In most states you need car insurance to have your vehicle legally registered. This is because if you cause an accident you are responsible not only for the damage to your car, but also damage to the other person’s car, medical costs due to injuries from the accident and any property damaged in the accident (think fences.) If you have insurance, they become responsible for these costs (up to a certain amount, which you will select when you purchase coverage.) The other driver’s insurance company is not liable for anything. If you don’t have insurance they can come after you personally, and if you don’t have the money the other person is SOL. That’s why the state makes you buy a certain amount of coverage. They use your history as well as statistics to determine how much of a risk you are, which is why car insurance costs more for people under 25, especially men, and in certain zip codes. They may also take into account how much you drive, and the safety equipment in your vehicle. It’s illegal in most states to charge people more for car insurance for being bad drivers, but it’s fine to give discounts to good drivers, which is why they will often lower your rate if you haven’t had an accident or violation in a certain number of years.The first thing you want to do is shop around with several different companies. This is a bit of a pain, but it makes a HUGE difference. When I was shopping for insurance, Progressive (which was cheapest when I bought my last car) quoted me over $1300 for 6 months, and I ended up paying $800.45 for the exact same coverage from Geico. Conveniently, you can shop for car insurance without leaving your house or talking to anyone. You'll need the following:
- Basic information about your own self and your driving history.
- Your social security number and/or drivers license number.
- The make, model and year or the VIN of your car or the car you're considering. Different cars cost different amounts to insure, so if you're looking at a few go ahead and do quotes for all of them.
- Information about the features-some companies change the rates slightly based on safety and anti theft features. If you don't own the car yet, and you don't have this info you can leave it alone (most insurance website auto populate with standard features) and you'll get a good idea, you can refine this once you know the info.
Head to as many sites as you can think of/google and punch it all in!
At this point, you'll probably get a quote for the amount of coverage they recommend, along with a cheaper bare bones version, and a more expensive Ultra Insurance. Many companies offer the option to pick your own coverage levels and will give you a quote for that. That's what I did, and I ended up with something in between the most basic and the recommended package. I like this, because you can see what each thing is contributing to your premium, and adjust it to balance what you're comfortable with against what you can afford. I've included what each costs me, for my total premium of $800.45, which you'll recall is for 6 months of coverage.
But why are there so many different kinds of coverage? What do they mean? Do I need them? You know what's coming next!
Most of these are displayed like this: 20k/40k, which means they will pay up to $20,000 per person or $40,000 per accident.
Compulsory BI (Bodily Injury) covers your share of the cost if someone not in your car is injured, as well as your legal defense if needed, up to your limit. 20k/40k is the minimum in Massachusetts. I pay $124.95 for this
Optional BI lets you pay a bit more to raise your limit to whatever you choose. I don't have this. If you hurt someone and they need more than 20k they and/or their insurance company is legally entitled to try and get the money from you. I don't have this coverage because I don't have much for anybody to get, and it's unlikely that anyone would want to spend the money/hire the lawyers needed to get my presumably damaged Mitsubishi and the couple thousand dollars that I own. As dads around the land will tell you, you get get blood out of a stone. (For the record, I am a beautiful gem in the scenario, not a regular rock) Generally, this is why I have low limits, someone who actually has assets to protect should have more.
Property Damage is pretty straightforward, if you cause an accident that damages someones property, your insurance will pay up to your limit to fix or replace what was damaged. Massachusetts requires you have at east $5,000 per accident. I have $25,000 because tbh I think it was the lowest amount I was able to choose. Because this is the one of the most likely to be what your insurance company pays out for, it's pretty pricey ($232.30, almost 30% of my total premium) so I'm just crossing my fingers that I don't crash my car into a shelf of Fabergé eggs.
Personal Injury Protection is like bodily injury, but for you and your passengers. It's for reasonable expenses like loss of wages and out of pocket healthcare costs. In MA the minimum is $8,000 per person, but you can basically waive it by having an $8,000 deductible. You can save a bit by choosing a more normal deductible (like it will kick in after you've paid $500 for example.) I figured it was worth it for the peace of mind, so for the pleasure of having no deductible on this I pay $83.60.
Uninsured Motorist pays if you are injured by a driver without insurance. MA requires 20k/40k, and that's what I have (for just $10.95!) I wouldn't pay any extra for a higher limit because I have health insurance.
Under insured Motorist pays if you are injured by a driver who doesn't have enough bodily injury to cover what you need. This is not required, but I was offered 20k/40k for FREE so I took it.
You can see that most of your car insurance is on the people and things in and around your car, but there are a few items that cover the car itself.
Collision pays for your car if it crashes or flips over. You can often buy limited collision, which will cover a collision if the other driver is at least 50% at fault. This is another expensive one (I pay $268.85 for it) I have regular, not limited, because I am not the worlds most amazing driver. You can also save a lot by raising your deductible. They tend to suggest $500, mine is $1,000. I also have a waiver, which means if I'm not at least 50% at fault in the accident I won't have to pay my deductible. When my old car got totaled I was so glad my deductible was waived, the idea of someone else running a stop sign and hitting me, and it costing me money is already making me mad. Because I have more than that in my emergency fund, I'm comfortable that IF I cause an accident, it's going to cost $1,000.
You might skip collision entirely if your car isn't worth much to start with. One rule of thumb I've seen is if collision coverage is 25% of the value of your vehicle every six months you can drop it. I've also heard if you car is over 10 years old. If you're really savvy, you would put the money you don't spend on collision coverage towards your next car, because if it's that old or worth that little there's a good chance it'll need replacing soon regardless even without an accident.
Comprehensive covers damage to your car from a variety of other stuff, generally things that would happen to your car while it's parked, like theft, vandalism, fire, a falling tree, hail, flood etc. I pay $73.15 for this. I have a $500 deductible. My comprehensive also includes glass, with it's own $100 deductible. So if one of my enemies smashes all my windows I can get it fixed for $100. You can also save on comprehensive coverage by not having any enemies.
Some companies will offer other coverage and perks. I have roadside assistance for just $6.65. Always get roadside assistance, especially if you can find it at that price! Even AAA ($66/year) will pay for itself after one call, two or three times over if you need a tow.
My favorite way to save on insurance is to pay in full. You buy it in 6 month parcels, and you can elect to pay each month, or pay it all upfront. I saved about $250 doing it this way. Because I'm savvy, I put away 1/6th of my premium each month, so when it comes time to renew I'm ready to roll without touching my savings.
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