How to Compare Auto Insurance – A Tutorial That Will Save You Money!

by Kevin Mercadante

Most ordinary people have little deep understanding of the nooks and crannies that make up an auto insurance policy. And when you go shopping for new coverage, that can be a real problem. In order to compare auto insurance quotes from one company to another, you must be familiar with the various types of coverage. This will help you to be able to accurately compare auto insurance quotes, as well as to know if you have the right amount of coverage.

How to Compare Auto Insurance

The 3 Most Important Auto Insurance Components

There are three specific types of coverage that are common in auto insurance policies. In fact, there are generally state specific requirements for these provisions, that we’ll get into a little bit later. But here are the three most important types of coverage:

Liability

Essentially, this is coverage that will pay a claim that is the result of damages that were caused by you. Basically, liability is coverage that you maintain to protect others in the event that you are involved in an accident that is deemed to be your fault.

There are actually two parts to this coverage. Bodily injury liability covers injuries to other people, and property damage liability covers damage to the other driver’s car.

Collision

This is coverage for damage to your own vehicle, no matter who is determined to be at fault. This is the only coverage that will pay for repairs to your vehicle, which means it will generally be a lender requirement if you have a loan on your car. But even if you don’t have a loan, it’s still worth having if your car is worth at least a few thousand dollars.

Comprehensive

While collision covers accident related damage to your car, comprehensive covers other disasters that are generally non-automotive in nature. For example, it will cover theft, vandalism, and damage that is a result of natural catastrophes, such as floods and falling trees.

The Many Different Types of Auto Insurance Coverage

Though most people are at least vaguely familiar with liability, collision, and comprehensive, there are actually a lot of other types of coverage. Though they are often not required by state law, they are still good to have.

This is especially true of the provisions that deal with uninsured motorists. Unfortunately, if you are involved in an accident that is caused by an uninsured driver, the damage will have to be covered by your own insurance policy.

Here are examples of the additional types of auto insurance coverage, including those for uninsured motorist:

  • Uninsured motorist coverage. This provision will pay medical expenses in the event that either you or your passengers are injured as a result of damage caused by an accident involving an uninsured driver.
  • Underinsured motorist coverage. This provision provides coverage for medical expenses for you and your passengers if you are involved in an accident that is the fault of a driver who has insufficient auto insurance coverage.
  • Uninsured motorist bodily injury coverage. This provision will cover you and your passengers for pain and suffering, and lost wages, in addition to medical expenses, that are incurred as a result of an accident with an uninsured motorist. It will also pay in the event that the injuries are caused as a result of a hit-and-run.
  • Uninsured motorist property damage coverage. This covers damage your car received from an accident caused by an uninsured driver.
  • Personal injury protection, or PIP. You’ve likely heard this referred to as no-fault car insurance. It covers bodily injury claims in situations where no fault has or can be determined.
  • Property protection insurance. This coverage provides protection if you cause damage to properly parked vehicles or fixed properties, like buildings and fences. It is specific coverage in the state of Michigan.

Each of these auto insurance provisions are particularly good to have, even if they are not required by state law. The uninsured motorist provisions are especially important, since the number of uninsured drivers is on the rise.

Start With Your State’s Minimum Auto Insurance Requirements

With the exception of New Hampshire, all states plus the District of Columbia impose minimum auto insurance requirements. A list of those requirements for 2016 is available at Insure.com. But before checking the requirements in your state, you first need to be familiar with the terminology.

State auto insurance minimums are usually shown in a three number sequence that looks something like this: 12/34/56. What do those numbers mean?

Each relates to a minimum dollar amount (in thousands) of a specific type of coverage within the mandated requirement. The coverage sequence refers to the following three types of policy provisions:

  1. Bodily injury liability maximum for one person injured in an accident
  2. Bodily injury liability maximum for all injuries in one accident
  3. Property damage liability maximum for one accident

As an example, the auto insurance requirement for Illinois is 25/50/20. That means that you must maintain a minimum of $25,000 for bodily injury per person, $50,000 total for bodily injury per accident, and $20,000 for property damage.

But like many states, Illinois’s minimum requirements also mandate additional coverage. You must also maintain uninsured/under-insured motorist bodily injury coverage, in the amounts of $25,000 per person, and $50,000 total per accident. This will cover injuries to you and your passengers if you are involved in an accident with an uninsured or under-insured driver.

Shopping for Auto Insurance & Comparing Auto Insurance Rates

Auto insurance is complicated! In order to get the best auto insurance coverage, you need to be consistent with the coverage requirements that you are getting insurance quotes for. If you leave yourself at the mercy of each insurance company to provide their “best quote”, you can easily end up paying too much.

Start with your state’s minimum coverage levels, and then add any other types of coverage that you believe are worth having. Be sure that you are requesting the same coverage types from each insurance company that you are inquiring with. That will give you the best side-by-side comparison, making your choice much easier when you compare auto insurance.



Published or updated February 7, 2017.
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