How to Pick the Right Car Insurance Plan for You

Insurance, Tips & how-to

Car insurance is complicated. If you feel overwhelmed and clueless about whether you’re paying too much for too little coverage, you’re probably not alone. How much coverage do you really need?

Your auto insurance is a collection of different policies that cover you in different ways in the event of a car accident. Here’s how they break down:

Liability Coverage

These policies help cover liability and expenses when you’re at fault in a car accident. The policy covers the people you hit; it doesn’t cover the people in your car.

Bodily Injury Liability

A bodily injury liability (BIL) policy pays for the medical expenses of people injured in a crash in which you’re at fault. You’ll often see BIL policies described as a “20/50” policy or a “100/300” policy. These numbers describe the maximum dollar amount the policy will pay for a single person’s injuries and the maximum for all the injuries sustained by all the occupants of the other car. A 20/50 policy pays a maximum of $20,000 for a single person’s injuries, and up to $50,000 total for the injuries of everyone in the car you hit.

Property Damage Liability

This policy pays for damage done to the other car if you’re at fault in an accident. Property liability is sometimes referred to alongside BIL as a third number, so a 20/50/10 liability package will cover up to $10,000 for damages to the other car.

Coverage for Yourself, Your Car, and Your Passengers

The following policies cover you and your car in an accident:

Personal Injury Protection (PIP) – This covers your and your passengers’ medical expenses after an accident. If you lose time at work because of your injuries, this policy may also cover lost wages.

Uninsured/Underinsured Motorist Coverage – This helps cover costs if you are hit by someone with minimal coverage or no insurance.

Collision Coverage – This policy covers repairs to your car after an accident.

Comprehensive Coverage– This policy covers costs if your car is stolen or damaged outside of an accident.

How Much Liability Coverage Do I Need?

Carrying automobile insurance is required in most states; usually there are required minimum values for different policies. If you don’t carry insurance, the state can impound your vehicle.

Minimum liability coverage isn’t necessarily all you should have. New Jersey, for example, requires car owners to carry a 15/30/5 liability package. If you’re involved in a serious accident, it’s possible that an individual’s medical expenses could exceed $15,000, or a group’s expenses could total more than $30,000. In addition, $5,000 for car repairs isn’t a lot, considering that the average car now costs a little more than $20,000.

When costs exceed your coverage limits, you can easily find yourself in a pickle. Therefore, many people opt for policies that cover more than only the required minimums — particularly if they have assets that can be seized to pay for repairs and medical care. A good rule of thumb is to make sure you’re covered for an amount equal to the total value of your assets (the dollar values of your home, car, savings, and investments).

How Much Coverage Do I Need for Myself?

You may not need to spend a lot of money on a Personal Injury Protection policy as you’re likely covered if you have health insurance and disability insurance through your employer. Check your health insurance before buying more than the required minimum.

You do need to make sure you have adequate coverage against uninsured and underinsured drivers. Most states have relatively cheap coverage (think $40 a year for $100,000 worth of coverage);  if you are in a collision with an uninsured driver, the coverage will help cover costs that your health insurance won’t. If you’ve decided to carry BIL for $100,000/$300,000, do the same for yourself.

Collision and comprehensive coverage is worth having if you would want to repair or replace your car after an accident. These policies have a deductible, and they pay out based on the current value of your car.

Choose the Highest Deductible You Can Afford

A higher deductible will significantly lower your premium. You’re seeking coverage for major damages to your car, not for every little thing that can go wrong. It’s better to spend $500 of your own money on minor repairs every so often than pay an extra $50 a month whether you need repairs or not. Save collision insurance for when you have car repairs that cost thousands, not hundreds. Remember, if you submit a claim for every little thing, your premium will increase.

How to Shop for Car Insurance

Once you’ve decided how much car insurance you need, it’s time to begin shopping. Auto insurance policies vary widely depending on your car, your driving record, and your credit, so it’s wise to do some research. Get quotes from several insurers. Visit and, fill out their forms, and you will shortly receive quotes from several insurers to compare.

There are three kinds of insurers:

Direct sellers – Brand name auto insurers like GEICO and Progressive sell coverage directly to you — meaning without traditional insurance agents. The savings from not paying commissioned agents then (theoretically) benefit you. However, these insurers accept only excellent drivers, so a history of accidents or moving violations could stand in your way of qualifying for coverage.

Large national brands – Allstate and State Farm are better equipped for drivers with a bit of an iffy driving history, and their rates are typically not outrageous. These insurers may even be willing to match offers from direct sellers, so have quotes ready to compare.

Independent insurance agents
 – These sellers offer all kinds of insurance from many different companies. If you have any issues affecting your ability to get coverage (such as a patchy driving record or a teenage driver in your house) independent agents can usually find you better coverage at better prices than what you’d find on your own. Ask friends and family whether they have an insurance agent they would recommend.

Picking the Best Insurance Company for You

Ask about discounts – There is almost always a way to save money. You may get a discount if your car has anti-lock brakes, if you don’t drive your car that often or that far, and so on. Request a list of all possible discounts to see if you qualify.

Read company reviews – No discount in the world will make up for slow claims processing or shoddy repairs, so find out as much as you can about a company’s service before you sign on. Consumer Reports periodically publishes service ratings for large insurers.

Consider no-fault policy costs when shopping – A handful of states require car owners to carry no-fault insurance — policies that pay out no matter which driver is at fault in an accident and limit your ability to sue other drivers. These policies tend to be expensive, so be sure to shop around for the best deal if you live in a no-fault state.

Skip towing insurance – Consider joining an auto club like AAA, which gives you towing services and roadside assistance.

Consider glass insurance – Auto glass is expensive to replace. Make sure that glass is part of your comprehensive coverage, and not as a costly separate policy. Chipped windshield? No problem.