Auto Insurance – A Step-by-Step Guide

family in car

Navigating auto insurance can be a complicated process. From selecting the policy that’s right for you to making a claim, this article can help streamline the process.

Step 1: Ask Yourself the Following Before Shopping for Insurance: 

  • Will you be driving more or less than 3,000 miles per year? 
  • Will your vehicle be used primarily for pleasure or a daily commute?
  • Do you have a garage or will you park your car out on the street?

Be sure to communicate these items to your chosen provider. If your situation changes (e.g., you move to a home with a garage), discuss it with your insurer to see if you qualify for savings.

Step 2: Get Recommendations About Quality Insurance Provider

Ask your local mechanic, friends and family which insurance companies they recommend. Small businesses and trusted individuals can help steer you to affordable, quality companies while helping you avoid disreputable insurance agents.

Step 3: Choosing Between a National and Local Provider

Typically, national insurance companies offer cheaper rates, while local businesses are known for a higher level of personal service. It pays to shop around. With quotes from multiple companies in hand, you can often negotiate a better price with a local agent and get the best of both worlds.

Step 4: Liability vs. Collision vs. Comprehensive?

  • Liability insurance is the cheapest alternative and minimum requirement for drivers in most states. It covers the property and medical needs of the other people involved when you are responsible for an accident, however, it does not repair or replace your car. 
  • Collision coverage pays for repairs to cars involved in an accident, including your own. 
  • comprehensive policy covers theft, weather damage, animal incidents…essentially vehicle damage caused by anything other than an accident. Collision and comprehensive insurance are typically required if you are still paying for the vehicle.  

Step 5: Reading the Fine Print

Once you’ve narrowed your choices and selected the type of insurance you need, spend some time reading about each company’s coverage. Not all policies are created equal and after an accident is not the time to realize your coverage is inadequate. Use the following tips to help you identify a good insurance policy:

  • Select a policy that contains a consumer-friendly  “Arbitration Clause.”  If a dispute arises, independently hired experts will establish an agreed-upon value. 
  • Familiarize yourself with your home state riders. For example, many states require minimum levels of Property Damage Liability or Bodily Injury Liability.
  • Look for a section that describes how the company will determine the “amount of loss” or how they will assess your car’s value.
  • Look for phrases that appear to move things heavily in the insurer’s favor, typically identified by too many clauses and exclusions.
  • Be wary of complex language and vague phrasing. If “payment for loss” has too many caveats and conditions, you might want to pass.
  • Be ware premiums vary by car models, make and year—the more expensive to repair, the higher the insurance premium.

Step 6: Evaluating the Extras 

  • Uninsured or Underinsured Motorist Coverage applies when a driver with no insurance causes an accident. It also applies to hit-and-run drivers.  Without it, the claim falls to your Collision Coverage, which could raise your rates.
  • Guaranteed Auto Protection (GAP) covers the difference—the “gap”—between the amount you owe on your loan and the value of your vehicle.
  • Custom or Specialty Equipment Coverage applies to add-on items such as a nice stereo or custom wheels. Without it, your insurance only covers the cost of the vehicle’s stock equipment and features. 
  • Personal Injury Protection (PIP)—If you don’t have comprehensive insurance, PIP pays passenger medical bills no matter who is at fault for an accident. 

Step 7: Other Savings Opportunities

  • Bundles—Combine your home or renter’s insurance with your auto, life insurance or other types from the same insurer to save.
  • Higher Deductibles = Lower Premiums—A high deductible can save you on premiums, but you’ll pay a higher amount should you need repairs.
  • Pay in Full or Pay Monthly—In most cases, paying for a six-month period earns a discount over monthly plans.
  • Various Discounts—Ask about good student and safe driver discounts. Anti-theft devices, defensive driving courses, good credit record and low annual mileage can also save you money.
  • Switch to Liability-Only Insurance—A good rule of thumb, if your car is worth $3,000, or less, switch to liability-only coverage and set aside about $85 per month towards your emergency vehicle fund. You’ll come out ahead. 

Step 8: Claims

Filing a claim is a complex process.  Getting it right can save you $1,000s. Follow these steps immediately following an accident and during the claims process:

  • Scene of the Accident
    • Never admit fault
    • Call the Police— No accident is too small and a police officer asking the questions helps guarantee honesty.
    • Exchange Information—Driver’s name, address, phone number driver’s license, license plate number, insurance company name, policy number and phone number
    • Ask for Witness’ Information— Name, address, phone number, driver’s license number, license plate number
    • Take Photos—Show all aspects of the scene, close-ups as well as wide-angle shots, to fully depict what happened.
  • You Can Use Your Own Coverage—In some cases, you can use your own policy to pay for damages caused by another driver without affecting you rates.
  • Ask Questions
    • What is getting covered? Ask the claims adjuster, body shop or doctor about new replacement parts for your car, rental coverage or out-of-pocket medical expenses.
    • Ask for every communication via email and/or written letter so you have a record of your insurance company’s commitments.
    • Be aware, many adjusters will offer you conservative settlement amounts. Never discuss how much you’re willing to accept until you’ve done your research.
    • To keep expenses low, many insurance companies will attempt to undervalue your claim. Be sure to demand about 25 percent more than you hope to get in the end.
    • If you feel the adjuster is being unfair, contact an attorney about pursuing legal action. Personal injury attorneys can help you navigate a claim and most will take a case on a contingency basis, so they only get paid if a settlement is generated.

Step 9: Over the Years

  • Continue to Shop—Shop around every few years or ask your current company for a rate review. You might land a great introductory rate elsewhere or use a competitor’s quote to bargain for better rates.
  • Read Your Updated Policy—When a copy of your updated policy arrives, take the time to read it and stay on top of any crucial changes.
  • Don’t Let Your Coverage Lapse—Set up automatic online billing and other fail-safes to ensure you don’t find yourself in a tough spot with no insurance coverage.