Are you confused about car insurance? How Much Car Insurance Do You Need? Did you select the same kind of coverage that your parents did? Because I don’t know, it’s confusing as heck.
In this article, I’m going to walk you through the exact steps to figure out how much car insurance you need, and spoiler alert; you have the potential to save big money.
Today I’m walking through car insurance. This can be super confusing for a lot of us, and I have to tell you. I had four separate conversations.
So let’s talk about how much car insurance you need.
Step one: You Need to Understand The Three Types of Car Insurance Coverages Available, Including Liability, Comprehensive, and Collision.
Okay, so liability coverage liability insurance covers any bodily injury or property damage when you have an accident that is your fault. In other words, if you were to hit somebody, your insurance would cover the cost of the repairs to that car, or if you caused any harm to the person like physical injury liability insurance, this is the primary type of insurance that everybody needs. It’s illegal not to have this type of insurance. So make sure you have it.
So bodily injury liability thinks of this as medical cost property damage liability. Think of this as the cost of the repairs to the car comprehensive insurance covers any repairs to your car that did not result from a collision. Let’s say your car got broken into a tree branch fell on top of it your car caught on fire unexpectedly from a natural disaster hailstorm came around any of those things would be covered by comprehensive insurance.
And the last type of insurance, number three, is collision insurance. Collision insurance covers the cost of repair for your vehicle if you are involved in an accident, and it doesn’t matter whose fault it is, whether it is the person who hit you or you hit somebody else. Collision coverage will cover the cost of repairs to your car your liability. Insurance does not cover the cost of repairs towards your vehicle unless the other person is at fault, and then their liability insurance would cover the cost of your repairs.
And let’s say that the other person didn’t have enough liability insurance to cover your repairs cost. This is where collision coverage would help you out.
One important thing to note here is if you have a car loan, you may be required to have full coverage. Which means all three types of insurance on your car. So while you may not have the opportunity to pick and choose the different types that you want. You do have the option to shop around other insurance companies to get the best rate.
Step two: You Need to Determine How Much Car Insurance You Need.
I will say this is an excellent idea to maximize your liability coverage. Now generally, most insurance companies will max out in three different areas.
This would include per maximizes, total injuries per accident, and property damage, so you go into your insurance coverage. You can log on to your account. You should see three different numbers the max generally for personal injury is $250,000, the total injuries per accident are $500,000, and the property damage max is $100,000.
Now I wanted to show you exactly what type of insurance I’m carrying with my 2015 Subaru Forester. So you can get an idea, but I have maxed out bodily injury and property damage liability – those exact numbers – 5500 and 100.
So it’s a good idea for you to max this out. Suppose your numbers don’t match mine and give you an idea of how this would impact your premium. I went ahead and went inside my insurance coverage, and I did some changes hypothetically to see how it would affect my rate.
So from the drop-down menu and I’m on progressive. Right now, I could select from the 250, 500, 100, and let’s say that I just dropped it down to half that 100 per person, 300 per accident, and 50 per accident and see what that does for my car insurance premium.
So you can see it reduces my premium from 215 dollars, which is paid out every six months, to a hundred and ninety-seven dollars for a six-month premium.
So my premium overall would drop $14 and 78 cents if I switched within my policy period. But if you look at the effect of the entire six-month period. Because I pay car insurance every six months, we’ll talk about how that saves you money as well. That’s the difference bn 2:15 and 197, and it only changes my six-month premium by $20.00.
Let’s this straight, cutting my liability in half, only saving me $20 for six months. So it only saves me three dollars and 33 cents per month. I don’t know about you but paying just three dollars extra to double my liability. I think that’s a pretty good deal. So maximizing your liability insurance is vital.
Next, you’re going to take a look at your comprehensive coverage. It’s pretty inexpensive to add. So I would suggest including this as well. Here’s a critical note about comprehensive and collision coverage raise your deductible.
If you have one thousand dollars in euro ship fund, that’s set aside for emergencies. if you have at least one thousand dollars in savings, raise your deductible on your comprehensive and collision coverage and just for kicks.
I will show you what happens when I reduced my deductible from $1,000 to one hundred dollars. Okay, remember comprehensive insurance covers any repairs to your car that did not result in a collision.
So these are things like natural disasters, theft, that sort of thing. So when I went into progressive and changed my comprehensive deductible from $1,000 to $100, that was a difference between paying twenty-three dollars two paying seventy-six dollars.
It is a big difference because it costs me fifty-three dollars more. The change raises my premium from three hundred and eighty dollars every six months to four hundred and thirty-three dollars.
So that’s a difference of about eight dollars and eighty-three cents additional per month or one hundred and six dollars per year. A great way to save even just a hundred dollars per year, in my case, is just raising my deductible.
Now let’s see how changing the collision deductible from $1,000 to $100 changes things. Okay, so this is insane, but I changed it from a $1,000 deductible for collision coverage, one hundred and five dollars for a six-month premium rate.
Dropping it to one hundred dollars increased my premium to two hundred and ninety dollars. That’s insane. This, by far, is the most significant swing impacting my compensation by lowering my car deductible from $1,000 to one hundred dollars.
I effectively increased my premium the money you pay towards the car insurance company to keep your car protected. I went from three hundred and eighty dollars for six months to five hundred and sixty-five dollars.
That’s a difference of three hundred seventy dollars per year. If you do anything, if you take away anything from this article, I highly suggest that you increase your deductible on your collision insurance to one thousand dollars.
You’re probably wondering why such a big difference in lowering in a lower collision deductible than a higher one. Well, what you are telling the insurance company is that you are willing to take on less risk.
If somebody hits you to pay for that out of pocket repair costs, then the insurance company and the insurance man be like, “oh, you don’t want to pay more for the collision coverage, then we’re gonna charge you more because you are a more risky customer to us and we’re afraid that somebody’s gonna hit you and you’re not willing to pay more upfront out-of-pocket costs” that’s why it’s so important to have at least $1,000 in your emergency fund.
This is the oh-shit fund that I keep talking about because if you have at least that much money, you have the opportunity to save yourself some megabucks on your insurance premium.
Step three: Get Multiple Quotes From Multiple Car Insurance Companies.
So you’re going to have to do a bit of legwork to shop around. But now you know what to look for right liability you are going to max out.
In my case, it was 250, 500, 100; you’re also going to opt for comprehensive, and collision coverage with a $1,000 deductible in each got it, then you’re going to request and put that out there to different insurance companies.
I recently used a tool called Gabi that’s www.gabi.com and what I did was I downloaded my coverage policy from progressive. I uploaded it into Gabi’s system, and I said to keep my coverage the same for you. You might opt to change your content to what I listed out, and then they’re going to email you and say “Hey, these are all the car insurance company quotes that we selected for you that could be a good fit,” and then you can opt to choose to switch through Gabi.
Gabi told me that I was getting a good deal. so I didn’t make any changes, and then they’re just going to keep that on record. so that if there was a new quote from another insurance company.
They would notify me, and then I can make a switch. You do not have to be brand loyal to these auto insurance companies. They don’t care. They want your money and what I like about this is I’m okay switching.
So that I can get the best deal and the best coverage. Okay, once you get the multiple car insurance quotes and you’re able to make some adjustments.
Step four: Optimize your car insurance to get the best rate.
now one thing that I liked about progressive, and I know a lot of other car insurance companies do this, is you can bundle other insurance policies with car insurance.
So with progressive, I bundled my renter’s insurance and auto insurance into one, and we get a slight bundled discount. My other trick to saving money on car insurance is paying the six-month premium rate instead of the monthly rate.
When you pay the monthly rate, you’re paying slightly more than if you were to spend the six-month rate. In my case, my monthly rate was 72 dollars, and my six-month rate was three hundred and eighty dollars.
Well, when you divide the three hundred and eighty dollars out by six months. It only ends up being sixty-three dollars. So that’s a difference of nine dollars that I’m saving or a hundred and eight dollars per year, and I don’t know about you. But I’d instead save that one hundred and eight dollar for something nice, a speedy trick to do. This is simply add-in that six-month premium to your budget and budget out for it monthly.
So it still feels like I am paying my car insurance monthly. But instead of giving it to the insurance company, I’m just setting it aside in my account, and then when that six months is due,e I will go back n pull that money out of my account and pay for it.
Because I’ve already saved up for it monthly. I want to mention a side note here your driving history impacts your car insurance premium. so if you’ve been involved in accidents in the past and recently that could affect your premium Rate.
So take that as a caveat. Fortunately, knock on wood, my husband and I have not been involved in an accident. I think since we were married, we’re safe drivers.
If you have an older vehicle, your car insurance premium might be a bit higher. That’s because insurance companies seem to think that older cars are less safe. I don’t know about you, but I drove a 2002 Ford Escort zx2 for 1112 years, and it was safe. Kyle had driven a 2003 Jeep Grand Cherokee and what was interesting about that is when we moved to California.
The insurance premium was 492 dollars for our six-month premium. When we bought our 2015 Subaru Forester in cash, our insurance premium dropped from 492 to 380 because it was a newer vehicle.
All right, so to recap all this, I know I unpacked a lot of stuff for you. but to know exactly what car insurance you need is to remember the three types of car insurance types liability collision comprehensive your liability you are going to max out 250 500 100 your comprehensive and collision raise your deductible to $1,000 each you’re going to get multiple quotes from multiple companies and make the switch you’re going to optimize.
Pay the six-month premium instead of the monthly premium and see how you can bundle other existing insurance policies.