The 7 Basics of Buying Auto Insurance

Insurance is mandatory in almost all states. From comparing companies to adjusting your deductible, learn how to buy car insurance by following these seven steps.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Jul 18, 2021

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Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.

Things to Remember...

  • It is illegal to drive without automobile insurance in almost all states in the U.S.
  • Property damage liability coverage pays for repairs or replaces any property damaged by an accident caused by you
  • Comprehensive coverage pays for any damage done to your car

Automobile insurance is a mandatory requirement for all drivers. Unfortunately, automobile insurance can be very expensive. It is imperative that all drivers do some

It is imperative that all drivers do some in-depth research to find the best possible automobile insurance policy that meets all their needs.

Like every search, there is a list of markers that need to be factored into your calculations such as lowest deductible, various discounts, and financial status of the insurance company, among others.

According to CNN Money, every customer is a statistic whose risk factor is measured by the insurance companies. Depending on their risk calculation, the insurance companies approve or decline to extend coverage to the customer.

Enter your ZIP code into the FREE toolbox and start comparing auto insurance quotes now.

Understanding Automobile Insurance

It is illegal to drive without automobile insurance in almost all states in the U.S. Automobile insurance is meant to protect drivers, their passengers, and other people on the road in the unfortunate occurrence of an accident.

Depending on your form of coverage, it can also cover any damages caused by natural disasters, vandalism, or theft.

A basic car insurance policy usually has the following forms of coverage:

 – Bodily injury liability: This covers any form of bodily injury caused to another person. This is meant to cover all medical bills incurred as well as other issues such as lost wages.

If the amount of losses exceeds the limit stated in your policy, then you are responsible for the remaining amount.

So it is important to factor that into your insurance coverage.

– Property damage liability: This liability coverage is to repair or replace any property damaged by an accident caused by you. This includes other cars as well as property such as fences, electric poles etc.

– Personal Injury Protection (PIP): This coverage is for any medical bills that need to be paid to treat any injuries to you or your passengers in case of an accident. Funeral costs are also included.

Collision coverage: This pays for any damage done to your car. If your car is totaled, then under collision coverage, your insurance company will pay the calculated value of your car. A car is considered totaled if the cost of repair goes beyond a certain percentage of its value.

– Comprehensive coverage: This covers the cost to repair your car if it is damaged or replace it if totaled by any other misadventure that is not collision-related.

 So if your car is damaged by an Act of God (natural disasters such as earthquake, hurricane, tornado or fire), is stolen, vandalized, or hit by an errant fly ball, comprehensive coverage will take care of repair or replacement costs.

Uninsured/Underinsured motorist coverage (U/UM): This form of coverage pays for any medical bills from a car accident when the erring driver is not insured or underinsured.

U/UM coverage is also applicable to injuries caused by hit-and-run accidents, as well as, pain and suffering claims.

This coverage is mandatory in the following states:

  • Illinois
  • Kansas
  • Maine
  • Maryland
  • Massachusetts
  • Minnesota
  • Missouri
  • Nebraska
  • New Hampshire
  • New Jersey
  • New York
  • North Carolina
  • North Dakota
  • Oregon
  • South Carolina
  • South Dakota
  • Vermont
  • Virginia
  • West Virginia
  • Wisconsin

In addition, you can also add elements such as roadside assistance and rental insurance to your policy.

Roadside assistance pays towards towing your car in case of an unexpected breakdown while rental insurance pays towards any damage done to your rental automobile.

It is mandatory to carry liability insurance in all states except:

  • New Hampshire
  • Tennessee
  • Wisconsin

The Insurance Information Institute states that it is mandatory to have Personal Injury Protection (PIP) in the following states:

  • Arkansas
  • Delaware
  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Oregon
  • Pennsylvania
  • Utah

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Enter your ZIP code below to view companies that have cheap auto insurance rates.

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Enter your ZIP code below to view companies that have cheap auto insurance rates.

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The First Basic of Auto Insurance Buying – Comparison Shopping

Whether you are shopping for groceries, diamonds, or cars, you are likely to look at various resources to get the cheapest deal for the best product.

Therefore, it makes sense that you must do the same for automobile insurance. It is important to look at different companies and compare the different elements of offered policies.

Make sure you look at all the different terms and conditions before you sign up.

You should make comparison-shopping a yearly project. Auto insurance companies are constantly serving up new deals, discounts, and additional perks to attract new customers and keep existing ones.

Insurance experts also suggest that you remove comprehensive insurance if your car is old and is paid up.

It does not make financial sense because if your old car is totaled in an accident, it is unlikely that your insurance policy will pay enough to replace the car.

The Second Basic of Auto Insurance Buying – Researching the Insurance Company

Just because you are getting a cheap deal does not mean you are getting the best one. Sometimes cheap translates into troubling issues such as poor customer service or difficult claim processing.

It is very important to closely examine the financial condition of the different insurance companies you are considering.

One of the best resources is A.M. Best.

They provide financial ratings of insurance companies based on their records, their ability to pay off their liabilities, and their assets, among others.

The Third Basic of Auto Insurance Buying – Avoid Monthly Payments

While most insurance companies offer you the option of paying a monthly premium, be aware that dividing your total insurance bill into smaller amounts comes with an added service charge.

Even though it is tempting to pay smaller amounts through the year, the cost of the exact same insurance will be noticeably higher.

Also, some insurance companies are likely to give you a discount if you pay your total premium in one go.

Remember to ask about such discounts.

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The Fourth Basic of Auto Insurance Buying – Asking for Discounts

Auto insurance companies offer a range of discounts to their customers. Some of the most popular and well-known categories are good student discount, good driver discount, and safe equipment discounts.

Additionally, you are eligible for a low-mileage discount if you drive less than a certain amount every month.

For instance, if you start telecommuting once a week, you should factor that into your insurance policy for a lower rate.

You are also eligible for discounts if you belong to certain professions such as teaching, medicine, and engineering.

Based on existing research, insurance companies assume that certain professionals are drivers that are more careful.

The Fifth Basic of Auto Insurance Buying – Pay a Higher Deductible

Your insurance deductible and your insurance policy price have an inversely proportional relationship. In other words, the higher your insurance deductible, the lower your premium.

The deductible is the amount you pay out-of-pocket in case of an accident, before your insurance kicks in to pick up the remaining repair or replacement bill.

However, before you raise your deductible, make sure that you will be able to pay the amount in case the need arises.

Factor in unforeseen situations such as job loss, or medical expenses among others that could strain your financial resources if you are faced with simultaneous damage to your car.

The Sixth Basic of Auto Insurance Buying – Buying the Right Car

While it seems ludicrous to limit your choice of car because of automobile insurance, yet you must be aware that certain cars cost more to insure.

Expensive luxury cars, for instance, cost more to insure because their repair and replacement of parts is pricey.

In addition, it might require specialized labor, which is very expensive.

According to Forbes, the MSRP of the car such as the color of the car, and where it is garaged also play into insurance calculations, along with the driving records of the owners and their families.

Car insurance companies also look at previous studies into which cars are targeted for vandalism, theft, and traffic tickets to reach an insurance policy price.

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The Seventh Basic of Auto Insurance Buying – Talk to Friends and Family

Besides researching the insurance companies, their records, and customer reviews, talk to other drivers.

Your friends and family might be a great resource.

As customers of insurance companies, they might be able to give insight into how the company works once you have signed up with them.

Buying Automobile Insurance

You can buy auto insurance online or from an insurance agent.

Always remember to verify all information provided to you. Additionally, understand all the terms and conditions of your policy before signing the agreement.

If you want reasonable quotes for great policies without a hitch, enter your ZIP code into the FREE toolbox below and get the best insurance coverage possible.



Free Auto Insurance Comparison

Enter your ZIP code below to view companies that have cheap auto insurance rates.

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