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- Everyone pays different rates for auto insurance
- You can choose which coverage to add to your policy
- Coverage requirements vary between states
- Choose a deductible you can afford
- Get a quote to determine your average rates
- Do you need an agent?
- Choosing the right insurance company
- Maximize your savings
Buying car insurance for the first time can be a little daunting. When you don't know how insurance works or what a reasonable price is for coverage, you run the risk of getting a bad deal. You don't want to be caught without proper insurance, but you also don't want to pay more than you have to. If you're a first-time driver or have never paid for your own insurance before, here are a few things to keep in mind:
Everyone pays different rates for auto insurance
The first thing to know about car insurance is that you probably won't pay the same premiums as your parents, friends or coworkers. Insurance companies set their rates on an individual basis. They may have a base premium that is adjusted up or down depending on the driver's level of risk, or the statistical likelihood of that person getting into an accident.
High-risk drivers include those who have been in accidents before, are new drivers, have poor credit or are driving flashy sports cars. Low-risk drivers include good students, people who have taken driver's safety courses and individuals with a long history of safe driving.
You can choose which coverage to add to your policy
Aside from risk level, your insurance premiums will differ depending on what coverage you carry. The more coverage you have, the more protection for your vehicle, but each additional type of coverage you buy will be added to the cost of premiums.
All drivers are legally required to carry liability insurance, which pays for damages or injuries you cause to someone else. First-party coverage pays for damage to your vehicle. This includes collision, which pays for damage caused by an accident, and comprehensive, which covers damage caused by vandalism, acts of nature and other similar losses.
If your car is older, it may not be worth carrying "full coverage" insurance on it as it may be worth less to replace than to repair. Carrying liability-only insurance on an older vehicle can be a good way to save money, but it does leave you financially responsible for your own repairs if something happens.
Coverage requirements vary between states
In addition to choosing your coverage, you can choose the limits of your liability coverage. This is the maximum amount of money that your insurance company will pay to someone for injuries or damages that you cause. Every state will have its own lower limits that must be met to be legally insured. You may however wish to purchase more than the minimum, as you can be held personally liable for costs exceeding your insurance company's limits.
Choose a deductible you can afford
The deductible is the amount that you're expected to pay toward your own vehicle's repairs. The higher your deductible, the lower your premiums. However, if your deductible is too high, you may struggle to pay it in the wake of an accident. A standard deductible is $500, but it's not uncommon to set it higher or lower. Whatever you choose, try to put money aside in a savings account to cover that cost in case you need to.
Get a quote to determine your average rates
To get a ballpark estimate for how much your insurance should cost, you can get a quote online. It's easy to comparison shop for insurance companies and to compare rates across the board. Bear in mind that the figure you get online will only be an estimate, however; the exact amount of your policy will depend on additional individual factors.
You don't have to commit to an insurance company right away. You can choose a few of the most affordable quotes and use that information to research your options.
Do you need an agent?
You do not need an insurance agent to get car insurance. In the past, it was the job of the insurance agent to break down all of the policies and find out which one would be a good fit for you. Nowadays, you can find most of the information you need online, and often times get a quote, and sign up for a policy right then and there.
Some insurance companies, like State Farm, primarily sell policies through brokers or agents. These agents then act as your point of contact throughout the life of the policy. Other companies, like Esurance, sell policies online and primarily use a call center to handle all customer questions. No option is better or worse than the others. However, if you prefer a more hands-on and personalized approach, working with an agent may be easier.
Choosing the right insurance company
When choosing an insurance company, you'll want to consider a number of factors:
The price of the policy
What types of coverage are available
The BBB rating
Consumer ratings
How you feel about the company
When you request a quote online, you'll usually be put in touch with a representative from the company. This can help you to get a feel for the quality of their customer service and allow you to ask questions.
Maximize your savings
When you're speaking with the agent or customer service representative, you'll also have an opportunity to discuss ways you can save more money on your premiums. Sometimes, simple things like taking a defensive driving course can dramatically reduce your monthly payments. You can also usually save money by bundling your car insurance with other types of policies, including your homeowners or renter's policy.
Car insurance can be complicated, but a bit of understanding can go a long way toward saving you money without sacrificing your safety or your vehicle. Remember that insurance is competitive, and insurance companies are always looking for ways to stand out from the competition; you may get the best deals from shopping around every few years to compare prices and ensure you're still with the best company for your needs.