How To Choose An Auto Insurance: Step-By-Step Guide

Are you aware of the process of choosing auto insurance? If not, we are here for you!

In the United States, a legally licensed driver needs to show proof that he or she can pay for any damages or liability in the event of a vehicle accident.

In most states, drivers are required to have automobile insurance to serve as their proof.

Most drivers have no choice in this matter.

There are two states in the union – New Hampshire and Virginia – which do not require auto insurance, and there are others that allow drivers to post a bond for their liability and damage costs related to auto accidents.

But, in all 50 states, drivers must be able to pay for those damages, and most states require auto insurance as proof that a driver can do just that.

However, drivers have a myriad of choices in the amount and type of insurance coverage they purchase and the company from which they purchase it.

The process can be daunting. Here is some information that can help you to choose an auto insurance coverage.

Legal Requirements

A driver must be able to demonstrate the ability to pay for damages or liability in the event of a vehicle accident.

In most U.S. states, automobile insurance is mandatory to serve as proof of this ability. There are exceptions:-

1. New Hampshire

Drivers are responsible for damages in a car accident up to $50,000 for liability and $25,000 for property damage.

Failure to pay results in having licenses and registrations suspended.

2. Virginia

Drivers must pay the state $500 annually instead of buying car insurance, but that does not remove them from paying liability or property damage from a car accident.

There are also states which allow drivers to submit a bond proving their ability to cover liability and damage costs if necessary, thus avoiding paying for automobile insurance.

The bond amount is set by the state. Some states even allow a cash deposit as proof of financial responsibility.

In the states that allow bonds to cover driver liability, the bond covers the expenses up to its limit when necessary, and the driver must then pay the bond issuer for the amount it puts out, as well as costs beyond the level of the bond.

In 2022, 31 states allow drivers to provide a bond in place of insurance to cover potential liability and damage costs.

Additionally, the penalties for not having proper automobile insurance differ by state and severity.

They can include fines, points on your license, suspension of your license or registration, court and administrative fees to get your license reinstated, and possible jail time depending on the severity of the damage or liability involved.

4 Steps To Choose Auto Insurance

Step 1: You Must Determine What Your State Requires

You can do this by visiting the website of your state’s secretary of state office or department of motor vehicle office, depending on your state’s governmental design.

There are basic coverages for most states, although you can expand depending on what you want to spend.

(i) Medical Costs – For the policyholder (and any other injured party if the policyholder is responsible) beyond coverage from the driver’s health insurance policy.

(ii) Uninsured/Underinsured Motorist – When a driver is having an injury; or suffers personal property loss due to the actions of an uninsured or underinsured motorist, this policy covers your costs for medical care and property damage.

Step 2: Examine Your Driving Habits And Conditions

Your driving conditions include the value of your car, the frequency with which you drive and the miles you put on your car over time, and where you live.

Do you live in an area of high accident frequency, or low?

How much time in a week or month are you actually behind the wheel?

Are you a safe driver or a risky one? Is the value of your car worth protecting?

These are considerations when deciding how much coverage to purchase.

Step 3: Set Your Budget

If you are going to base your auto insurance coverage decision entirely on the cost and buy the cheapest coverage you can get, your decision is actually easy.

It’s comparing one number to another.

But a low-cost policy is cheap for a reason, and it’s up to you to determine what you are NOT paying for; and how the low-cost policy lacks in comparison to others.

This could be in terms of customer service (responsive to calls), automobile assistance when needed (coverage for tow trucks, etc.), or length of time in paying out coverages.

The Better Business Bureau or Yelp! It can provide ratings from previous users in case you are concerned about the quality of the lost-cost coverage.

They will also possibly ask you to determine your own deductible for some policy details.

That’s the amount you are willing to pay out of pocket before your coverage begins.

The higher your deductible, the lower the cost of your coverage.

Determining what you are willing to pay out of pocket (either per accident or per policy period); it’s the key element to determining your coverage’s cost.

Furthermore, if cost is not the primary decision-making consideration, then there are a myriad of coverage options to look over.