safety ratings, as well, based on claims data that include vehicle damage, personal injury and theft. It is always smart to obtain quotes on any vehicle you are considering before purchase.

How to Get the Best Price

If you’ve ever shopped around for car insurance before then you know quotes for the same product can be vary wildly when obtained through different companies. And if you haven’t experienced this yourself yet, chances are you will. The reason why is simple: Every car insurance company relies on its own set of data–and its own unique pricing formula–to calculate policy rates. So, when it comes to finding the best deal, your best bet is to compare policies from multiple companies. Consumer Reports advises getting quotes tailored to your circumstances from at least a dozen insurers in your state.

Wondering how to find a comprehensive price comparison tailored to you? “You can do that efficiently by visiting TheZebra.com,” says Consumer Reports. At The Zebra, we compare quotes from 24x more insurance companies than the average insurance agent, using trusted independent data. And we make sure to simplify your options based on your specific needs to keep the process quick and easy.

Have any questions or tips we missed? Tell us in the comments.