How To Buy Car Insurance

A car is an investment. Even if you buy a pre-owned older model, you probably spent a considerable amount of money on the purchase. And if you’re involved in an accident, medical bills and repair costs can be expensive. Auto insurance is a great way to protect yourself financially in case of an accident. Besides, car insurance is mandatory in nearly every state in the country — driving without it can land you in serious financial and legal trouble. It’s important to know how to get car insurance to protect yourself and your investment.

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      What will I need to buy auto insurance?

      Buying auto insurance these days is a simple process. Before you get started, make sure to collect some information. This is the information you’ll need to have handy:

      • Driver’s license: The insurance company will need to confirm you’re legally able to drive.
      • Social Security number: Many insurance companies review your credit history to determine your auto insurance rate. Individuals with lower credit scores may be considered higher-risk drivers. If you live in California, you’re just in luck since the state prohibits car insurance companies from using credit history to insure drivers.
      • Vehicle identification number (VIN): The VIN is a unique number that reveals a lot about your vehicle. It can be found by looking from the outside in on the driver side dashboard corner. It may also be on your bill of sale or vehicle registration.
      • Make, model and mileage: You’ll need to provide the insurance company information about the car, such as the trim package and any extras included in the model and the current mileage.
      • Payment information: To purchase auto insurance, you’ll need a credit card number or bank account information including your bank’s routing number and your bank account number.

      Where can I buy auto insurance?

      Knowing how to buy auto insurance has never been easier. You have plenty of options to make the process smooth and seamless. Depending on how fast you need car insurance and your comfort level with technology, you could buy car insurance online yourself or get help from an agent or representative. Consider the following options:

      Online 

      The fastest way to get car insurance is by purchasing a policy online. You can start by getting a no-obligation quote by entering the information you collected. If you’re happy with the quote provided, you could choose to purchase the coverage by completing the application online and paying for your coverage. You could be legally insured to drive in just a few minutes from start to finish.

      [ Read: Understanding Auto Insurance Quotes ]

      Over the phone 

      If you’re not comfortable with entering your personal banking information through an insurance company’s website or you’re not sure how to buy car insurance from your smartphone or a computer, you could call to purchase insurance over the phone. Most insurers have a toll-free 800-number at your disposal and knowledgeable agents available to help you through the process.

      Captive agent 

      A captive agent sells insurance for a specific insurer. Some of the top insurance companies have captive agents to help you shop around for insurance policies — like State Farm or Farmers. You could visit State Farm’s local office and meet with a captive agent to purchase car insurance. Working directly with a captive agent and building a relationship comes in handy down the road if you need help filing an accident claim or you’re having trouble with the insurance company. Your agent could step in to help you get any issues resolved.

      Independent agent or broker

      A car insurance broker or independent agent works with several insurance companies. If you’re having trouble getting insured because of your driving history or if the lowest possible price on car insurance is important to you, an independent agent could be a good option. They’ll have knowledge on which auto insurance company may insure your unique needs, as well as shop around to get you the best price.

      Car insurance from specialty agencies  

      Some agencies specialize in nothing but vehicle insurance. AAA is a good example, although many smaller insurers also specialize in vehicle insurance. Specialty agencies know auto insurance well and are ideal if you’re insuring a classic car, for example. A specialty agency could also be a valuable resource if you’re considered a high-risk driver and require help finding the right policy.

      What are the types of coverages?

      There are five main types of auto insurance coverage available. In most states, liability insurance is mandatory and the rest of the coverages are optional. Your insurer will know the minimum amount of car insurance you’ll need to legally drive in your state.

      Liability

      Liability insurance covers property damage and the injuries of others if you’re at fault in an accident. It’s the most commonly required type of coverage you’ll need. Liability insurance only protects others if you cause an accident. If you’re hurt in an accident you’re at fault for or your car is damaged, liability coverage won’t pay for your medical bills or repairs. 

      Collision

      If you’d like to add coverage to your vehicle and property, you’ll need to buy collision insurance. Collision insurance is designed to provide repair or replacement of your vehicle if you’re at fault in an accident. If you’re financing a vehicle, the lender will likely require you to have full coverage consisting of liability, collision and comprehensive coverage.

      [ Related: When You Should Downgrade Your Car Insurance ]

      Comprehensive

      Comprehensive insurance is often sold with collision insurance to create full coverage insurance. As mentioned, liability insurance only protects others if you cause an accident. Collision insurance covers your expenses if your car is damaged in a crash. Comprehensive expands your personal protection by adding coverage for other events such as storms, flooding, fire, theft and striking an animal while driving.

      Medical payments or personal injury protection (PIP)

      Personal injury protection and medical payments cover injuries and medical bills for yourself and your passengers, regardless of who is at fault in the accident. Some states require PIP/medical payments in addition to liability insurance. The states are:

      • Florida
      • Hawaii
      • Kansas
      • Kentucky
      • Massachusetts
      • Michigan
      • Minnesota
      • New Jersey
      • New York
      • North Dakota
      • Pennsylvania
      • Utah

      Uninsured and underinsured motorist

      Although all states except New Hampshire require some form of auto insurance, there are many drivers on the road that don’t have car insurance or have the minimum amount. If you’re in an accident with an uninsured driver, your own insurance would need to step in to cover your damages. In other cases, if you’re driving a newer-model vehicle and the other driver has only the minimum amount of car insurance required, it may not be enough to pay all the costs of your medical bills and property damage. 

      [ More: What Is the Car Insurance Minimum in Your State? ]

      Uninsured and underinsured motorist insurance adds an extra layer of protection to your auto insurance policy. If someone else causes an accident and doesn’t have insurance to pay for the damages they caused you, your uninsured/underinsured motorist coverage would step in.

      How much does car insurance cost?

      Car insurance in the U.S. averages about $121 per month. The costs can vary widely based on a number of factors. Some of the most common factors that could make your car insurance cheaper or more expensive include:

      • Age: Younger drivers are considered at higher risk for accidents than older drivers because of their lack of driving experience. The most expensive age group to insure are teenagers. Car insurance prices lower in cost as a teenager gets older.
      • Location: The neighborhood you live in could make a big difference in how much your car insurance will cost. Car insurance companies collect and analyze data to determine which areas have higher claims than others. Some neighborhoods are more prone to vehicle theft and vandalism. Other areas are more congested and responsible for more accidents. 
      • Driving history: Your driving past is one of the most important factors determining how much you’ll pay for car insurance. If you’ve had speeding tickets or accidents in the past, your insurer will consider you a higher risk to insure. They use your driving history to determine how likely it will be that you’re involved in a car accident in the future.
      • Credit score: A surprising factor many drivers don’t know about is credit history. If you have a low credit score, you could end up paying more for car insurance. Auto insurers may worry you won’t pay your car insurance premiums on time. The state of California has prohibited insurance companies from using credit scores as a pricing factor. Perhaps other states will follow suit in the future.
      • Gender: Women are statistically safer drivers than men. Since auto insurers rely on data to make decisions on how to price their car insurance and who to insure, they may give females lower insurance rates than men.
      • Claims history: Similar to driving history, the number of claims a policyholder tends to make could affect your auto insurance premiums. Car insurers will offset the risk that you’ll file a costly claim by raising the cost of your car insurance.
      • Marital status: Statistics show that married drivers are less likely to file an auto insurance claim than single drivers. Married couples may enjoy lower auto insurance rates based on the statistics.
      • Coverage type: The amount of coverage you buy can make a big difference on how much you’ll pay for car insurance. It only makes sense that a basic liability insurance package for the minimum amount of coverage mandated by your state will be far cheaper than full coverage with higher limits.
      • Vehicle: If you drive a newer-model or higher-end vehicle, expect to pay more for car insurance. It’s only logical — repairs on a ten-year-old Honda Civic are likely far less than the same repair on a brand-new BMW.

      To find the best price on car insurance, it’s best to shop around and compare quotes from several insurers periodically. You may find a big difference for the same type of coverage from one insurer to another and decide to switch auto insurance companies.

      We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

      Cynthia Paez Bowman

      Contributing Writer

      Cynthia Paez Bowman is a finance, real estate and international business journalist. Her work has been featured in Business Jet Traveler, MSN, CheatSheet.com, Bankrate.com and Freshome.com.

      She owns and operates a small digital marketing and public relations firm that works with select startups and women-owned businesses to provide growth and visibility. Cynthia splits her time between Los Angeles, California, and San Sebastian, Spain. She travels to Africa and the Middle East regularly to consult with women’s NGOs about small business development

      Reviewed by

      • Nashalie Addarich
        Nashalie Addarich
        Editor

        Nashalie Addarich is an editor for The Simple Dollar. She recently made a career switch from the legal field, where she was an attorney in Washington, DC. In her free time, she enjoys learning new languages. You can also find her editorial work on Reviews.com.