When you choose the right car insurance policy, you are ensuring financial protection in case you get into a car accident and injure someone or damage their vehicle with your car. Depending on what type of car insurance policy you choose, your car could also be protected from damage due to accidents and other circumstances, like if a tree falls on your car, or if your car is stolen.
When you choose a car insurance policy you should do so with a few things in mind, like how much coverage you need and how much you can afford.
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Choosing the right car insurance policy starts with understanding how car insurance protects you, what kind of protection you need, and then shopping around different car insurance companies to find the most affordable and best offer for you.
How to choose the right amount of car insurance coverage
Car insurance is made up of individual types of coverage and each type offers a different form of protection. Every state that requires you to have car insurance mandates a minimum amount of insurance that you need to have in each type of car insurance. However, these amounts are low in comparison to the actual costs you could incur if you’re liable for an accident or need to repair or replace your car, which is why it is a good idea to buy more than just your state’s minimum requirements. Knowing what each component of car insurance covers and how much protection you need is integral to buying a new car insurance policy.
Below are the coverage components that make up what is called a “full coverage” auto policy:
Gap insurance is another component of car insurance coverage you can buy that covers the gap between your car’s depreciated value and the amount you still owe on its lease or loan. Gap insurance comes into play when your car is a total loss or has been stolen and not recovered.
Choosing policy limits
When you choose the coverage components that you want to make up your car insurance policy, you will also choose the limits for each type of coverage. A limit is the maximum amount your insurance company will pay you out for a covered claim. For example, if you have $15,000 worth of property damage liability coverage, and you get in an accident and cause $25,000 worth of damage to someone else’s vehicle, your insurance company will only pay you out $15,000 because that is your policy limit, and you’d be on the hook for the remaining $10,000. This is why it’s important to have higher limits than your state’s mandated minimums, because higher limits means you pay less out of pocket if you get into an accident or if your car is damaged in a separate event.
Additional car insurance coverage
When choosing a policy, you can also add additional coverages that don’t typically come with a standard auto insurance policy. For example, some policies might cover safety glass breakage while others don’t, so you might want to add on extra coverage. Policies differ on how they handle damage to your windshield or windows, sometimes offering different amounts of coverage whether the glass was repaired or replaced.
Other additional coverages include:
- Roadside assistance coverage : Usually not needed if you’re already a member of an auto club like AAA, but it would come in handy if you are not.
- Rental car reimbursement: When your insured car is in the shop or you’re waiting for it to be replaced, your insurer may cover the cost of renting a car in the meantime.
- Associated legal costs : When you’re liable for damage, additional costs may crop up, like interest owed on damage payments, court costs, and appeal and appeal bonds. If you’re required to assist the insurer in investigating a claim, and your assistance results in lost wages, you may be entitled to a daily payment for each day you assist.
Once you know how much coverage you need in each component, it’s time to get car insurance quotes.
How to choose a car insurance company
A better insurance company typically means faster responses to claims and questions, a better claims process and higher settlement amounts. You should check ratings with third-party reviewers while researching insurance carriers. . J.D. Power and A.M. Best publish satisfaction ratings for insurance companies. During these scorings, insurance companies are rated based on a variety of factors, such as:
- How efficiently they file claims
- How long it takes to get claims approved
- Overall customer service