4 tips for choosing the right auto insurance and coverage plan

Estimated read time: 5-6 minutes

For most people, purchasing auto insurance is a fact of life. That said, there’s no law requiring you to understand what you’re purchasing, even though doing so may help you make smarter financial decisions.

Choosing the right insurance provider is important because the costs for the same coverage can vary by hundreds of dollars per year from one company to another. As nerdwallet explains, “Insurers look at similar factors, but they have their own ‘secret sauce’ when it comes to setting rates. So two companies can charge wildly different rates for the same driver.”

Of course, you also need to consider more than just the cost of the coverage. As with most things, the cheapest quote is usually not the best. And the proper insurance can protect you from financial hardship if your car is stolen, damaged, or if you are in an accident that injures yourself or others.

Before you purchase an auto policy – or even before you renew an existing premium – make sure you know how to choose the right insurance and coverage plan.

Look beyond state limits and premium rates

Currently, 48 states require drivers to purchase auto insurance – but of course, the law isn’t as basic as a simple requirement. State auto insurance laws also outline coverage requirements. According to Wallet Hub, most states require you to have at least $50,000 in bodily injury liability coverage, along with at least $25,000 in property damage liability. Some states (like Utah) also require uninsured or underinsured motorist coverage or personal insurance protection.

While many people opt for the minimum required limits, having higher coverage amounts is usually a good idea and often requires a relatively minor cost increase.

Instead of focusing on the monthly premium alone, focus on other factors that may affect your bottom line – like the deductible amount and coverage limits – then take a more holistic approach to decide the best fit for your needs and budget.

“If you are at fault in an accident and injure someone else or damage their property, you will be held liable for their expenses. Drivers without enough liability coverage to pay those costs will still be held responsible,” explains moneygeek.com. “The courts can seize your assets and garnish your wages to pay for damage you’ve caused, so having the highest possible liability coverage levels is the best way to protect yourself.”

Keep in mind that choosing a reputable insurance company is also important because you’ll likely be relying on the company’s customer service and ease of process at some point.

Know the terms

Car insurance terms can often be a bit misleading. For example, you might assume that if you purchase comprehensive insurance, you’re buying everything you need to ensure you’re covered. Unfortunately, that’s not the case. Comprehensive insurance covers damage to your car not incurred in a collision – think vandalism, hail or weather damage.

Other coverages include collision, liability, bodily injury, personal injury, property damage, uninsured motorist insurance and others. Before you decide on an insurance plan, be sure you know exactly what each coverage includes – and more importantly, what it may not. Visit the Insurance Institute for Highway Safety for a glossary of the most commonly used auto insurance terms.

4 tips for choosing the right auto insurance and coverage plan
Photo: loraks/Shutterstock.com

Note the deductible

If you’ve purchased health insurance before, you’re familiar with the idea of meeting a deductible before your benefits kick in. Where auto insurance differs from health insurance is that there’s no annual deductible to meet. Instead, you’re responsible for your deductible each time you make a claim – even if (heaven forbid) that happens more than once per year.

When you’re shopping for auto insurance, be sure you know how much you’ll pay out of pocket any time you file a claim. For example, if your collision deductible is $500 and you incur $4,000 of damage following a collision, the insurance company will pay $3,500 and you’ll be responsible for $500. Deductibles typically apply to collision and comprehensive coverage, but may also apply to other coverages, like uninsured motorists.

Customize for your vehicle and driving

There’s a big difference between insuring a 20-year-old Honda Civic and a brand-new Tesla. While the premium price will vary greatly, likely so will your coverage needs. For example, if your car still holds significant value, you will likely want collision and comprehensive insurance coverage – and if there’s a loan on your car, your lender will require it anyway.

However, if your car’s value is low, it may no longer make sense to pay monthly premiums for coverage like comprehensive or property damage. While you’ll need to understand that you’ll be responsible for your own car’s damage – and possibly incur a total loss of the vehicle, this may make more financial sense if you’re paying more in premiums over the course of the year than your car is actually worth. Of course, you’ll always need to purchase auto insurance that covers your state’s requirements – but these are usually limited to liability and bodily injury coverages.

Choosing the right insurance will bring you peace of mind every time you drive.

If you’ve been injured in an accident call The Advocates Injury Attorneys at (385) 350-8460, or visit utahadvocates.com for a free consultation.

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