The following simple steps will help you determine how much car
insurance you need to carry. And it will also help you get the best
coverage at the lowest price. If you are confused about any of the
terms we use, be sure to review the glossary in "Little-Known but
Important Insurance Issues."
Step 1: Starting Out
When it comes to auto insurance, you want to be adequately covered
if you get in an accident but you don't want to pay any more than
you have to. So how can you navigate your way through this murky
Keep telling yourself there is money to be saved. How much?
Hundreds, even thousands, per year. For example, one of our editors
typed all of his insurance information into a comparative insurance
service. The quotes (for very basic coverage on two old cars) ranged
from $1,006 to $1,807 — a difference of $801 a year. If you're
currently dumping thousands into your insurance company's coffers
because of a couple of tickets, an accident or a questionable credit
rating, shopping your policy against others may be well worth the
Look at it this way — you can convert the money you save into the
purchase of something you've desired for a long time. Hold that goal
in your mind.
Step 2: How Much Coverage Do You Need?
To find the right auto insurance, start by figuring out the amount
of coverage you need. This varies from state to state. So take a
moment to find out what coverage is required where you live. Make a
list of the different types of coverage and then return for the next
step. (You will find a list of each state's requirements and an
explanation of the various types of insurance in "How Much Auto
Insurance Do You Really Need?" Also, check out "Little-Known but
Important Insurance Issues" as it has a glossary of basic insurance
Now that you know what is required, you can decide what you need in
addition. Some people are quite cautious. They base their lives on
worst-case scenarios. Insurance companies love these people. That's
because insurance companies know what your chances are of being in
an accident, and how likely it is for your car to be damaged or
stolen. The information the insurance company has collected over
previous decades is crunched into "actuarial tables" that give
insurance adjustors a quick look at the probability of just about
So how much insurance should you buy beyond your state's minimum?
Experts recommend that if you have a lot of assets you should get
enough liability coverage to protect them. For instance, if you
purchase $50,000 of bodily injury liability coverage but have
$100,000 in assets, attorneys could go after your treasures in the
event of an accident in which you're at fault and the other party's
medical bills exceed $50,000.
General recommendations for liability limits are $50,000 bodily
injury liability for one person injured in an accident, $100,000 for
all people injured in an accident and $25,000 property damage
liability (that is, 50/100/25) given that half of the cars on the
road are worth more than $20,000. Here again, though, let your
financial situation be your guide. If you have no assets, don't buy
Another issue to consider is that the limits of any uninsured and/or
underinsured motorist coverage that you purchase cannot exceed the
limits of your liability coverage. Such coverage, he said, can be
valuable, as it will cover lost income if you're out of work for
several months after being injured in a major accident.
Your driving habits may also be a consideration. If your past is
filled with crumpled fenders, if you have a lead foot or a long
commute on a treacherous winding road, then you should get more
comprehensive coverage. Keep in mind that you don't have to buy
collision and comprehensive coverage. If your vehicle is older, if
you have a good driving record and if there is a low likelihood that
it would be totaled in an accident, but a high likelihood of it
being stolen, you could buy comprehensive but not collision.
Step 3: Review Your Driving Record and Current Insurance Policy
Before you begin shopping for insurance you should check the
following: the status of your driving record, your current coverage
and the premiums you are paying.
You should know how many tickets you have had recently. But time
plays tricks and our memories repress painful incidents. If you
can't remember how long that speeding ticket has been on your
record, check with your state's DMV. If your record will soon
improve, and the points you earned will finally disappear, wait
until that happens before you get quotes. Nothing drives up the
price of insurance like a bad driving record.
Also, you should contact your auto insurance company or pull out a
recent bill. Jot down the amount of coverage you have and what you
are paying for it. Take note of the yearly and monthly cost of your
insurance since many of your quotes will be given both ways. Now you
have a figure in mind to try to beat.
Step 4: Solicit Competitive Quotes
Now that you have made several practical and philosophical
decisions, it's time to start shopping. Begin by setting aside about
an hour for this task. Bring all your records — your current
insurance policy, your driver license number and your vehicle
registration. Drink plenty of coffee. Have a phone at your elbow.
And, of course, power up your computer.
Begin with the online services. If you go to InsWeb.com or other
online insurance quote sites, you can type in your information and
get a list of comparative quotes. These forms take about 15 minutes
to complete. If this bores you, just remind yourself how much you
will be saving and that you can use the money to buy something nice
for yourself. If the entire shopping process takes you two hours to
complete and you save $800, you're effectively earning $400 an hour.
A few things to keep in mind: 1) When you use quote sites, you may
not get instant quotes. Some companies may contact you later by
e-mail, and some that are not "direct providers" may put you in
touch with a local agent, who will then calculate a quote for you.
(A "direct provider," like Geico, sells an insurance policy to you
directly; other companies like State Farm sell insurance through
local agents. We'll discuss the pros and cons of each later.) 2)
It's not easy to get quotes from these sites in all states — if you
live in New Jersey, for instance, you'll probably find it faster to
pick up the phone, since most insurers in this state currently don't
provide online quotes.
You can also try getting quotes from some of the insurance companies
listed on the Edmunds.com Web site — Liberty Mutual, Geico or
Progressive. These forms will take about 10 minutes each to
Step 5: Record and Compare Quotes
While you're researching companies, make notes in a separate
computer file or on a piece of paper divided into categories. This
will keep you from duplicating your efforts. When you visit the
different online insurance sites, you should take note of several
•Annual and monthly rates for the different types of coverage — make
sure to keep the coverage limits the same so that you can make
•An 800 number to call for questions you can't get answered online
•The insurance company's payment policy (When is your payment due?
What happens if you're late in making a payment?)
•Discounts offered by the insurance company that pertain to you
•The insurance company's consumer complaint ratio from your state's
department of insurance Web site (more on this later)
•The insurance company's A.M. Best and Standard & Poor's ratings
(more on this later)
Step 6: Work the Phones
Once you have exhausted your online options, it's time to work the
phones. Those companies you haven't been able to get an online quote
from should be contacted. At times, doing this process verbally can
actually go faster than the online counterpart, providing you have
all the information regarding your driver license and vehicle
registration close at hand. When you get a quote, be sure to confirm
the price. Also, ask them to fax or e-mail the quote to you as a
Step 7: Look for Discounts
While talking to the insurance companies' telephone salespeople,
make sure you explore all options relating to discounts. Insurance
companies give discounts for a good driving record, favorable credit
score, safety equipment (for example, antilock brakes), certain
occupations or professional affiliations and more. For more guidance
in this area, check out "How to Save Money on Auto Insurance."
Step 8: Choosing the Right Insurance Company
You now have most of the information in front of you that you need
to make a decision. However, there is something more to consider.
You can clearly see which company is least expensive, but when you
need them to cover a claim, what kind of job will they do? To put it
another way, which is the most reliable insurance company?
Below, we offer a number of issues to guide your thinking and help
you reach a decision:
1.Visit your state's department of insurance and check consumer
complaint ratios and basic rate comparison surveys.
2.Get in touch with local body shops or dealerships you trust and
ask which insurance companies they recommend.
3.Consider contacting an insurance agent for additional information
about a particular company.
4.Check out the financial strength ratings for an insurance company
by referring to the A.M. Best and Standard & Poor's ratings.
5.Look over J.D. Power and Associates' consumer satisfaction surveys
reviewing auto insurance companies.
Step 9: Review the Policy Before You Sign
So, you've done your research, and you've decided on a company.
Before you sign, though, read the policy. In addition to verifying
that it contains the coverage you want, there are two clauses that
you should look for in the contract:
1.Retain your right to sue. "Find out if you are giving up your
right to go to court and will be forced into arbitration if there is
a disagreement [between you and the insurance company]," one expert
advised. "You're much better off if you don't give up this right….
It makes it easier for [insurers] to take advantage of you." If you
find a clause to this effect, all isn't necessarily lost. "At least
in theory, a contract is a mutual agreement, so you should be able
to cross out that line in the policy," he said. If the company won't
agree to the policy sans clause, then you should probably take your
2.Avoid aftermarket parts requirements. If an insurance company has
written in the policy that "new factory," "like kind and quality" or
"aftermarket parts" may be used for body shop repairs, go to another
company, one expert advised. If you own a relatively new car that
you plan to keep for a while, you will probably be much happier if
you spend a little more time researching companies on the front end
rather than try to fight the company when you have a claim.
Step 10: Cancel Your Old Policy
After you lock in the insurance policy you want with the company you
select, you have two more things to do. The first is to cancel
coverage with your existing insurance company. Second, if your state
requires you to carry proof of insurance, make sure you either have
it in your wallet or the glove compartment of your car (some experts
discourage this, however — if your car is stolen, the thief has
everything he needs to prove the vehicle is his).
Now, there's one last thing to do: reward yourself for saving so
much money on car insurance.
•Determine your state's insurance requirements.
•Consider your own financial situation in relation to the required
insurance and consider buying more to protect your assets.
•Review the status of your driving record — do you have any
outstanding tickets or points on your driver license?
•Check your current coverage to find out how much in premiums you
•Get competing quotes from an Internet insurance Web site such as
InsWeb.com, YouDecide.com and InsureOne.com.
•Make follow-up phone calls to insurance companies to get additional
information about coverage.
•Inquire about discounts you might qualify for such as a multiple
•Evaluate the reliability of the insurance company you're
considering by visiting your state's insurance Web site.
•If you have chosen a new insurance company, remember to cancel your