This Is Why Your Car Insurance Is Making You Broke
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Jeff Green has held a variety of sales and management roles at life insurance companies, Wall street firms, and distribution organizations over his 40-year career. He was previously Finra 7,24,66 registered and held life insurance licenses in multiple states. He is a graduate of Stony Brook University.
If your car insurance is running your bank account dry, it's time to reevaluate your coverage. Car insurance doesn't have to be expensive, and working with an insurance agent is the easiest way to save money.
Agents will shop different carriers and find car insurance discounts that you qualify for. Let's take a closer look at why your car insurance is making you broke and how you can save on it.
What Does Car Insurance Cover?
Car insurance helps you pay to repair or replace your vehicle in the event that you're in an accident or your vehicle is damaged. You can choose from a variety of coverages depending on your needs.
- Bodily injury liability coverage: Pays for medical bills, legal fees, and any other costs that you may incur if you're in an at-fault accident and the other driver or passengers are injured.
- Property liability coverage: Pays to repair or replace any property that you damage in an at-fault accident, including someone else's vehicle.
- Collision coverage: Pays to repair or replace your vehicle if you're in an accident or collide with certain objects.
- Comprehensive coverage: Pays for any damage done to your car from events other than a collision, such as a tree falling on your car or hitting an animal.
- Uninsured/underinsured motorist coverage: Pays for your own injuries and any property damage if you're in an accident with an uninsured or underinsured driver.
The above are the most common coverages, but several additional add-ons exist.
- Rental car coverage: Pays for rental car service in the event that your vehicle is being repaired and not able to be driven.
- Medical payments coverage: Additional coverage for injuries and medical bills associated with an accident.
- Roadside assistance/towing coverage: Pays for assistance if you break down while on the road or if your vehicle needs to be towed for repairs.
Is Car Insurance Required?
Most states will require some form of auto insurance coverage, and with those requirements are minimum liability limits.
When looking at liability limits, the three numbers represent the amount you're required to purchase. For example, if the limit is 25/50/15 this means you're required to have $25,000 liability coverage per person, $50,000 per accident, and $15,000 for property damage.
Example of state-required car insurance limits
| State | Bodily Injury Liability | Property Damage Liability | Personal Injury Protection | Uninsured Motorist Coverage | Minimum Liability Limits |
|---|---|---|---|---|---|
| California | required | required | not required | not required | 25/50/15 |
| Florida | required | required | not required | not required | 10/20/10 |
| Illinois | required | required | not required | required | 25/50/20 |
| Massachusetts | required | required | required | required | 20/40/5 |
| Texas | required | required | not required | not required | 30/60/25 |
As you can see every state varies, so it's best to speak with your agent about your state's requirements. Whether your state requires insurance or not, it's a good idea to have coverage. Many drivers need more than the minimum requirements and benefit from adding collision and comprehensive insurance.
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Why Is My Car Insurance So Expensive?
Car insurance premiums are calculated based on a number of factors related to your driving history, your vehicle, and personal traits. The most common factors that increase car insurance rates include the following.
- Having multiple accidents on your record and/or moving violations
- If you drive in a busy city
- Your age
- If you drive frequently and put a lot of miles on your car
- If you drive a sports car or luxury vehicle
- Choosing high limits for your coverage
- Having a high deductible
Fortunately, many of these factors can be controlled, which means you have the ability to bring your insurance costs down.
How Can I Save on My Coverage?
Auto insurance companies have made it fairly easy to receive discounts on your car insurance, which is the best way to save money.
Every company will have its own discount offerings that are typically based on driving behaviors, but here are the most common options.
- Bundling policies: You can save money by combining your car insurance with your home, renter, life, or business policy.
- Driving a safe vehicle: Safety features like automatic braking, blind-spot warning, and lane-keeping can save you money on your car insurance premiums.
- Being a safe driver: If you don't have a record with a lot of accidents and/or moving violations on it, insurance companies assume you're a safe driver and will reward you for that.
- Good student discounts: High school and college-aged students can receive a discount on insurance for having good grades.
- Taking a safe driver course: Companies will offer a discount to drivers who actively participate in being safe drivers by taking a safe driving course.
- Specialty group discounts: Special groups like federal employees, military, and those in education are frequently offered group discounts.
- Paying your premium in full: Instead of paying monthly installments, paying your premium in full potentially save you money on your coverage.
- Increase your deductible: The more you're willing to pay out of pocket in the event of a claim, the lower your insurance premiums will be.
Will My Rates Increase if I Insure Multiple Vehicles?
It seems like the more vehicles you have to insure the more expensive your car insurance would be, but the opposite is true. Most insurance companies will provide a discount if you're insuring multiple vehicles under the same policy.
If you drive multiple vehicles yourself, it's likely you will not need full coverage for all of your vehicles. An agent can learn how you use each of your vehicles and what types of coverage will work best to insure each individual car.
What Other Factors Can Impact My Rates?
In addition to what we've already discussed, the following factors can impact your rates.
- Age: Young drivers usually pay the highest rates because they're inexperienced and have the highest risk of an accident.
- Credit score: A bad credit score tells insurance companies that you may be late or unable to make your car payments.
- Driving history: Keeping your driving record clean will keep your car insurance premiums low.
- Gender: Female drivers have lower accident rates than male drivers and therefore typically have lower premiums.
- Location: Insurance companies see driving in a busy city as riskier than driving in an urban area. Crime rates can also affect rates.
- Type of vehicle: Insurance companies look at safety features, repair cost, and price when calculating premium rates.
How Can an Independent Insurance Agent Help?
Insurance agents are experts in all things car insurance. They have your back throughout the entire insurance shopping and purchasing process. Agents will chat with you free of charge to learn about your vehicles, driving history, and other behaviors before shopping policies. They then speak to multiple carriers to find you the best car insurance options for you and your wallet.
https://www.iii.org/article/how-can-i-save-money-auto-insurance