We’ve all seen the commercials promising insurance premiums as low as $39 a month—that’s nothing new. Over the last few years, once everyone became glued to their computer, a new ploy has popped up—there’s not a day that goes by where I’m not visiting a site with an ad or ‘breaking news’ announcing that someone in my city just found auto insurance for $30.
The companies aren’t lying to you—they’re simply telling you it’s possible. However, what’s possible isn’t necessarily what’s best for you, and in the case of $39 premiums, that’s probably not the best for your insurance profile or long-term finances.
As people called these companies for insurance quotes, they discovered that some of the companies were absolutely able to offer those prices—but only if the people were willing to take the bare state minimum liability limits without any coverage for their own car and absolutely no extra coverage options.
In a state like Virginia, the bare bodily injury liability limits required are 25K per person, 50K per accident, and 20K in property damage coverage. Once you consider the price of the average auto accident, which is over $61K according to the National Safety Council, that sounds greatly insufficient. As a Virginia resident, if I carried the bare minimum liability (thus achieving a very cheap premium), I would be on the hook for over $11K or more if I caused the average accident.
Which is the problem with the abundance of “$39 monthly premiums.” Upon obtaining quotes, you’re offered coverage that only makes you legal in the state’s eyes as a car owner and doesn’t offer you the insurance you truly need—for you and enough coverage to pay for the average accident of $61K.
Fox Business Journal recently researched how one gets a $39 a month premium. They set out to investigate, and after mulling over 52K insurance quotes, they extracted the factors that would lead to a $39 monthly insurance premium.
As expected, bare minimum liability only policies got insurance quotes with this premium, and was only possible if you:
* Outright own only ONE vehicle
* Don’t have any violations, accidents, claims, SR-22s, or lapses in coverage
* Have a credit score of 650 or higher
No matter how long you’ve been driving with insurance, understanding coverage options and insurance lingo can seem overwhelming–don’t let it, especially since some insurers are luring in customers with such bait and taking the customers who might not know how much they need something for granted.
Car insurance actually isn’t that complicated, and unfortunately, now you need to prove that when getting insurance quotes. YOU have to be your own advocate when getting insurance quotes. When you get auto insurance quotes, they may not cost $39 a month, but at least you’ll now be able to tell the insurer what you need versus the insurer telling you what you need just so they can offer low prices. Take control of insurance quotes from step A to Z and you’ll be informed and ready.
What Insurers Need for Insurance Quotes
To provide the most accurate quotes, insurance companies check your driving and claims history, usually by pulling Comprehensive Loss Underwriting Exchange (CLUE) report. Have your driver’s license number and VIN numbers for your vehicles so they can pull information needed to provide accurate insurance quotes. If you have other drivers to list on the policy, have their driver’s license numbers.
If you don’t have your driver’s license number or VIN, you can usually get a decent generalized insurance quote, although you’ll need to relay any violations, accidents, or claims you’ve had within the last seven years. Some companies only ask about history from the last three to five years when you’re getting insurance quotes, but since the reports insurers use pull seven years of history, you’ll get more accurate insurance quotes by disclosing all. Note that if you fail to provide any accidents or violations, intentionally or not, and buy a policy, it’s highly likely your rate will change once it reaches underwriting.
List all drivers in the household unless you specifically want them excluded and your state allows exclusions. It will do you no good to buy auto insurance and have your insurer refuse to pay a claim because you had a sixteen-year-old driver that you “forgot” to mention.
Liability Coverage, Physical Damage, and Extra Options
What’s Required: Liability Coverage
Liability coverage pays for damages you’ve done with your vehicle, and 47 states require liability coverage if you own a car. Liability has two parts–bodily injury coverage, which will pay up to policy limits for medical expenses to the other person if you cause an accident, and property damage coverage pays for damage done to another person’s personal property.
What’s Important: Physical Damage Coverage
Physical damage coverage, aka ‘full coverage,’ includes comprehensive and collision. Collision coverage pays for damages to your vehicle whenever you collide with another vehicle or object, and comprehensive coverage pays for damages that are out of your control, like storm damage, flood, fire, theft, vandalism, and glass damage.
When deciding whether you need physical damage coverage you need to ask yourself a couple questions:
– Do you have a loan on the car?
– What’s the value of the car?
If you have a loan, the lender will require physical damage coverage 9 times out of 10. When you have a loan or lien on your car, the lender is essentially the owner of the vehicle until you’ve paid it off, so if something happens, they actually have the majority of insurable interest in the vehicle, therefore entitling them to any payout if there’s damage or if it was a total loss. Usually they’ll want to be listed on the policy as a lienholder, so that the insurer knows to send them claim payouts if the vehicle is totaled. This is precisely why you want to inquire about gap insurance when you’re shopping for insurance quotes on new cars.
If you own the car outright, it’s up about wanting damage coverage. In this case, determine the value of the car versus the cost of carrying physical damage coverage. Receive insurance quotes with both liability only and with physical coverage.
• Optional coverage may include:
-Medical coverage for yourself and passengers.
-Rental car coverage which pays for a rental if your vehicle is being repaired or if it’s been totaled.
-Roadside assistance and/or towing and labor.
-Wage loss benefits, gap insurance, and new car replacement.
• Ask each insurer about all available options which vary by state and insurer so you know you’re making informed choices. Most companies have their own optional extras or variations, like ‘Diminishing Deductibles’ and ‘Vanishing Deductibles.’
Shopping for car insurance doesn’t have to be difficult or complicated, and understanding the terminology doesn’t require the Rosetta Stone. Once you know the basics, you’ll realize companies are relatively similar in what they offer—you just have to know what you need and make sure the insurer includes those. The main differences will be optional extras, available discounts, and what coverage choices make the most sense for you. Know the coverages you need, and never let an insurer lure you with cheap insurance quotes into being under-insured. While receiving insurance quotes, you’ll likely see several alluring cheap options—just remember that cheap insurance premiums aren’t worth what they could cost in the long run.
Follow Desiree on Twitter @DesireeBaughman