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Everyone knows you should carefully shop around when buying a car, but all too many drivers neglect to purchase insurance with the same level of care. Failing to thoroughly comparison-shop can leave you paying more than you need to for coverage, and far from getting the best car insurance coverage for your needs.
Below are tips to help you seek out the best insurance coverage at the lowest rate.
What Is Good Car Insurance?
Getting cheap car insurance does not necessarily mean you bought the right type or amount of coverage.
Having “good coverage" means you don't find yourself paying significant amounts of money out of pocket after an accident.
When you have found the right insurance provider:You'll feel assured that you'll be able to handle the financial costs after an accident. You'll feel comfortable knowing you're not overpaying for your car insurance.
Comparison-shopping for car insurance can help you make sure you've picked the right insurance coverage.
Deciding on the Best Insurance Coverage
You need car insurance to comply with state laws, to satisfy your lender or leaseholder, and to protect your assets.
Each state has different financial responsibility laws that dictate the least amount of insurance you must have. However, unless you have very few assets, the smallest amount of insurance is most likely not enough coverage. Talk to your insurance company about how much coverage and what types of optional insurance coverages might be right for you. These typically include:Comprehensive. Collision. Medical payments. Uninsured/underinsured motorist. GAP coverage. Towing and labor. Rental reimbursement.
NOTE: If you have a loan or lease on your car, it will typically come with coverage requirements. Be sure you understand these when reviewing your loan/lease agreement.
For more information on what your state requires, please visit our section on state car insurance requirements.
What if I Have a Loan?
The fair market value, or actual cash value, is the sales price minus depreciation. A car depreciates at a surprisingly rapid rate. In fact, just driving a car off the lot after purchase decreases its value by an average of 11%. During the first 5 years, the car's value depreciates by an average of 15% to 25% every year.
In the event of a serious car accident, you can be left with substantial costs due to normal depreciation. This is where GAP and loan/lease coverage come in.
To protect yourself from having to pay a loan on a car that no longer functions, you can purchase either:Guaranteed Auto Protection (GAP) insurance – Covers the difference between your insurance payout and what you still owe on your car loan after insurance pays, without any maximum limits. Loan/lease payments coverage – Also covers the gap between what you owe on the car and its current value, but only covers a percentage of your car's actual cash value in the event of a total loss. This might not be enough to cover the gap between your loan and the cash value.
Like most consumer purchases, different insurance companies charge different premiums for the same insurance coverage. However, all car insurance companies do not give the same level of service or share the same rankings.
Insurance companies are given a Best Insurance Ranking provided by the A. M. Best Company. Since 1899, the A.M. Best Company has provided ratings of insurance companies based on their financial stability. The stronger the rating, the more likely the company is able to pay if you file a claim.
Rankings range from AAA down to D.
Insurance companies use one of three methods to sell their policies.
Exclusive agents: These agents only sell the products of a single insurance carrier.
Independent agents: These agents represent many companies and can give you multiple quotes on car insurance to compare.
Direct market: Sales are usually with one company and completed over the Internet, phone, or by mail.
All three sales methods have their merits. The most important thing is to get multiple quotes from the insurance companies you feel most comfortable comparing, as insurance rates can fluctuate widely from insurance carrier to insurance carrier.
What to Notice
When you compare car insurance companies, you should pay close attention to the following:The premium. This is the monthly cost for your car insurance. One company may offer you discounts that others did not. Ask each insurance company you speak with about car insurance discounts for which you may qualify. A. M. Best Rating. This rating indicates the financial strength of an insurance company and their likelihood of paying on your claim. Customer service. Most state insurance departments have lists of complaints against insurance companies. These complaints are frequently referred to as “valid complaints." The higher the number of complaints or the complaint ratio, the higher the likelihood of the company violating a policy, contract, or statute.
Doing your research when shopping for car insurance quotes can ensure you get the best rates, great coverage, and stellar customer service. In contrast, neglecting to comparison-shop can leave you with a policy that does little for you in the long run and can hurt financially if you get into an accident. Informed consumers always get the best deal.
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