Clark Howard's Guide To Auto Insurance Coverage

Money expert Clark Howard has a lot of advice when it comes to auto insurance coverage. He recommends re-shopping for coverage every three years, as rates can vary significantly from company to company. He also advises against settling for state minimum coverage, as this could leave you underinsured in the event of an accident. Instead, he suggests taking an inventory of your assets and choosing a coverage limit that will protect them. Additionally, Clark Howard recommends a deductible of at least $1000 to get the best savings on your car insurance policy.

How to determine how much car insurance you need

The amount of car insurance you need depends on several factors, including where you live and your personal circumstances. While there isn't a one-size-fits-all answer, you can take several steps to figure out the right amount of coverage for your needs. Here are some guidelines to help you determine how much car insurance you need.

Understand the Legal Requirements

According to the Insurance Information Institute (III), you must demonstrate financial responsibility for any damages or liability in the event of a car accident. This means that if you cause an accident, you are responsible for covering the costs of any resulting damages. Most states have financial responsibility laws that require drivers to maintain a specific minimum amount of car insurance to comply. These laws vary from state to state, so be sure to check the minimum requirements for your state. Keep in mind that state minimum coverage may not be sufficient for your needs and could leave you underinsured.

Consider Your Assets

The more assets you have, the more car insurance you may need to protect yourself financially. If you have substantial assets, such as investments, savings, or property, consider purchasing additional coverage beyond the state minimum. This will help ensure that your assets are protected in the event of an accident. As money expert Clark Howard warns, a severe accident could result in a multi-million-dollar claim, so it's essential to have adequate coverage.

Evaluate Your Risk Factors

When determining how much car insurance you need, consider your risk factors. For example, if you have a history of accidents or live in an area with high traffic congestion, you may want to opt for more comprehensive coverage. Additionally, if you don't drive frequently or have a safe driving record, you may be eligible for lower coverage or discounts on your premium.

Shop Around for the Best Rates

It's essential to compare rates and coverage options from multiple insurance providers. Money expert Clark Howard recommends re-shopping your car insurance every three years to ensure you're getting the best rates. When shopping around, be sure to provide accurate information about yourself, your driving history, and your vehicle to get the most precise quotes.

Choose the Right Coverage Types

There are several types of car insurance coverage to choose from. Here's a breakdown of the most common ones:

• Liability Coverage: This is typically required by state laws and covers damages, losses, and injuries to others and their vehicles in an accident you caused.
• Comprehensive Coverage: This pays for damages to your vehicle caused by events other than a collision, such as weather damage or hitting an animal.
• Collision Coverage: This covers damages to your vehicle after an accident, regardless of who is at fault.
• Personal Injury Protection (PIP): This covers your medical expenses and certain financial losses after an accident, regardless of fault.
• Uninsured/Underinsured Motorist Coverage: This protects you if you're in an accident caused by a driver without sufficient insurance.
• Medical Payments Coverage: This pays for medical expenses for you and your passengers, regardless of who is at fault in the accident.

In conclusion, determining the right amount of car insurance depends on your individual circumstances, including your location, assets, and risk factors. By understanding the legal requirements, assessing your needs, and shopping around for the best rates and coverage options, you can make an informed decision about how much car insurance is right for you.

The average cost of car insurance

State Requirements and Minimum Coverage

The cost of car insurance differs from state to state, with some states having higher minimum insurance requirements than others. For example, Michigan has the highest minimum insurance requirements in the nation, including $50,000 in bodily injury liability per person and $100,000 in bodily injury liability per accident. On the other hand, some states like Virginia offer the option to pay an uninsured motor vehicle fee instead of maintaining car insurance.

Full Coverage Car Insurance

The average cost of full coverage car insurance across the U.S. going into 2024 is $1,984 per year, or about $165 per month, according to ValuePenguin. However, this can vary significantly depending on the state you live in.

Personal Factors Affecting Cost

When determining how much car insurance you need and how much it will cost, it's important to consider your personal assets, such as investments, savings, or property. If you have significant assets, you will need higher coverage limits to protect yourself in the event of an accident. Additionally, factors such as your age, driving history, credit score, and vehicle type can also impact your insurance rates.

Ways to Save on Car Insurance

• Shop around for insurance and compare rates from different companies.
• Increase your deductible—a higher deductible can result in lower premiums.
• Improve your credit score—a higher credit score can lead to lower insurance rates.
• Drive safely and less frequently—safe and minimal driving can lead to discounts and lower premiums.
• Consider a pay-per-mile policy, especially if you drive less than 10,000 miles annually.
• Drop comprehensive and collision coverage if your vehicle is older and not worth the cost of protection.

While the average cost of car insurance has been increasing, there are ways to mitigate these rising costs. By shopping around, adjusting your coverage, and taking advantage of various cost-saving strategies, you can find ways to reduce your car insurance expenses.

How to save money on car insurance

As the cost of car insurance continues to rise, you might be looking for ways to save on coverage. Here are some tips on how to save money on car insurance:

Shop around for insurance

Money expert Clark Howard recommends re-shopping your car insurance at least every three years to get the best rates. Compare rates for the same types and amounts of coverage from different companies. Choose at least three different car insurance companies and get a quote from each of them for identical coverages.

Ask about discounts

Insurance companies offer a variety of discounts. Some common ones include discounts for paying your policy in full, setting up automatic payments, and going paperless. Other discounts include savings for being accident-free, having anti-theft devices installed in your vehicle, bundling multiple policies, and having low mileage.

Improve your credit score

Most states allow insurance companies to consider your credit score when determining your rates. A lower credit score is associated with higher risk, so improving your credit score is one way to tell insurance companies that you're less risky. Paying your bills on time is one way to improve your credit score.

Increase your deductible

Opting for a higher deductible of at least $1000 can help you get better savings on your car insurance policy. A higher deductible will also prevent you from filing smaller or unnecessary claims.

Drive safely and less

Distracted driving can lead to speeding tickets or collisions, which will increase your premiums. Driving safely and reducing your driving time will help you avoid events that cause damages, injuries, or loss. This can lead to savings on your insurance!

Drop uneconomical coverages

If you drive an older vehicle, a full-coverage policy might not be worth it. When the cost of comprehensive and collision coverage exceeds 10% of your car's value, drop the extra coverage and carry only liability coverage.

Consider a pay-per-mile policy

If you don't spend much time on the road, consider a pay-per-mile insurance policy. Your premium is determined by how many miles you drive, so the less you drive, the less you pay.

Avoid unnecessary claims

Filing an insurance claim will most likely cause your insurance rates to go up. Before filing a claim, remember that auto insurance is meant for catastrophic circumstances only.

Maintain continuous coverage

Having continuous coverage demonstrates responsibility and makes you seem less risky to insurance companies. Maintaining coverage can help keep your rates low.

Consider dropping comprehensive and collision coverage

If you've paid off your car and depending on its value, dropping comprehensive and collision coverage might be worth considering. When the cost of this coverage is more than 10% of your car's value, that's the time to drop it.

Raise your deductible

Raising your deductible will lower your premium and prevent you from filing unnecessary claims. However, be careful not to make your deductible more than you can afford in the event of an accident.

Consider buying a car that's cheaper to insure

Insurance companies look at the claims they've paid on cars that are the same or similar models as yours when calculating your premium. Choosing a car with lower repair costs can help you save on insurance.

Improve your credit score

Working on your credit score is another way to lower your car insurance rates. Insurance companies use your credit score as a factor to determine your riskiness, and a lower score is associated with a higher level of risk.

Drive with an insurance tracker

Some insurance companies offer a discount if you use a tracker to monitor how you drive. This can include monitoring your cellphone use while driving, hard braking, and driving patterns. This data is used to assess your riskiness and can lead to significant discounts on your insurance.

Choose a state with lower insurance rates

The state you live in plays a major role in how much you pay for car insurance. Moving might not be an option, but it's worth considering if you're looking for ways to save.

Remember, there is no one-size-fits-all answer to how much car insurance you need. Assess your personal situation and consider the minimum requirements in your state to determine the right amount of coverage for you.

How to shop for lower car insurance

As the cost of car insurance continues to rise, you might be looking for ways to save on coverage. Here are some tips on how to shop for lower car insurance rates:

Re-shop your car insurance regularly

Money expert Clark Howard recommends re-shopping your car insurance every three years. This is because insurance companies have different rates, and you might be able to find a better deal elsewhere. When re-shopping, be sure to compare rates for the same types and amounts of coverage from different companies.

Gather your documents

Before reaching out to insurance companies, gather key documents so that you can provide potential insurers with the right information to get the most accurate quotes. This includes personal information such as your name, date of birth, address, driver's license number, etc., as well as vehicle information like the make, model, vehicle identification number, etc. Knowing your current insurance information is also important, such as types of coverage and coverage limits.

Review your coverage

Review the different types of coverage and coverage limits included in your existing insurance policy to determine if any changes are needed. There are six common types of car insurance: liability, comprehensive, collision, personal injury protection, uninsured/underinsured motorist, and medical payments. While every state requires liability coverage, you should consider your state's minimum requirements and the value of your assets when deciding on coverage limits.

Choose a new insurer

Get quotes from at least three different companies, comparing rates for the same types and amounts of coverage. You can call insurance companies directly, use comparison sites, or work with an independent insurance agent to get quotes. Remember to look at customer satisfaction reviews and ratings when considering a new insurer.

Switch your policy

Once you've chosen a new insurer, select an effective date for the new policy, ensuring there is no lapse in coverage. Contact your existing insurer to cancel your old policy, being mindful of any cancellation fees or refunds for prepaid premiums.

By following these steps, you can be sure you're getting the best rates on auto insurance and saving money on your premiums.

The different types of car insurance

According to Clark Howard, there are six common types of car insurance:

Liability Insurance

Liability insurance covers damages, losses, and injuries to others and their vehicles resulting from an accident that you caused. This is the only type of car insurance that every state requires drivers to have.

Comprehensive Insurance

Comprehensive insurance covers damages to your vehicle caused by events other than a collision, such as hitting an animal or weather-related damage.

Collision Insurance

Collision insurance covers damages to your vehicle after an accident, regardless of who is at fault.

Personal Injury Protection (PIP)

PIP insurance covers your medical expenses and certain financial losses after an accident, regardless of who is at fault. This includes medical bills and lost wages.

Uninsured/Underinsured Motorist Insurance

This type of insurance covers damages, losses, and injuries to you and your vehicle resulting from an accident caused by an uninsured or underinsured driver.

Medical Payments Insurance

Medical payments insurance covers medical expenses for you and your passengers after an accident, regardless of who is at fault.

In addition to these six types of car insurance, there are also optional coverages that you can add to your policy, such as rental car reimbursement, roadside assistance, and more.

When shopping for car insurance, it's important to compare quotes from multiple companies and ask about discounts. Clark Howard recommends re-shopping your car insurance every three years to ensure you're getting the best rates.

Frequently asked questions