At the start of 2021, car insurance rates in 45 US states dropped by an average of 2.3%. This is the first time premiums plummeted in more than a decade. However, today’s auto insurance costs are still 106% higher compared to 2011.
Despite vehicle insurance being expensive, most US motorists can’t bypass it though. For starters, it’s a legal requirement in the majority of states. Plus, it’s an invaluable source of personal, financial, and vehicle protection.
Besides, a good car insurance policy won’t and shouldn’t cost you an arm and a leg. You do have to know how to distinguish a good policy from one that can deplete your finances.
To that end, we created this guide on what to look for in an auto insurance policy you can rely on. Read on to discover what your new or next policy’s attributes and features should be.
Meets Your State’s Minimum Required Coverage Amounts
New Hampshire is one of the only two states without mandatory auto insurance laws. NH drivers are free to bypass car insurance, but they must still pay for the damages they cause in a crash. Failure to do so can lead to their driving privileges getting suspended or canceled.
In Virginia, motorists can opt not to buy auto insurance, but they must pay $500 in exchange. Those five Benjamins are only for the Uninsured Motor Vehicle Fee. It allows them to drive uninsured, but like NH, they must pay for damages they cause in a collision.
The remaining states have mandatory minimum car insurance coverage requirements. This varies from one state to another, so be sure to check your state’s Department of Motor Vehicles (DMV). Your state’s local DMV website should publish these minimum requirements.
States that require auto insurance mandate bodily injury liability and property damage liability. Each state, in turn, specifies the minimum for each liability coverage.
For example, California requires a $15,000 bodily injury liability coverage per person. It also mandates a $30,000 bodily liability coverage per accident. Motorists in the Golden State must also carry at least $5,000 in property damage liability.
These are the lowest coverage amounts that your policy must at least have. Any lower than that, and you’ll become an underinsured driver, which is illegal in most states.
Factors In Your Assets
State requirements are only a fraction of what most people would otherwise incur in a crash. If you settle for these minimum requirements, you can end up risking your assets.
To give you an idea, the economic cost of a road accident with a possible injury averaged $23,400 in 2019. That rose to a staggering $98,400 for a crash that resulted in a disabling injury.
So if you only have a $15,000 bodily injury coverage per person, you’d have to shoulder the rest. The more people you injure, the bigger your out-of-pocket costs. This may then force you to liquidate your assets to cover the expenses.
As such, a good auto insurance policy has coverage amounts that also protect your assets. For example, instead of only having a $15,000 injury coverage per person, it may have up a $50,000 or even $100,000 limit. Either way, a higher coverage won’t force you to use your savings or assets to make up for what your policy won’t cover.
Deductibles That Won’t Break the Bank
A deductible is an amount an insured person must pay before the insurance policy kicks in. It’s a portion of a claim’s total cost that the policyholder assumes, and thus, shares with the insurer. Deductibles are almost always required for comprehensive and collision coverage.
Either way, the higher the deductible, the lower your vehicle insurance premiums.
Sounds great, right? Yes, but it won’t make sense to get a higher deductible if you won’t be able to cover it once you need to make a claim. According to this policy guide, auto insurance deductibles can be as high as $1,000, but they can go as low as $50.
If you have a considerable emergency fund, it might be better to go with a higher deductible. In this case, a $500 or even $1,000 deductible can go a long way to saving you every month on premiums. The lower your insurance premiums, the more money you can put away as savings.
However, you’d want to stick to a lower deductible if you’ll find it hard to deal with a surprise car expense. This means higher premiums, but at least you get collision or comprehensive coverage. With these two optional plans, you won’t have to go carless until you have enough cash to fix or replace your car.
Makes It Easy To Qualify For Auto Insurance Discounts
A good insurance policy comes with discounts, such as a bundle or a good driver discount. You can get a bundle discount if you buy another type of insurance along with an auto insurance policy. The most common bundled policies are car and homeowners’ policies.
Some insurers also offer good driver discounts to motorists with excellent driving records. In fact, some states even require insurers to offer this discount or a similar one to their customers. California is one example wherein good drivers can qualify for a discount of at least 20%.
Good car insurance policies also usually offer anti-theft discounts. These often apply to vehicles with alarms, cameras, as well as wheel, tire, and brake locks. The discount rates vary, but they can start from 5% and go as high as 25% for more innovative features.
Get the Right Car Insurance Policy for the Best Vehicle Protection
Always remember that a good car insurance policy provides adequate vehicle protection. More than that, it protects your assets and finances without making it hard for you to pay your premiums. So, when buying insurance for your wheels, be sure it also qualifies you for several discounts.
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