Key Factors to Consider When Choosing Auto Insurance


Nearly every state requires car insurance, but choosing the right company depends on your situation. Ask family and friends about their experiences, or consider third-party ratings from companies that rates insurance carriers on customer service.

Your car’s value and driving record also play a role in prices. Carefully review the coverages, limits, and deductibles in each quote.

Liability Coverage

In almost all states, drivers must have minimum liability coverage on their auto insurance Newark DE to cover any injuries or property damage they may cause to third parties. Consider obtaining higher levels of coverage based on how much danger you are willing to take with your money.

The ratio (bodily injury per person/bodily injury per accident/property damage per accident) is a common way to represent liability limits. You also have the option of choosing a single limit, which is one number that covers all types of damages and injuries.

A policy that offers only the minimum required by law may save you money. Still, it won’t protect your car or assets from costly legal claims that can stem from serious accidents involving property damage or injury. You should also look for a policy that includes personal injury protection, or PIP, which covers medical expenses, lost wages, and a new car replacement if you need to replace your vehicle after an accident.

Comprehensive Coverage

Comprehensive coverage, typically necessary if you lease or loan your car, protects your automobile from damage brought on by theft, natural catastrophes, and other events not covered by collision insurance. About 80% of drivers add it to their policies.

Before deciding whether to choose comprehensive coverage, consider your car’s value and how much it would cost to repair or replace it. According to the Insurance Information Institute, a rule of thumb is that if your car’s estimated value is less than ten times your annual collision coverage premium, it might not be worth paying for comprehensive coverage.

Other factors influencing your decision include where you live and how often you drive your car. With discounts for safe driving accessible to many drivers, your driving history may also impact your rates. Your credit history will also impact your rates. However, different insurers treat this factor differently. To receive a cost quote, you must know your driver’s license number, age, address, and other personal details.

Collision Coverage

In contrast to liability coverage, collision insurance pays for damage sustained to your car when involved in a crash with another vehicle or object, such as a tree or guard rail. This type of insurance also usually requires a deductible, which you must pay before the insurer starts to pay out.

In addition to liability and comprehensive insurance, the majority of states additionally mandate that drivers obtain personal injury protection (PIP) and medical insurance for injuries sustained in an accident they caused. Moreover, the lienholder might mandate that you carry collision and comprehensive insurance if you are still paying off a loan or leasing your car.

Many financial experts recommend dropping collision coverage once your car reaches a certain age or when the cost of annual premiums exceeds your vehicle’s value. However, this is a decision each driver has to make based on their specific circumstances. If you’re considering dropping collision coverage, consider the following:

Uninsured/Underinsured Motorist Coverage

Adding uninsured motorist property damage (UMPD) and uninsured/underinsured motorist bodily injury (UMBI) coverage to your policy may provide extra protection. Both coverages are designed to help pay for damages from accidents caused by drivers who don’t have car insurance or whose policy limits are lower than what’s needed to cover your costs.

While all states require drivers to carry liability coverage, plenty of people choose not to — and even drivers with insurance often don’t buy enough to cover all the damages they cause in an accident. UM and UIM coverages help to close that gap and protect you and your family in these situations.

Uninsured/underinsured motorist coverage is usually inexpensive and available in $5,000 increments up to your bodily injury limit. You can also “stack” your UM and UIM coverages in some states to increase the limits you’re covered for. Check with your agent to see if this is an option in your state.

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