Choosing Auto Insurance: A Nerd Wallet Guide To Getting The Right Coverage

Choosing the right auto insurance can be tricky. NerdWallet can help you compare car insurance rates from some of the largest insurance companies in the country. It breaks down average coverage rates by state, insurance company, age, and driving history. It also includes helpful resources like a car insurance calculator, guides on the best way to get quotes, and more.

NerdWallet's auto insurance ratings reward companies for customer-first features and practices. The ratings are based on weighted averages of scores in several categories, including financial strength, consumer complaints, and discounts. Their ease of use category looks at factors such as website transparency and how easy it is to file a claim.

NerdWallet's top picks for the best car insurance companies in 2024 are:

- Travelers

- Auto-Owners

- USAA

- American Family

- State Farm

- Shelter

- NJM

- Amica

- Geico

How much car insurance do I need?

The amount of car insurance you need depends on your state's requirements and your specific situation. Liability insurance is the main mandated coverage and is required in almost every state. It covers damage and injuries you cause to others in an accident. The most common minimum limits for liability are $25,000 per person and $50,000 per accident for bodily injury and $25,000 for physical damage. However, your state's requirements may differ.

It is recommended to have enough car insurance to comply with state laws and cover any injuries, property damage, and lawsuits that may arise from an accident. If you don't have enough savings to cover these costs, you need enough insurance to protect yourself financially.

• Uninsured/underinsured motorist coverage: This covers your medical bills if you are hit by a driver without insurance or with insufficient insurance.
• Personal injury protection (PIP): This covers medical bills, lost wages, and other expenses for you and your passengers, regardless of who caused the accident.
• Comprehensive coverage: This covers damage to your car from situations outside your control, such as vandalism, theft, or a collision with an animal.
• Collision coverage: This covers damage to your car in an accident, regardless of who is at fault.
• Medical expenses coverage: Also known as MedPay, this covers medical bills and other expenses for you and your passengers, regardless of who caused the accident.

When deciding on the amount of car insurance you need, consider your net worth and how much you can afford to pay out of pocket. You want to have enough coverage to protect your assets and finances in the event of an accident.

What does car insurance cover?

Car insurance offers financial protection in the event of an accident, theft, or other auto incidents beyond your control. It typically covers injuries and property damage you cause, but there are also additional coverage options available.

Required Car Insurance Coverage

Each state has minimum car insurance requirements, which usually include liability insurance. Liability insurance covers expenses like personal injury to others and damage to a vehicle when you are at fault. It covers medical expenses for the other driver, as well as property damage, but not your own vehicle.

Accidents Not Involving Another Driver

Collision insurance covers incidents such as hitting a fence or utility pole, as well as rolling your vehicle or damage to your vehicle caused by hitting another car.

Natural Disasters

Comprehensive insurance covers damage caused by natural disasters, such as flooding or a wildfire, as well as damage caused by animals, vandalism, theft, and falling objects.

Extended Medical Coverage

Medical payments coverage, or MedPay, covers your own medical expenses after an accident, regardless of who is at fault. Personal injury protection, or PIP, is similar but also covers lost wages or funeral expenses.

Insufficient Car Insurance Coverage from the Other Driver

Uninsured motorist coverage and underinsured motorist coverage pay for damage caused by drivers without enough (or any) car insurance to cover your medical or repair bills.

Money Owed on Your Vehicle

Gap insurance pays the difference between what your car is worth and the amount you owe on it. This may be required if you are leasing a vehicle.

Additional Car Insurance Coverage Options

Other optional coverage types include:

• Rental car reimbursement
• Roadside assistance
• Rideshare coverage
• Coverage for custom parts
• Classic car insurance
• And more

How to get the cheapest car insurance rates possible

If you're looking for the cheapest car insurance, you can try the following:

• Shop around for the best rate: Don't settle for the first quote you get. Compare car insurance quotes from multiple insurers to find the most affordable rate.
• Ask for discounts: You might be eligible for discounts that you're not taking advantage of. For example, if you work from home and don't drive much, you could ask for a low-mileage discount.
• Take advantage of life changes: Life events such as getting married or moving to an area with lower accident and crime rates can result in cheaper car insurance, so shop for quotes whenever something significant changes in your life.
• Raise your deductible: Opting for a higher deductible can lower your premium. Just ensure you have enough money set aside to cover the higher deductible if you ever need to make a claim.
• Revisit quotes after improving your driving record: Shop for new quotes once any accidents, tickets, or moving violations are no longer on your record.
• Choose your car wisely: The type of car you drive affects your insurance rate. Newer and more expensive cars tend to be more costly to insure than older or less expensive models.

How to find the best car insurance for you

Finding the best car insurance for you involves more than just getting the cheapest deal. Here are some tips to help you find the right car insurance for your needs:

• Shop around: Price is a key consideration, especially with car insurance rates on the rise. Since every insurance company weighs factors like your age, location, vehicle and driving history differently, be sure to get multiple car insurance quotes to find the cheapest option for you.
• Check for complaints: Most people don't deal with their insurance company until they need to file a claim. Before you sign on the dotted line, read up on how to find complaints about insurance companies in your area and other information.
• Check your coverage: Ask your agent or a customer service representative to make sure you're getting the coverage you need so that you're not under or over-insured.
• Consider smaller insurance companies: Smaller car insurance companies often offer prices well below those of large competitors, and they can also provide a better customer experience.
• Shop strategically: If you've gotten a speeding ticket, DUI or other violation recently, shop for insurance three to five years after the incident, when surcharges can drop significantly.

You can also use a tool like NerdWallet's car insurance calculator to help you estimate your car insurance costs. The amount you end up spending will depend on your car, your age, how much coverage you want, your driving record, and your location.

Why is car insurance so expensive?

There are several reasons why car insurance is so expensive. Here are some of the key factors:

High-Risk Drivers

High-risk drivers are often charged higher insurance rates due to their increased likelihood of getting into accidents. This includes individuals with a history of at-fault accidents, moving violations, or convictions like driving under the influence (DUI). Insurers view these drivers as more likely to incur damage and lawsuits, leading to higher premiums.

Young Drivers

Age is a significant factor in insurance rates, with younger and less experienced drivers often facing higher costs. Teenagers tend to pay the most for coverage, while rates generally decrease as individuals enter their twenties. However, rates may increase again for older drivers, especially those aged 65 and above.

Location

The area you live in also plays a crucial role in insurance costs. Densely populated regions often have higher rates of accidents, traffic violations, and vehicle theft, driving up insurance rates. Additionally, inclement weather or natural disasters that damage a large number of vehicles in a specific area can lead to increased claims and, consequently, higher premiums.

Vehicle Type

The type of vehicle you own can significantly impact your insurance rates. Cars with advanced technology, luxury vehicles, sports cars, and full-size pickup trucks tend to be more expensive to insure. This is due to higher repair costs, the likelihood of theft, and the potential for causing extensive damage to other vehicles in accidents.

Poor Credit Score

In most states, insurance companies take into account an individual's credit score when determining insurance rates. Poor credit history is associated with a higher likelihood of filing claims, leading to higher premiums for those with lower credit scores. Improving your credit score over time can help you find better rates.

Insurance Company

Different insurance companies offer varying rates, and switching providers can potentially result in significant savings. It's important to compare quotes from multiple insurers and consider factors beyond just the price, such as customer service, financial strength, and complaint information.

Frequently asked questions