If you own and drive a car, you most likely are required by state law to carry car insurance. Although there are two states that don’t require car insurance, if your car is financed, your lender likely will require you to carry car insurance in order to protect their investment.
Shopping for car insurance can seem confusing, but it doesn’t have to be. By taking the time to research the coverage you need and shopping around with several car insurance companies, you are better suited to get the right coverage for the best rates.
Do your research before buying car insurance
Shopping for car insurance first means knowing what you need. The different types of coverage, how much you need, finding the best coverage for the best rates with the best companies—these components are all part of the shopping process.
Different types of auto insurance coverage
Most states require all drivers to carry auto liability insurance that pays for the other driver’s medical expenses, car repairs, and other expenses if you are found at fault. All states require a minimum amount of coverage or provision for financial security to ensure you can pay if you are found at fault. It’s important to find out what the required minimums are for your state before shopping for car insurance. Check with your state insurance commissioner or car insurance agent to find out the required minimums are for your state liability insurance includes:
Bodily injury liability
This pays for expenses when the other driver or their passengers are injured and you are responsible. In most states, this coverage is required by law. The state you live in determines the minimum amount you are required to carry, but you can increase the amount of coverage to further protect yourself from unexpected expenses if the claim is for more than your insurance will pay.
Medical payments or personal injury protection (PIP)
This pays for medical expenses for you or your passengers if you are hurt in a car accident. PIP coverage also may pay toward lost wages, funeral or burial costs, and certain out-of-pocket expenses for essential services. Also required by many states, which set the minimum amount of coverage you must have, it’s a good idea to buy more than the minimum amount of coverage to protect your savings and/or assets from any expenses not covered by your car insurance policy.
Property damage liability
This pays for damage you cause to the other driver’s vehicle. It also pays for repairs if you hit buildings, fencing or other structures with your vehicle. As with the other liability coverage mentioned above, property damage liability is required in most states, which set the minimum amount of coverage you must have. Check with your state insurance commissioner or car insurance agent to find out what your state minimums are and to determine if you may want to purchase additional amounts.
Although not required, most car insurance policies also include the following coverages:
Collision insurance pays for repairs to your car if it is damaged during an accident with another vehicle. According to the Insurance Information Institute, this coverage generally comes with a deductible between $250 and $1,000. While not required by state law, if you financed your vehicle, your lender may require you to purchase collision coverage to protect their investment.
This coverage pays for repairs if your vehicle is damaged from something other than a collision in a car accident. This includes fire, hail damage, falling objects, riots, vandalism or hitting animals. It also can pay if your car is stolen or the windshield is cracked or broken. The average range for this coverage’s deductible is $100 to $300, according to the Insurance Information Institute. Like collision, comprehensive coverage is not required by state law, but your lender may require this coverage if you financed your vehicle.
This coverage pays for your expenses if the other driver has no insurance, does not have adequate insurance to cover your losses, or you are hit by a hit-and-run driver.
The type of coverage you purchase and the coverage limits you choose will help determine how much your car insurance rates will be. The more coverage you purchase, the higher your rates will be. If you have a new car versus an older vehicle, you'll need more coverage to replace or repair the new vehicle and you'll want more coverage.
There are many add-on coverages you may want to purchase to supplement your primary auto insurance policy. These include:
If you financed your vehicle purchase and your vehicle is deemed a total loss, this coverage will pay the difference between how much your car insurance pays for the loss and how much you still owe on your car loan.
In the event your car breaks down, won’t start, or has a flat tire, this coverage will pay for a towing service, battery replacement, or other repair services so you are not stranded on the side of the road.
This coverage reimburses you in the event you need to rent a car while your vehicle is being repaired. Your car insurance company will set a limit on how much it will pay for a rental, but it often covers the time period your car is in the shop for repairs.
This option prevents your rates from going up in the event you are found at fault in a car accident. Typically, this refers to your first accident under the policy, but each insurer sets its own requirements. For example, you may receive accident forgiveness for the first accident if you already have a clean driving record or if you have only one accident in a three-year period.
If you drive for a rideshare app company, this provides extra coverage while you are working.
Car insurance is available for purchase online or by phone, through a car insurance company agent, or through an independent insurance agent or broker. Deciding which option is right for you depends on your personal preference as all options can walk you through insurance requirements and provide auto insurance quotes.
Purchase online or by phone
This is a quick and convenient way to get an insurance quote, apply for car insurance, and pay your premium, all from the convenience of your home. You also can review coverage options without feeling pressured to purchase coverage right away. However, you may not receive all discounts you may be entitled to, and you may not find all the coverage options you want.
Purchase from a car insurance company agent
A dedicated agent with a specific car insurance company can discuss all available coverage options as well as discounts you can receive. However, you may feel pressured to purchase coverage you don’t need or the rates may not be as low as you hoped.
Purchase from an independent agent or broker
These agents will shop on your behalf with a number of different companies to help you find the best coverage for the most affordable rates. However, they may not be able to get coverage from some of the larger car insurance companies that have their own agents. In addition, they may charge a fee for their services.
Top car insurance companies
To find the best car insurance rates, it’s important for you to shop around and get car insurance quotes from at least three different companies. Every car insurance company evaluates a number of individual factors to determine your rates, such as age, type of vehicle, where you live, and driving history. Because car insurance companies don’t weigh those factors the same, you need several quotes for a fair rate comparison. When getting quotes, make sure you provide the same information to each car insurance company. Also, because car insurance rates fluctuate frequently, call for quotes on the same day for the most accurate rate comparison.
Well-known for its “15 minutes can save you 15%” ad campaign, Geico offers a full range of car insurance coverage so you can customize a policy for your needs. The second-largest car insurance company in the United States, Geico is the second-cheapest car insurance company according to a 2020 study by U.S. News & World Report
and Quadrant Information Services. That study found that Geico’s average car insurance “study” rate was $1,168 annually based on the test parameters.
A mainstay in the car insurance industry for nearly a century, Farmers has a good reputation for great customer service, scoring a 3 out of 5 by J.D. Power for customer satisfaction. Farmers also offers a wide range of coverage, making it easy for you to buy only the coverage you need, which can save on your premiums. Per the U.S. News & World Report study, Farmers was the seventh-cheapest car insurance company with an annual study rate of $1,682.
Unlike the first two companies, Gabi is not a car insurance company. Instead, it is a free service that will shop around for you to find the best rates on car insurance that fits your needs. It will showcase multiple offers from some of the top car insurance companies so you can see how they compare to one another. If you find a rate and coverage you like, you purchase it through Gabi instead of the car insurance company.
The costs of car insurance
Your insurance premium—how much you pay for your car insurance—depends on the type of coverage you have and the coverage limits for each type of coverage. According to the National Association of Insurance Commissioners
, the national average cost of car insurance in 2017 was $1,005.
Factors affecting car insurance rates
Many factors determine your individual car insurance premium. These include:
- Marital status
- Driving experience and history
- Type of vehicle
- What you will use the vehicle for and how often you will drive it
- Credit history and credit score
- Previous car insurance coverage
- Car insurance claims history
- Your chosen coverage and deductibles
Choose a premium and deductible that fits your budget.
Deciding how much you can afford for your car insurance policy depends on your financial situation. For instance, if money is tight, a lower premium can lower rates on your car insurance. However, it will come with a higher deductible, so you must be prepared to pay a larger amount upfront if you have to file a claim for an accident.
On the other hand, if you are in good financial standing, paying a larger premium for your insurance reduces your deductible, meaning you won’t have to come up with a lot of cash in the event you file a claim.
Ask about all available discounts.
How much car insurance you need varies by state requirements but car insurance discounts can be found when buying auto insurance.
Most car insurance companies offer a number of discounts that provide additional savings on your car insurance rates. Some of the more common discounts include safe driver discounts, multi-vehicle discounts, and bundling discounts, which you receive if you also have homeowners or renters insurance with the same insurer.
Car insurance companies also may offer such discounts as:
- Good student driver: Your teen or college student could receive additional savings if they get good grades.
- Accident-free discount: If you have no accidents for a specific period of time, you could receive additional savings.
- Defensive driving course: If you take an approved defensive driving course, you may save on your car insurance.
- Good driving discount: If you don’t receive a speeding ticket or other moving violation for a specific period of time, you could save on your car insurance.
- Safety features discounts: If your car is equipped with specific safety features such as airbags or an anti-theft device, you could receive a discount.
- Automatic payment discount: If you set up automatic payments to pay your premiums, you could save on your car insurance.
- Paperless discount: If you sign up to receive your billing statements and car insurance information via email, you could receive extra savings on your insurance.
- Pay in full discount: If you pay your full premium upfront rather than splitting it into multiple payments, you could receive extra savings.
Therefore, when talking with your car insurance company, be sure to ask for a full list of discounts to make sure you don’t miss out on extra savings.
The bottom line
When purchasing car insurance, first know what type of coverage as well as the coverage limits you need and want. This should include both required coverage as well as any optional coverage you want to add to your car insurance policy. Shop around with at least three different car insurance companies to get individual quotes and compare rates to find the best deal. Ask for a full list of available discounts so you don’t miss out on extra savings. Once you find the coverage and rates that fit your budget and insurance needs, you’re ready to buy your car insurance. Taking the time to research and shop around for car insurance is the best route to getting the right coverage for the best rates.