Car Insurance 101

For most Americans, owning a car means buying car insurance. But not all car insurance policies are the same and many factors can affect your premiums. You don’t have to be an insurance expert to get a good deal. Here are some tips to help you make informed decisions before and after you choose your car insurance.

Know Your Options

If there’s one thing you can be sure of when it comes to auto insurance, you have options. A lot of them. It pays to do your research before you choose an agent and continue to keep an eye out for better deals even after you have purchased a policy. According to DailyFinance.com, the best time to start looking for new insurance coverage is a month or so before your policy is set to renew. This is because some agencies charge penalties for canceling before the policy term has ended. When doing your research, learn which companies offer special discounts for things like carpooling, attending driving classes and, as the New York Times reports, volunteering to use a car monitor that collects data on your driving behavior.

It’s also important to understand that the make and model of car you drive can affect your bottom line. As Kiplinger points out, there are several factors that can contribute to determining your insurance premium, including your car’s horsepower, your driving record, and even your level of education and your job. If you find that your costs are increasing, you can find discounts when you insure multiple cars or group your home and auto insurance with the same company.

Get Your Credit in Shape

Another important consideration in determining your insurance premium is your credit score, which agencies use to assess risk. According to DailyFinance.com, FICO has concluded that there’s a relationship between poor credit scores and the likelihood a driver will file an insurance claim. A FICO insurance underwriting expert states that 70 percent of your credit score can be attributed to two elements: your debt-to-credit ratio and your history of paying bills on time. With this in mind, being diligent about keeping debts down and paying in a timely manner could significantly reduce your auto insurance premium.

Make Sure You Have the Right Amount of Coverage

The last thing you want to hear when you need repairs is that you’re not covered. But you don’t want to overpay on your premiums, either. So, just how much coverage is enough? The answer will depend on your own circumstances, but be sure to consider multiple scenarios, including whether you’d be covered for someone else’s mistake.  The New York Times points out that 20 percent of drivers buy only enough insurance to cover minimum liability. When you consider that in many states, the maximum payout is just $25,000, this is quite a risk. And you may be surprised to know how many drivers don’t have insurance at all. Skimping on the insurance and finding yourself in a large wreck could mean extreme financial distress. The savings may not be worth that risk, especially when you note paying just $200 more per year could bring your liability limit up from $50,000 to $1 million per accident.

File Claims the Smart Way          

In the unfortunate event that you have to make an insurance claim, it’s important to know how to handle it ahead of time. Edmunds.com provides some great insight into what the insurance claim process is like, with tips on how to help support your claim. For instance, if you are involved in an accident, it’s imperative that you document as much as you can, taking notes, pictures and names of those involved, including police officers at the scene. Contact your insurance agent as soon as you can and relay every detail. Once the claim is filed, they’ll likely be in touch with you again to go over specifics, so it’s wise to have as many details documented as possible. When it comes to car insurance claims, more is more, so take notes and lots of them.

Do you have tips on how to make sure your car insurance is right for you? Share with us in the comments below.

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