Determining Coverage For You

What You Should Know About: Buying Auto Insurance

Ready to buy auto insurance? This brief guide will help.

Three things you should know:

  1. It’s important to “shop around” for insurance companies, coverage and prices that best fit your needs. Generally, it’s a good idea to compare policies from at least three different insurers.
  2. Almost every state requires you to have at least a minimum amount of liability coverage, but there are other coverage options every driver should consider to protect your vehicle, your passengers and yourself.
  3. An insurance policy is a legal contract that defines the duties and responsibilities of both the insurance company and you, the policyholder.

Choosing An Insurance Provider

It’s important that you have confidence in the service that will be provided by your insurance company. Knowing how to compare insurance companies and rates and what questions to ask can go a long way towards buying an insurance policy that fits your needs. Here are a few pointers:

  • Shop around: Hundreds of companies sell auto insurance in your state. Make some calls and ask agents, brokers or insurance companies for price comparisons. Try to compare apples to apples when choosing your insurance policy. All of the policies that you review should have the same types and coverage limits.
  • Lower your insurance rates: Find out what discounts are offered by the companies you’re comparing. For example, younger drivers who have passed an approved driver education course or have a B-grade average or better may qualify for a lower rate. Some companies also may offer substantial discounts for insuring more than one vehicle and not being involved in any accidents the past three years.
  • Choose a trusted agent, broker or company representative: Consider the reputation and financial stability of prospective insurance providers. You can verify that an insurer is licensed in your state by visiting the website of your state’s insurance division. There, you can also review information about consumer complaints filed against insurance companies.

How Much Insurance Do You Need?

The NW Insurance Council recommends talking with your insurance agent or company representative about your insurance needs to help you accurately determine the types and level of coverage that is appropriate for you. To help you decide the coverage you need, here are a few things to consider:

  • Coverage Required by Law: Almost every state requires by law that you carry a minimum amount of liability insurance. In Washington, Oregon and Idaho you will be required to purchase Bodily Injury Liability limits of at least $25,000 per person/$50,000 per accident.
  • Additional Liability Limits: To protect your investments in your home, retirement or personal savings, you may need more than minimum limits coverage, and most insurers offer limits up to $250,000 per person/$500,000 per incident for an additional premium. For even higher limits, a Personal Umbrella Policy will supplement your underlying coverage with an additional $1 million or more.
  • Collision and Comprehensive Coverage: These optional policies pay to repair or replace your vehicle if it is damaged in an accident, or by a storm, for example; or if your car is stolen or damaged by vandalism. 
  • Your Vehicle: The type of vehicle you own will help determine your coverage. For example, if you drive an older model car of lower value, you may decide not to buy optional Collision or Comprehensive Coverage for that car. If you have a new car, however, paying for Collision or Comprehensive Coverage may make more sense, and may even be required by your auto loan.
  • Your Deductible: A deductible is the amount of money you pay on a claim before the insurance company reimburses you. Typically, deductibles are $500 or $1,000; the higher your deductible, the lower your premium.
  • Gap Insurance: This coverage refers to the “gap” between what you owe on your auto loan or lease and the current market value of your financed vehicle. It is designed to pay the outstanding loan amount or lease residual payoff should you be involved in an accident and your vehicle is determined to be a total loss.

Now That You’re Insured

An insurance policy is a legal contract that defines the duties and responsibilities of both you and the insurance company. Your insurance company and its representatives should answer your questions and handle your claims fairly, efficiently and quickly. To get the best value for your insurance dollar, you should:

  • Understand the coverage and limits your policy provides. Ask questions about parts of the policy you don’t understand.
  • Report to your insurance agent or company representative any changes that might affect your premium or coverage, like purchasing a new vehicle or adding a driver in your household.
  • Report accidents promptly and accurately.
  • Perform routine maintenance – rotate or replace tires as needed, replace worn brake pads and windshield wipers for safer driving. When driving, obey all traffic laws and drive safely – no drugs, alcohol or mobile phone use while behind the wheel.

Additional Resources: Insurance Information Institute

Determining Coverage For You