Car insurance: Know the basics

Buying auto insurance? Do your homework first

Before you buy a new auto insurance policy, it might be beneficial to talk to your agent about the best coverages for your lifestyle and to do a little homework yourself.

Know what car insurance does — and what it doesn’t do

Different states have different requirements, so, it’s tough to make blanket statements about “typical” levels or varieties of coverage. If you finance your car through a lender, for instance, that institution may require full coverage.

However, if you own your vehicle outright, in some states you can get by with just “liability” coverage that, in case of an accident, pays for damage your car does and injuries you’re liable for, but it won’t pay for physical damage to your car or injuries you sustain.

There’s a lot of room between these extremes. You can choose from a menu of “optional” coverages including collision (which pays for expenses due to impact with other cars, trees, guardrails, etc.), personal injury protection (PIP), and comprehensive policies, which cover theft, vandalism, and natural disasters. Some states also require you to carry coverage for accidents caused by other drivers who’re driving without insurance.

Think it through

Think about how much coverage you need. To reduce your monthly premium, you might consider a higher deductible. According to the Insurance Information Institute (III), increasing your deductible from $200 to $500 can cut your cost for collision and comprehensive coverage by up to 30 percent. And, if you own an older car worth less than 10 times the yearly total of your premium, you can cut your outlay by dropping collision and comprehensive coverage. To find out what your older car is worth, check online with Kelley’s Blue Book (

You’ll need to have a few pieces of information at hand when you ask an agent for a quote:

  • The make, model, year, trim level, and Vehicle Identification Number (VIN) for each vehicle on the quote
  • A list of each vehicle’s safety features, including air bags, an anti-lock braking system (ABS), blind-spot sensors, crumple zones, passive restraints, lane-keeping assist (LKA), and daytime running lights, which may entitle you to a discount
  • A list of anti-theft measures, such as car alarms, a stolen vehicle recovery system (e.g., LoJack® or OnStar®), and/or other passive lock-out devices you have installed. As with safety features, these may lower your premium
  • A rough idea of the number of miles you drive each vehicle per year
  • Your credit score. A solid credit history can cut your insurance costs

Three’s the minimum

Once you’ve pulled together your paperwork and settled on the level of coverage you need, it’s time to find out what carriers are offering coverage in your area. If you’re going to ask for a quote, make sure you don’t stop with one. Get at least three and get them in writing.

The Insurance Information Institute (III) recommends your quotes come from different types of insurers, including companies that sell through their own agents, policies sold by independent agents, and policies sold direct to the consumer via app, phone, or Internet. Be sure the company you’re seeking the quote from is licensed in your state and ask your agent for the company’s ratings from independent rating agencies like AM Best, Fitch Ratings or Moody’s. Ask friends, relatives and coworkers about their experience: do they like their carrier? Have they ever had to file a claim? And, if so, how did it go?

Compare apples to apples

With your quotes in hand, compare all coverage levels, including bodily injury liability (BI), property damage liability (PD), medical payments (PIP), uninsured/underinsured motorist coverage (UM/UIM), and coverage of non-collision damage (comprehensive).
Make sure everything lines up. If you take your time and compare carefully, you may turn up some significant differences. For instance, it’s common for windshield damage to be covered, but is it just the windshield, or will the policy you’re considering also cover sunroofs? If not, you may need to buy supplemental glass coverage.

The information included here was obtained from sources believed to be reliable, however Grinnell Mutual Reinsurance Company and its employees make no guarantee of results and assume no liability in connection with any training, materials, suggestions, or information provided. It is the user’s responsibility to confirm compliance with any applicable local, state, or federal regulations. Information obtained from or via Grinnell Mutual Reinsurance Company should not be used as the basis for legal advice or other advice but should be confirmed with alternative sources.

Source: The Insurance Information Institute