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The ultimate guide to shopping for car insurance

Buying car insurance is like trying to navigate a winding road with a lot of hairpin turns. Not only do you need to find a good insurance company, but you also have to hope it offers the right coverage at a great price.

The process can be intimidating. One way to relieve the anxiety is to break down the search into smaller bite-size questions.

Answer these six questions, and you’re well on your way to finding the right policy for you.

1. Where should I start?

To examine your car insurance options, roll up your sleeves and do a little digging for information, says Lynne McChristian, Florida representative for the nonprofit Insurance Information Institute.

“You can call companies directly or cruise sites on the Internet,” she says. “Another place to shop that people tend to overlook is the websites of their state’s insurance department.”

Many state insurance regulators provide comparison-shopping resources. The Insurance Information Institute website has a page dedicated to state insurance departments. In addition, its website has a “Find an Insurance Company” page that can help you find insurers in your neck of the woods.

Pete Moraga, a spokesman for the nonprofit Insurance Information Network of California, says your state’s government resources also can offer other valuable nuggets of information.  

“Most states have a department of insurance that provides factual information on insurers, including complaint ratios and actions taken against insurers,” Moraga says.

2. Which car insurance company is best for me?

Once you’ve zeroed in on a list of sound companies, whittle down the list to insurers that offer the right products for you. For example, if you drive just a few thousand miles a year, consider mileage-based insurance programs offered by industry heavyweights like State Farm, Allstate and Progressive. These programs track the number of miles you drive and monitor your driving behavior.

On the other hand, if you drive a lot, an “accident forgiveness” option from companies like Liberty Mutual or Ameriprise may be more important. Such programs make sense if you have a spotless record when it comes to crashes, but want to be protected from a rate hike if you have a wreck in the future.

When comparing insurers, always use an apples-to-apples method, Moraga says.

Do not assume anything; find out the details of an insurer’s policies, he says. For example, some car insurance companies offer the same level of coverage to both you and any others who drive your car. By contrast, other insurers offer full coverage for you as the policyholder, but provide your state’s minimum amount of coverage only to drivers who borrow your car, Moraga says.

“It is extremely important to understand what’s covered and what’s not,” Moraga says.

3. What will insurance companies want to know about me?

While you’re scoping out insurance companies, the companies will be taking a close look at you and how likely you are to file a claim, says Janet Patrick, a spokeswoman for the Illinois Insurance Association, an industry group.

Statistics show that certain factors make claims more likely or more costly, according to Patrick. Factors that insurers may examine include marital status, credit score, driving record and how and where the vehicle will be used (for example, commuters who drive a lot each year pay more than those with shorter commutes).

Usually, an insurance company that scrutinizes all of these factors will be able to offer you a policy at a price that reflects your level of risk. But that isn’t always true.

“If there is more risk than the insurer is willing to accept, the applicant’s request for coverage is declined,” Patrick says.

If that happens to you, do not give up. Insurers rate risk differently, so what’s considered risky to one company may be acceptable to another.

4. What type of coverage do I need?

Before you decide how much coverage you should have, you’ll need to know how much you must buy. That amount will depend on where you live, as insurance laws vary by state.

Every state except New Hampshire requires drivers to buy insurance. Each state sets mandatory minimum amounts for liability coverage. That’s the type of insurance that covers damages you cause to other people or property.

Remember that buying the minimum amount of car insurance – and nothing more – may leave you inadequately covered to pay for damages you cause, says Carole Walker, executive director of the nonprofit Rocky Mountain Insurance Information Association.

“Cutting corners on car insurance could leave you without legal protection, medical care and transportation if you cause an accident,” Walker says.    

Depending on where you live, you also may have to buy: 

  • Uninsured and underinsured motorist insurance. Uninsured coverage protects you if your car is hit by a driver who doesn’t have insurance. Underinsured coverage protects you if the driver who hits you is inadequately insured and can’t pay a claim.
  • Personal injury protection (PIP) insurance. This coverage pays for the treatment of injuries to you and your passengers and is required if you live in a no-fault state. In such states, a policyholder’s own insurance company pays for covered injuries and damages, regardless of who caused a crash.

You’ll also need to decide whether you want to carry optional coverage. The two major types of optional insurance are collision (reimburses you for damage to your car after crashes with other cars or objects) and comprehensive (covers other damage from things like fire, hail and collisions with animals).

5. How many quotes should I get?

Too often, drivers fail to shop around for the best deal. Nearly one-fourth of car insurance shoppers obtain just one quote, according to the comScore 2012 Online Auto Insurance Shopping Report.

“If you don’t seek quotes from different companies, chances are you’re going to pay more for the same coverage,” Moraga says.

Insurance companies look at risk in different ways, Moraga says. As a result, a discount from one company may be more or less than at another, he says, or may not even be available.

If you don’t seek get several quotes, you won’t detect these variations in price. Many experts suggest getting three quotes to give you an accurate comparison.

6. How much should I pay?

Determining whether you’re paying the right price is tricky. McChristian mentions one rule of thumb: “You can measure what you pay against average costs for your state.” (The Insurance Information Institute has a link to average insurance rates by state on its website.) However, she cautions, using this benchmark may not tell you the whole story.

“These minimums are insufficient to help you fully recover financially from a car crash,” she says. “Chances are you will need more liability insurance than the minimum requirement.”

A better way to figure out how much to pay is to talk with insurance agent or company about your needs, so you’re not buying unneeded coverage. If you still find the cost is too high, look for discounts.

Many insurance companies offer discounts for the following: 

  • Having antitheft devices.
  • Getting good grades in school.
  • Driving relatively few miles each year.
  • Bundling your coverage, such as buying car and home insurance from the same company.

Another way to save is to raise your deductible. However, do so only if you can afford to pay out of your own pocket for any damages you sustain.


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