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25 Questions to Ask When Buying Auto Insurance

When searching for affordable car insurance, you can't just look at price alone; there's a process involved. You have to take a deeper look at what you're paying for coverage. Even though it's important to try to save money, it's essential to have the right car insurance policy because you never know when you might have a car accident.

No one ever anticipates having a collision, but it happens to the best of drivers. That's why it's essential to know how it works before you buy it. It will help you find out which insurance is right for you.

We've done all the research for you and created a list of Frequently Asked Questions about buying insurance. If you're ready to save on auto insurance, you can use SmartFinancial's free online comparison tools to get a car insurance quote that matches your budget and needs. Just enter your zip code to compare quotes.

1. What is car insurance?

Most states mandate drivers to sign up for an auto insurance policy before they receive a driver's license. Car insurance is a contract between you and a carrier. It protects you from financial losses when you have a car accident or someone steals your vehicle.

You pay a premium, and in exchange, your carrier agrees to pay for any damages or losses outlined in your policy.

Auto insurance provides the following types of coverage:

  • Property – pays for damages or theft of your automobile.

  • Liability – covers your legal responsibility for another driver's injuries and damages.

  • Medical – pays for the cost of treating injuries, rehabilitation, lost wages and funeral expenses.

Insurers use an a la carte method to price policies to fit a customer's budget and needs. For instance, you can add roadside assistance to your policy. Insurers issue policies in six-month and annual time frames. Most coverage is renewable unless an insurance company decides not to renew a person's policy.

2. What are my state's minimum requirements?

Before you sign the dotted line of your policy, spend a few moments learning about your state's requirements. It will help you understand what your policy covers, so you aren't surprised if you have an accident.

Most states require liability protection for all people who get a driver's license. If you cause an accident, it pays for the physical damage and personal injuries of another party, with different levels of minimum coverage.

State minimum coverages usually include:

  • Bodily injury liability(BI) – It pays for the injuries and medical expenses of another party.

  • Property damage liability (PD) – It covers another person's property or vehicle damage.

  • Medical Payments/Personal Injury Protection (MedPay/PIP) – Depending on the state, these overages pay for medical expenses resulting from an accident. In no-fault states, you're required to carry PIP, which means that drivers share medical costs, regardless of fault. MedPay doesn't cover lost wages and has lower policy limits than PIP.

  • Uninsured/Underinsured motorist property damage (UMPD/UIMPD) – It pays for your vehicle damages when a person with little coverage hits your vehicle.

  • Uninsured/Underinsured motorist bodily Injury (UMBI/UIMBI) – It pays for your medical expenses when a person with inadequate insurance crashes into your car.

Each state determines the minimum requirements that their drivers should pay for coverage.

Ask your agent about your state's minimum requirements when you purchase your policy. If you're a customer looking to save with a new insurance quote, you can use SmartFinancial to find local insurers within your state with the lowest rates. We've included a list of minimum coverages by the state for your convenience.

State

Required Minimum

Liability Limits (2)

Alabama

BI & PD Liab

25/50/25
Arizona

BI & PD Liab, PIP

25/50/25
Arkansas

BI & PD Liab

50/100/25
California

BI & PD Liab

15/30/5
Colorado

BI & PD Liab

25/50/15
Connecticut

BI & PD Liab, UM, UIM

25/50/20
Delaware

BI & PD Liab, PIP

25/50/10
District of Columbia

BI & PD Liab, UM

25/50/10
Florida

PD Liab, PIP

10/20/10
Georgia

BI & PD Liab

25/50/25
Hawaii

BI & PD Liab, PIP

20/40/10
Idaho

BI & PD Liab

25/50/15
Illinois

BI & PD Liab, UM, UIM

25/50/20
Indiana

BI & PD Liab

25/50/25
Iowa

BI & PD Liab

25/40/15
Kansas

BI & PD Liab, PIP

25/50/25
Kentucky

BI & PD Liab, PIP, UM, UIM

25/50/25
Louisiana

BI & PD Liab

15/30/25
Maine

BI & PD Liab, UM, UIM, MedPay

50/100/25
Maine

BI & PD Liab, PIP

20/40/5
Maryland

BI & PD Liab, PIP, UM, UIM

30/60/15
Michigan

BI & PD Liab, PIP

20/40/10
Minnesota

BI & PD Liab, PIP, UM, UIM

30/60/10
Mississippi

BI & PD Liab,

25/50/25
Missouri

BI & PD, UM

25/50/25
Montana

BI & PD Liab, UM

25/50/20
Nebraska

BI & PD Liab, UM, UIM

25/50/25
Nevada

BI & PD Liab

25/50/20
New Hampshire

FR only

25/50/25
New Jersey

BI & PD Liab, PIP, UM, UIM

15/30/5
New Mexico

BI & PD Liab

25/50/10
New York

BI & PD Liab, PIP, UM, UIM

25/50/10
North Carolina

BI & PD Liab, UM, UIM

30/60/25
North Dakota

BI & PD Liab, PIP, UM, UIM

25/50/25
Ohio

BI & PD Liab

25/50/25
Oklahoma

BI & PD Liab

25/50/25
Oregon

BI & PD Liab, PIP, UM, UIM

25/50/20
Pennsylvania

BI & PD Liab, PIP

15/30/5
Rhode Island

BI & PD Liab

25/50/25
South Carolina

BI & PD Liab, UM, UIM

25/50/25
South Dakota

BI & PD Liab, UM, UIM

25/50/25
Tennessee

BI & PD Liab

25/50/15
Texas

BI & PD Liab, PIP

30/60/25
Utah

BI & PD Liab, PIP

25/65/15
Vermont

BI & PD Liab, UM, UIM

25/50/10
Virginia

BI & PD Liab, UM, UIM

25/50/20
Washington

BI & PD Liab

25/50/10
West Virginia

BI & PD Liab, UM, UIM

25/50/25
Wisconsin

BI & PD Liab, UM, Medpay

25/50/10
Wyoming

BI & PD Liab

25/50/20

3. What is full coverage?

Full coverage is not a standardized product since every state has different requirements. It includes your state's minimum coverage amounts plus collision and comprehensive coverage on your vehicle.

Finance companies, banks, and lenders require people who take out car loans or lease cars to purchase full coverage for their vehicles.

Finance companies, banks, and lenders require people who take out car loans or lease cars to purchase full coverage for their vehicles.

4. Do I need collision and comprehensive?

If you finance or rent your vehicle, your lender will probably require you to carry both collision and comprehensive insurance. No state requires these coverages, they are optional.

Collision and comprehensive prevent you from having to pay out for your vehicle's repairs out of pocket. It will pay for your vehicle after it's damaged, totaled or stolen.

  • Collision Coverage – This will reimburse you for damages to your vehicle resulting from a collision with another vehicle or object when you're at fault. These include crashes with trees, guard rails, etc. It doesn't pay for mechanical failures or normal wear on your car.

  • Comprehensive Coverage – This works very much like a collision and pretty much takes care of all losses that are not classified as a collision or rollover.

The only time it doesn't make sense to have this coverage is when your car isn't worth much or when it's completely lost its value. You should not be paying your car's worth (or more) a year.

Also, keep in mind that you will only get paid out the Kelly Blue Book value of your car the day it was involved in an accident if it's totaled. It's also a good idea to use online car dealerships or shopping sites like CarMax to learn how much your car is currently worth.

These search engines will tell you what other dealerships are offering for your vehicle's make, model, and year. It will help you estimate your settlement, so you won't be shocked f you get a smaller-than-anticipated check.

5. Should I buy uninsured and underinsured motorist coverage?

Uninsured and underinsured motorist protection will cover pay for your damages and medical bills when a person with little or no coverage crashes into your vehicle.

It protects you if a driver crashes into your vehicle, then leaves the scene during a hit-and-run accident. If you cannot find the at-fault driver, you'll have to pay these expenses out of pocket unless you have UM or UIM coverage.

These coverages will also pay for your repairs and losses if another driver is at fault but has inadequate coverage or none at all. Of course, you have the option of suing that driver, but often, uninsured drivers don't have the means to pay for your damages.

You'll spend far less money buying uninsured/underinsured motorist insurance than if you paid for repairs out of pocket.

6. How much does car insurance cost?

Rates vary widely and are based on how much coverage you elect. A very affordable policy is often very minimal and leaves one exposed to repair costs.

Carriers use the personal information you provide them to determine your car insurance quotes. Factors that determine rates are:

  • Driving experience
  • Driving history
  • Car's value
  • Occupation
  • Marital status
  • Financial record
  • Garaging address
  • Annual mileage
  • Age and Gender

On average, a six-month premium can range anywhere from $300 to $1000, depending on coverage, driving history and discounts added.

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7. How should I select a deductible?

A deductible is a cost you share with your auto carrier. The insurer expects you to pay a specific amount before it will pay the remaining accident-related expenses. It affects how much you will get paid for your settlement. You can also save money on your rates if you increase your deductible.

Choose one that you can afford to pay. Understand that you must pay the deductible before your coverage begins.

The lower your deductible, the higher the monthly premiums and vice versa. If your deductible is $1,000 and you are at fault in an accident that will cost you $10,000 to fix your car.

The lower your deductible, the higher the monthly premiums and vice versa.

You'll pay $1,000, and the carrier will pay for the rest unless your car is worth less than $10,000, at which point the carrier company would pay you the worth of the vehicle, whatever that may be according to Kelly Blue Book on the day of the accident.

8. What are car insurance discounts, and do I qualify for them?

A car insurance discount is cost savings that help customers save money on their premiums. Many companies have multiple offers that fall into three categories: policy, driver and policy discounts.

Most people qualify for discounts one way or another. You may get a discount for having multiple policies, like home and auto or renters and auto.

If you have a safe driving record, you'll get a safe driver discount. You may even get a price cut for your education if you have a master's degree or a Ph.D. Go over all the available discounts the carriers you're considering an offer with your agent.

Also, many newer model cars have safety equipment that may earn you a discount. Other discounts include pay-in-full, multi-car policy , good student, veterans/military, mature driver and more.

9. Who's covered by my car insurance?

Some drivers are confused about the situations auto insurance covers. According to the Insurance Information Institute, these are the following scenarios:

  • Driving your car – Your policy covers your vehicle and drivers listed on your policy and who live in your household unless your policy excludes them. 

  • Driving another person's auto – Under permissive use, your policy provides you with coverage when you drive someone else's car with their permission. 

  • People not on your policy – Your policy also covers other people who are not on your policy when you give them consent to drive your car. Carriers consider this a permissive use situation.

  • Consider adding people and excluding others on your policy. It depends on whether you allow other people in your household to use your car. 

If someone you live with--possibly a roommate--has high insurance rates, and you never loan them your car, it may be wise to exclude them on your policy. It can prevent an insurer from raising your rates. You won't be covered if the excluded roommate has an accident while driving your car.

You don't need to list a permissive user on your policy. Your express permission renders a driver a permissive user. The coverage levels may differ. 

For example, you receive a lower settlement from an insurer if a friend has an accident after borrowing your car. You may have received a higher payout if you were the driver

Before you allow someone to borrow your car, speak with your agent. This professional can help you understand the terms and conditions of your policy.

In some situations, if you aren't fully covered for an accident with your liability coverage, the driver's insurance kicks in, and their liability will pay the gap.

 10. Do I have enough coverage?

There are three steps you can use to determine whether you have enough coverage for your vehicle.

  1. First, research the minimum auto coverage requirements in your state.

  2. Compare the price of your collision and comprehensive insurance policy to your vehicle's actual cash value to see if it's worth carrying.

  3. Calculate the maximum liability coverage you'll need to cover all of your assets and total net worth in case someone sues you for an at-fault accident.

When purchasing insurance, consider whether you have enough coverage to pay for your medical bills or other expenses if you have a terrible car accident. It should also be enough to pay for another driver's property and medical bills if you're at fault for an accident.

The amount of liability coverage you purchase should be sufficient to cover your assets. Experts recommend minimum limits of $100,000 - $300,000.

The amount of liability coverage you purchase should be sufficient to cover your assets.

Additionally, it's a wise idea to raise your liability limits if you're accident-prone. You may pay a little bit more, but it's better than paying thousands out of pocket after a legal judgment.

You should also consider collision and comprehensive insurance, which can help take care of your car damages resulting from an accident that was your fault.

Some people even have gap insurance, which pays the remainder of their car loan if the vehicle is totaled and not fully covered by your collision insurance because the vehicle's worth is less than the remaining balance on your car loan.

11. Do I need Gap Insurance?

Comprehensive and collision coverage will only pay for your vehicle's market value, not the price you originally paid for your car.

Your new car will depreciate quickly, so if it's totaled or stolen, there may be a gap in how much you owe for the vehicle and the settlement the insurance company pays.

You'll need Guaranteed Asset Protection (Gap) insurance to protect your vehicle if you owe more money on your car than it's worth.

For example, if your car is worth $25,000 and you owe $30,000 in loans, there's a $5,000 balance that your carrier won't pay. If you total your vehicle, you'll lose $5,000, or you may continue making car payments until you pay off the balance.

When you buy Gap insurance for your new vehicle with an upside-down loan, you'll get the entire amount that you owe on the vehicle.

12. What if I get into an accident and my car gets damaged?

If you have an accident, the amount your coverage pays out will depend on two things:

  • The coverage you have on your policy (whether you're at fault in an accident)
  • Your residence (whether you're or not you live in a no-fault state)

Ask your agent or representative about what kind of coverage you're required to have. In no-fault states, drivers must carry Personal Injury Protection (PIP), which means that both companies pay for damages incurred in the accident.

In most states, your liability insurance covers damages and injuries to the other driver, his/her car and passengers when you are at fault. Your collision coverage will cover it if the accident was your fault and you damaged your vehicle.

Collision insurance is not a required coverage. But if you don't have it and cause an accident, your repairs will come out of your wallet.

The same goes for a comprehensive insurance: say you hit a dead deer on the road, your windshield gets cracked, or someone vandalizes your car? 

You are responsible for your repairs unless you have some form of comprehensive insurance. If someone steals your car, you may be out of luck if you don't have comprehensive insurance.

Even if you have collision and comprehensive insurance to cover your damages, there are coverage limits. Keep an estimate of your car's maintenance and repairs in mind when you buy a policy.

Remember that some insurers will not cover manufacturer parts, meaning they will use inexpensive aftermarket parts. If this matters to you for whatever reason, make sure your agent addresses this concern as you shop around for a quote from carriers.

13. What if I have an accident and someone is injured?

Your policy's liability portion not only takes care of property damage; it also covers personal liability. You will receive coverage up to your policy's limits for covered damages. It includes car damages and medical costs incurred by another driver or their passenger(s).

Most people don't carry high enough limits to cover a severe or catastrophic injury claim or death. When you don't have enough coverage, you are liable to a personal injury lawsuit after limits are reached.

The other driver can sue you for your home, property, and other assets. These situations are why it's wise to carry as much liability coverage as you can afford. You can use SmartFinancial's search engine to find car insurance quotes from reputable companies. Just enter your zip code to get started.

14. What if I use my vehicle for ridesharing or commercial purposes?

Do you want to get a job with a ridesharing service, like Uber or Lyft, to earn extra money? Be very careful about using your car for business reasons since most policies only insure vehicles for your use.

Ridesharing companies require their drivers to carry private insurance on their vehicles. Consider getting ridesharing insurance. It is a type of coverage developed for people who drive for livery services like Uber or Lyft.

These policies are less expensive than commercial policies. It also fills gaps that an insurance policy from your ridesharing company may not cover.

  • Add-on options – It is an optional coverage that you can add to your existing auto coverage.

  • Stand-alone policy – It is a ridesharing policy you can purchase from an insurance company.

If you use your car for regular business use, you'll get commercial coverage.

15. Does how much I drive affect my rate?

The more you drive, the higher the chances that you'll have an accident. You pay more expensive rates for higher mileage. The fewer miles you drive, the lower your rates. You'll get the lowest auto insurance rates for spending less time on the road. Often, you get a steep discount if you drive 5,000 miles a year or less.

You pay more expensive rates for higher mileage. The fewer miles you drive, the lower your rates.

16. Can my occupation or education affect my car insurance coverage rates?

You'll be surprised to learn that your job can determine your rates. Your carrier will ask about your occupation when you apply for coverage. It may also ask about the highest level of education you've finished.

Insurers use social and economic information to create a profile about you. These are called socioeconomic factors. They include data like your wages, education, residence, payment history and credit score.

For instance, they use your answers to determine whether you're a low-income, middle class, or high-wage earner.

Unfortunately, these answers can have a more significant impact on your premiums than your driving record. Why? Many companies use these responses to raise or lower your rates.

Insurance companies are in the business of assessing risk and mitigating it. Carriers claim statistics show low-wage workers and people who attain less education file more claims. As a result, companies charged higher premiums to low-wage earners and people who only had a GED or high school education.

Consumer advocacy groups say it's due to a little-known practice called price optimization. Insurers realize that people in low-income brackets and educational backgrounds are less likely to shop around for better insurance quotes.

17. Does my credit score affect my car insurance rate?

Yes, it can. Your insurer uses a credit-based score to determine your car insurance coverage rates unless you live in a state that forbids this practice.

It helps determine whether a person will file a future claim within the next 24 months. They look at your payment history, financial history, outstanding debts, the pursuit of new credit lines and credit mix.

  • Good scores: These individuals will likely pay lower rates, because insurers view them as having a lower chance of filing a claim. Scores above 700 are "good."

  • Poor scores: These drivers will receive higher rates, because insurers believe they have a higher risk of filing a claim. Scores below 600 are "poor."

Carriers say several studies support this claim.

In four states, it's illegal to check someone's financial history to determine a car insurance rate. They are 

  • California
  • Hawaii
  • Massachusetts 
  • Michigan

In other states, it's perfectly legal to use your score to determine your car insurance rates. If your auto insurance rate seems high, you may want to ask your agent if the carrier uses your score to determine your rates. Do you have a low score? You may want to work hard to raise that score to pay less every month.

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18. What are my payment options?

You have a few different payment options with auto insurance. Policyholders pay off their premiums in monthly, six-month, and annual payment plans.

Most carriers will offer discounts if customers can pay their bill in full when it renews every six months or year.

Most carriers will offer discounts if customers can pay their bill in full when it renews every six months or year.

Some carriers or agencies will set up a payment plan for you. It may consist of a down payment, fewer than two payments, or a monthly premium. Other insurers allow you to select your preferred payment option.

19. What's the value of my car?

Kelly Blue Book is the resource most often used to determine the value of your car. The value of a car changes and usually depreciates over time, so consult this guide to see what others in your area are paying for the same model/make/year car.

20. Does the carrier have a 24-hour claims service?

There's nothing worse than having to wait to speak on the phone with someone on Monday if you have a car accident over the weekend. Ask your agent about claim service hours.

You don't need to use a phone to speak with an agent. Another option is to submit your claims online. Some mobile apps and websites make filing claims easier. You can file forms and upload images of the accident online.

21. Will the insurer pay for original manufacturer parts if my car needs repair?

Most insurers use aftermarket parts, which are much less expensive; however, it may also cause your car to depreciate more in value. For most people, this stipulation is not a deal-breaker. If it matters to you, ask your insurer about policies that supply manufacturer parts.

22. Does my insurance agent have my best interests in mind?

How can you find a good agent? 

  1. First, ask a close relative or friend to give a local agent referral. When getting a recommendation, ask if these agents provide in-person appointments and try to get to know their customers personally.

  2. Next, interview all prospective agents. It's best to speak with two or three agents before you make a final decision.

  3. Third, ask about the education your local agent has received. When your agent has received advanced designations, it means they're likely to be an expert about products and coverages you'll need.

  4. Check into your insurance agent's background. You can verify their license and ensure they have an excellent customer service record.

Most insurance agents are hardworking, honest individuals. If they push you to raise your limits, they may have your best interests in mind. They can leverage their experience to help with your claim.

Some agents are shady and may push you to purchase coverage you don't need. If you have a clunker worth about $800 and your agent is trying to get you to pay an extra $1,000 per year protecting it, no, your agent doesn't have your best interests in mind.

When hiring an agent, trust your intuition. Research any questions you have about your coverage. Speak with your agent to see if they are knowledgeable and can answer your questions.

Another option to find a good agent is to use a comparison-shopping engine like the one at SmartFinancial. This way, you're getting multiple quotes, so you know they will be competitively priced.

23. I don't own a car. Do I need car insurance?

It's a good idea to have a non-owner auto insurance policy if you borrow automobiles regularly. If you cause an accident, the vehicle owner's auto coverage may not pay up to limits when the insurer learns that you are driving during the car accident.

With a non-owner auto insurance policy, you can cover the other driver's expenses, injuries and damages. Without it, you and the owner of the car you borrowed may be liable to a lawsuit for damages and injuries.

If you live with the person whose car you use regularly, you should have that person include you on their primary policy. If you are excluded from their policy, there will be no coverage for the accident at all. If you are a relative of the person whose car you borrow, you should also be included in their policy.

24. Does the color of my car affect my insurance rate?

The idea that companies charge higher rates for red cars is a myth. There's absolutely no rate drop or rate hike based on the color of a car. What does affect your insurance rate is the value of the car and how expensive it is to fix if it needs repair. Also, sports cars are often indicators of risk and owning one may raise your rate.

25. How can I lower my premiums?

Here are a few tips to lower your car insurance premiums:

  • Raise your deductible - The simplest way to lower your premiums is to raise your deductible. Remember, if you're in an accident, you'll have to pay that amount before your collision or comprehensive coverage take effect.

  • Practice safe driving habits - Avoid traffic infractions, accidents and drunk driving, so you can get a safe driver discount.

  • Raise your credit score - Reduce your debt and paying your bills on time. It will affect your rates if you live in one that checks your financial history.

  • Put your car in a safe garage - If you live in a high-crime area, you can find a safe garaging address to lower your rate.

  • Don't file unnecessary claims - If you have a tendency to file lots of claims, stop doing that and only file claims on accidents you can't cover on your own; many claims mean a rate hike and possibly even cancellation.

  • Change your marital status - Seriously, married people have lower car insurance rates.

  • Drive a cheaper car - your rate will be higher the more valuable your car is and the more expensive repairs on it will be.

  • Take a defensive driving course - Other things you can do to lower premiums is to take a defensive driver or driver education course. The less you drive, the less you pay in insurance so live near work and make sure you get the proper discount if you drive 5,000 miles or less a year.

  • Bundle your coverage - Also, bundling policies bring down your rates so bundle home and auto or renters and auto.

Do I need rental car insurance?

If you don't have car insurance, you should buy rental car insurance at the car rental shop. Do you have collision and comprehensive coverage on your policy? If you own or lease a car and have full coverage (collision and comprehensive), it will extend over to the rental car and you are covered but it's best to call your agent and ask.

Also, if you plan to use a credit card, ask how much they cover. The insurance that rental car companies sell is usually expensive, so avoid buying it.

Another thing you should consider when shopping for rental car insurance is your health coverage.

Do you have adequate health insurance? If not you may want to consider buying additional coverage unless you have medical payments coverage or Personal Injury Protection coverage on your primary insurance policy.

Are you concerned about traveling in a rental car with lots of valuable content? You are only covered for these by your homeowners or renters insurance policy. If you are renting a car abroad, you'll need to speak with your agent to see if you have less expensive options than the rental car shop's insurance.

Your U.S auto insurance will likely not apply to cars rented outside of the U.S. Even in Mexico, U.S. auto policies and credit card insurance will not apply. It's important to buy Mexican liability insurance.

Also, consider accident insurance if traveling in Mexico. Ask your credit card company in advance to see if they will cover the loss damage waiver or if you need to buy it in Mexico.

Where do I get a cheap insurance quote?

It's important to find the best carrier that has the financial strength and fits your budget. That's why buying cheap car insurance is tricky. You don't want to buy a product from a company that will cease to exist or won't have the funds to reimburse you for a covered claim. Comparison shop for a car insurance quote and get competitive rates from top carriers by entering your zip code below. The process of getting a quote is really straightforward, and you could save hundreds!

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