5 Things to Know Before Buying Auto Insurance

While getting auto insurance is easier than ever due to all the online tools available to help you get quotes, not being well informed can cost you thousands of dollars a year. What are some things to know before buying auto insurance? Some things include pay-per-mile insurance, which is a great option for people who drive rarely and don't put lots of mileage on their cars, and it's also important to know how your credit score affects your insurance rates.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Nov 12, 2020

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Getting auto insurance seems like such an easy task. After all, it is required by state law that you hold an auto insurance policy at all times to reduce the financial risks involved with getting in an accident. While it is true that getting car insurance is painless these days with all the various quote tools available online; not being well informed on the subject can sometimes cost you thousands of dollars a year.

The goal of this article is to point out the essential tidbits of information that you should know before purchasing an insurance policy. Some points are self-explanatory, while others you probably never would have thought of. I’ll start with the more obscure pieces of information first, so I won’t bore you.

Things To Know Before Buying Car Insurance

  1. Pay-Per-Mile – If you rarely drive your car to and from work or school, it may be a good idea to find pay as you go auto coverage. If you regularly take the bus, carpool, or ride your bike, chances are you don’t put a ton of mileage on your car. Many states now offer this type of insurance for these very situations. Car insurance companies will track your mileage by making regular in-person checks of your mileage, or they will give you an easy-to-install device that automatically relays your usage details back to them.  You might even consider getting temporary auto insurance coverage.
  2. Credit Scores – Whether you think your credit is an excellent way to gauge your liability to your insurer or not, they certainly feel that it should affect your premium. If your credit score is far from favorable, you may end up paying more for your auto insurance.  Remember to keep your credit score high if you want your premiums to stay low.
  3. Your Friends May Cost You – Just because you weren’t behind the wheel or even in the car, doesn’t mean that you aren’t responsible for damages. If you lend a friend your car, and they and up getting in an accident, it is your responsibility to file a claim with your insurance company, not theirs.
  4. High-Speed Cars Mean High Premiums – The car you insure greatly effects what you will have to pay as your premium. The speed of your vehicle isn’t the only thing taken into consideration either. Safety ratings, size, and the demographic that drives a particular car can all affect what you pay, in both positive and negative ways.
  5. Get Multiple Quotes – This is the best way to ensure you are getting the best price for the coverage you are receiving. Going directly to an insurance company’s office might give them the idea that you don’t plan to shop around, and will sometimes give you a higher than usual quote. An easy way to avoid this is by getting online quotes. This way, you can get multiple quotes at the same time without shady sales tactics.

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Be Wary Of Auto Insurance That’s Too Cheap

Often, people are lured by auto insurance companies that seem to offer rates that are much cheaper than most other auto insurance companies. If you have been presented with such an offer, it is recommended that you approach it with caution for the reasons mentioned below.

First of all, you must understand that auto insurance companies are investment companies. They take your money and invest it somewhere to make money on it. So, a good insurance company will also have to be a good investment company. That is why it is recommended that you purchase insurance coverage only from companies that have been in the market for a long time. Most insurance companies are also subject to ratings such as Moody’s rating which will help the public ascertain the financial strength of an insurance company. In many cases, you will find that auto insurance companies that offer low rates will often be ones that do not have a lot of history behind them.

There is no guarantee that these companies will be around when you might make a claim after an accident. Even if they are around, they can fail to pay you if they are in the midst of bankruptcy proceedings or other financial problems.

Another reason for you to be careful about auto insurance quotes that are very low is one that is related to the type of coverage. Some insurance companies will trick you with low insurance quotes on insurance policies with very little insurance coverage. Many people do not read the fine print of an insurance policy and might not even know the maximum coverage of their policy. Just imagine the disappointment and shock you will feel when your insurance company states that your maximum coverage is only $3,000 when your expenses are $20,000.

Also, one has to be careful about the fine print of insurance policies that offer very low premiums. Just because an insurance company states that it provides full coverage does not necessarily mean that it will cover all expenses that are related to an accident. You might find that the fine print will often excuse the insurance company from paying significant costs such as medical expenses, collision charges while they pay for only third-party damages.

As a general rule of thumb, you should buy insurance only from well-established insurance companies even if it means that you will be spending a bit more than usual.

What now?

If you want to pick up where we left off with point #5 and start getting quotes from multiple insurance providers, scroll up to the top of this page and enter your zip code to begin comparing quotes from the best automobile insurance companies in the world.

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