You are finally looking at your finances and trying to get on a budget. You look at all your monthly and annual expenses and finally come to your insurances. You don’t know sh#t about car insurance, but know that you want to pay less. You hop online and Google, “Auto Cheap Insurance Quote”, pick the first link get what ever quote they give you and Boom! mission accomplished.
A few months go by and one day you accidentally rear end some one. They don’t appear to be seriously injured, but they are older and taken to the hospital in an ambulance as a precaution to check their head and neck. Next thing you know their insurance company is coming after you. The damage to their vehicle was $7,000 exceeding your state minimum limits of $5,000. Another claims adjuster is coming after you for another $2,000 because the medical bills exceeded the state minimum limits on bodily injury. You plan of getting car insurance based on a Google search of “Auto Cheap Insurance Quote” isn’t looking like the prudent financial decision you thought it would be.
Don’t Just Google “Auto Cheap Insurance Quote”
What went wrong? I’ve worked with car insurance for a decade. First dealing with claims through the eyes of a car rental agency. I got to see how companies process claims through the customer’s and body shop’s perspective. Then I started my own captive agency which primarily sold auto and home insurance. I currently work for the world’s largest insurance broker, but primarily with life and health, but still advise on auto, home, and umbrella insurances. I have a very good understanding of how people handle their insurance.
Car insurance is pretty simple to understand, but does require you to learn how to separate the important information from what I call the “noise”. There are only a few values you need to know, a few more that you should know and everything else is superfluous. Accordingly, there are only a few things you need to know about shopping for car insurance. I will outline them here.
- Insurance Coverages You Need to Know. Bodily Injury and property damage are coverages you will be required by law to carry. In layman’s these coverages cover the costs when you are at fault in an accident. Having just your state’s minimum’s requirements is not good enough. In the example I gave it shows that state minimums barely cover anything. Unless you are independently wealthy; only carrying the minimum required by law makes you an a$shole. Increasing the limits of liability generally does not have a huge effect on the overall cost. Further when you go to shop around for a new carrier, many insurance companies will give you a better rate based upon previous high liability limits. Below I have included my personal renewal with Liberty Mutual. It shows the associated costs and I have copy and pasted the exact definitions from the policy itself. The other big coverage that you need to know is Collision and ‘Other than Collision’. This covers your car for damages either for an actual accident or something other than an accident like hitting a deer or hail. This ‘Other than Collision’ is sometimes referred to as ‘Comprehensive’. If your vehicle is financed you will be required to have these coverages. Each of these coverages is based in part on the type of car you have and the size deductible you elect. The larger the deductible; the lower the cost of the insurance. Determine the deductible you are comfortable with.
- Insurance Coverages You Should Know. Uninsured and underinsured are coverages similar to bodily injury only instead of covering other people for your at-fault accidents, they cover you for another driver’s at-fault accident in which they don’t have or don’t have enough liability coverage (read: as$holes I mentioned in #1.)Uninsured and underinsured are not requirements, but are very common. If you have health insurance with low deductibles you can feel free to ignore these coverages.If you need a car to drive to work, you should have rental car coverage. This covers the cost of a rental while your car is being fixed for an accident. There are a couple reasons why you want. Renting a car can be expensive over the course of two weeks. Even with the insurance company discount; car rentals can add up to the same amount as a deductible. You will also get better service. Insurance rentals are the bread and butter of Enterprise Rent-A-Car. trust me I worked there for 5 years before starting my own business. An added bonus is if you have rental coverage for $40+ per day. Enterprise branches get judged partially on the average insurance rate for the cars that they rent. Anything over $30/day looks great to them. If you have $40-$50/day you will receive the best service without a doubt. They will put you in the best car and you won’t have to wait. State specific coverages are also important to know. In Pennsylvania we have to choose between full tort and limited tort. Full tort is the default option and allows you to sue an at fault driver for whatever reason you want. Full tort costs more. Limited tort limits the instances for which you can sue to when you are severely injured (think paralyzed), the driver was DWI/DUI, it was a commercial driver, or it was an out-of-state driver. Limited tort costs less.
- Determine What You Actually Need. Once you know the important coverage options then you need to figure out what you need. You can see what I personally have from the examples and those are what I recommend as well.
- Shop Around, Every Year. There is absolutely no reason not to reevaluate your insurance every year. People will cite ‘trusting their agent’ or ‘loyalty’. After having had my own agency those reasons make little sense to me. So long as you are….
- Only Shopping for What You Need. There should be no reason to choose a policy based on an agent. You are paying a specific price for the specific coverages that you want. If an agent is steering you toward some sort of set of coverages that deviates from your intention; then approach it with skepticism, especially if it is from…
- A Captive Insurance Agent. A captive insurance agent is captive to the brand they represent. The can only give you one price (essentially), their price. These agents do represent most of the large insurance companies: State Farm, AllState, Nationwide. For this reason those companies may provide you with the best price for you for what you need. You need to also look at brokers (those with access to multiple companies). Remember though…
- A Quote Doesn’t Count if They Didn’t Run You’re Driver License Number. Giving you a preliminary quote is meaningless and only gets you to stop looking.
You are your own best advocate. Learn a little, determine what you want and stick to your guns. Shop around every year. Do Google searches, but don’t rely only on, “Auto Cheap Insurance Quote” as your only query. Do not fall for salesmanship of those whose living is dependent upon you signing with one specific company.
Author: David Matthews
I started this site as a way of discussing what I’ve learned about the relationship between personal finances and physical fitness. What I have learned allowed me to lose 50lbs and improve my credit score 150 points in the same year and become a happier person.
Husband. Father. West Virginia University Grad. Licensed Insurance and Financial Professional. Sports fan (Philadelphia, WVU, and Manchester City). I’m also a huge nerd (like Magic: The Gathering huge)