Since car insurance is so expensive, partiularly for teenagers and other young drivers, it’s natural that this question should come up frequently for first time car buyers.

You need insurance on your car to protect you from the risk of disasterous financial problems resulting from accidents,  personal injury and property damage, and loss by theft, fire, or natural disasters. It may seem pointless to spend so much money on something you may never need. But if you ever need it, you’ll be really happy you have it.

It’s tempting to believe that you don’t need insurance because you are a safe driver and will never cause an accident. However, other people can involve you in an accident that is not your fault. If the other driver doesn’t have sufficient car insurance, your own insurance will take over and pay your repair bills and medical expenses.

You might avoid insurance if you had enough money to cover such problems on your own.  This is called “self-insurance.” However, self-insurance is not legally sufficient in most states and is not practical for most people.

Financial responsibility laws in all states (except Wisconsin and New Hampshire) require automobile insurance coverage. The laws specify the type of insurance that is required and the minimum level of coverage. In most cases, liability insurance – bodily injury and property damage – is required, to help protect drivers from the financial risks of injury and damage caused to others in accidents. Other coverage may be required as well. The Insurance Information Institute publishes a table showing auto insurance requirements for all states.

If you purchase only the minimum insurance required in your state, you may be seriously under-insured. Many of these laws were put in place years ago and the mandated coverage amounts don’t reflect today’s higher accident costs. For example, some states require only “10/20/10″ liability coverage. This means the insurance only pays up to $10,000 for bodily injury to a single person in an accident, $20,000 for all persons, and up to $10,000 for property damages. 

Medical costs for someone seriously injured in a car accident can easily exceed $10,000. Damages to  an expensive luxury car can easily exceed $10,000. You can be held personally responsible for any costs above that which is covered by your insurance. Therefore, you should consider increasing your liability limits to a minimum of $100,000 for a single person and $300,000 for multiple persons.

The above mentioned state laws say nothing about collision and comprehensive insurance that covers your own vehicle. Young drivers often try to lower insurance cost by getting only the minimum liability policy required by state law. This can be a serious mistake. If you can’t afford to repair or replace your vehicle in case of an accident, you need additional insurance. Furthermore, if you have a loan or lease, your finance company or bank probably requires that you have collision and comprehensive (“full coverage”) insurance.

What if I drive without auto insurance?

If you drive without insurance, you are violating the law. You can be fined, arrested, jailed, your vehicle impounded, or your license revoked/suspended, depending on the laws in your state.

If you have an accident and damage or destroy your own vehicle, the cost of repair or replacement is completely on you. If you cause an accident and injure other people or damage their property, you are subject to being sued. Don’t drive without car insurance.

You can get free auto insurance quotes from Netquote who works with all the major insurance companies to help you find the one that has the best rates for you. You are not obligated to accept any offer.

###

You may go through your entire life and never have a car accident. But the odds are against you. Auto insurance protects you from potentially disasterous costs of such accidents. If you are buying your first car, you must understand how car insurance works and why you need it.

Laws in most states require that drivers have at least a minimum level of liability insurance – repeat, liability insurance – not collision or comprehensive, although lenders and lease companies may require full coverage, including liability, collision, and comprehensive.

Types of insurance
An auto insurance policy might include one or more of the following types of coverage:

Liability – Protection from costs associated with personal injury and property damage you cause in an accident. Legal actions against at-fault drivers is becoming more common and more expensive. . For this reason, liability coverage is the most important part of car insurance — and the part required by law.

Comprehensive – Protection from the cost of non-collision damages, vandalism, theft, weather-related damage, or natural disasters. Comprehensive coverage typically pays for the cost of repairs, or in the case that the vehicle is totally destroyed or stolen, the cost of a replacement vehicle – at “cash value” of the old vehicle. A deductible lessens the amount you are paid.

Uninsured Motorist – Protection from costs associated with an accident caused by another driver with insufficient liability coverage — or no coverage at all.

Collision – Protection from the cost of repairing or replacing your own vehicle if damaged in an accident. A deductible lessens the amount you are paid.

Medical – Pays medical costs to you or other parties for accidental injuries associated with an accident. There are limits specified in your policy regarding maximum amounts paid for each incident.

Towing and Labor – Pays cost of towing your damaged or disabled vehicle. Maximums usually apply.

Rental Reimbursement – Pays cost of renting a replacement vehicle after an accident. You’ll need this unless you have other cars you could use if your own vehicle is not available for a while.

Gap Coverage – Pays the difference between the amount owed on a loan or lease and the “cash value” paid by your insurance company in case of theft, fire, or accident. A gap waiver or gap insurance is usually provided with most leases, but not loans. If you are going to be “upside down” on your loan, it’s good coverage to have.

Manage your insurance costs

Beyond the minumum auto insurance requirements of your state laws, you can determine the kind of coverage you want, how much, what deductible, and what add-ons you want.

If you buy with a loan or lease, the finance company may dictate minimum coverage requirements. They may even dictate the maximum deductible you can choose. This protects them, and you, in case your vehicle is damaged or destroyed before your loan or lease is completed.

You can add higher liability coverage, beyond the outdated minimum requirements of your state laws, which can be a smart thing to do in these days of muti-million dollar lawsuits. If your auto insurance policy doesn’t cover the full cost of a large settlement, you may be personally responsible for the remainder. Additional coverage in the form of an “umbrella” policy can be purchased at little cost. One million dollars coverage is recommended.

You can increase your deductible amount. If you have sufficient cash available, you can set a high deductible, which can significantly reduce your premium. However, many people who set high deductibles really can’t afford to pay and take a chance that they will never have to. Not very smart. Set your deductible only as high as you can pay.

Dropping collision and comprehensive coverage is another opportunity to save money. You should only do it, however, if you can afford to buy a replacement vehicle or pay for repairs from your own pocket. This strategy is only recommended if you have an old car that that doesn’t justify the coverage – as long as you can afford to fix or replace it if you have an accident.

Improving your credit history can lower your insurance cost. Many insurance companies now look at your credit score and offer lower rates to people with high scores. They have conducted studies that show that people who manage their finances well have the lowest claim rate. You should know your FICO® credit score before you begin shopping for insurance.

The best way to get the lowest car insurance rates is easy. Having the Internet makes it simple to get multiple rate quotes from different insurance companies. This way, you can compare rates and go with the company you like best.

You can get free auto insurance quotes from Netquote . They work with all the major insurance companies and can find the one that has the best rates for you. You are not obligated to accept any of the offers. It’s a great fast way to shop for insurance.

###

Auto insurance is one of those irritating expenses of car ownership that has no immediately obvious benefit. We pay and pay, and may never get anything in return. Teenage first car buyers are always a bit startled by the high cost of insurance.

Car insurance is one of the most expensive costs of owning and driving a car, especially for teenagers and other new drivers who can least afford it. 

In this article we’ll show you how and where to find the car insurance company for your first car that has the best rates and provides the best service.

We frequently hear the question, “Which auto insurance company is best?” or “Where can I find the cheapest car insurance?” or “What is the cheapest insurance for a 16 year old?” It would be nice if there were a quick simple answer to those questions. 

It’s a fact that you will find an insurance company that has the lowest rates for you, your car, and your personal situation than any other company.  But that same company may not have the lowest rates for someone else.  Because rates depend on so many different factors, and insurance companies are not the same in how they base rates on those factors, rates vary widely between companies.  

Furthermore, an insurance company that offers low rates in one state may have totally different rates in another state, or may not even be licensed to operate in the other state. That’s why it’s not as easy as saying that XYZ company has the cheapest rates. 

Teenagers bear the burden of the highest car insurance rates 

It’s  because teenagers cause the most accidents. Rates for a 16 year old male added to his parent’s policy can easily double the cost of the policy. Depending on the state he lives in, where he drives, and the kind of car he drives, rates could be in the range of $1000 to $3000 a year.

Choosing an insurance provider should be based not only on good rates but also on how well the company services its customers. A company with low rates but is difficult to deal with when you file a claim may not be a good choice.Here is a strategy we recommend for finding a good auto insurance company for your first car.

Learn from the experience of others

Visit JDPower.com for the results of a consumer study of major insurance companies, rated in terms of overall customer experience, policy offerings, prices, and customer service. Some of the companies only operate in a single state or only in a few states.  Not all companies are listed, especially many of those who operate in a single state.

Avoid those companies with the lowest scores. Consumer Reports magazine regularly surveys auto insurance customers from all over the U.S. Its most recent survey covered 27 insurance providers and ranks them in terms of overall customer satisfaction and fewest problems with customer claims.  It publishes results in its magazine (last published in the March 2006 issue) and on its web site at http://www.consumerreports.org/. There is a small subsciption fee but it’s well worth the cost. 

Get free quotes from multiple companies

Visit or call multiple insurance providers in your area and ask them for rate quotes. A much easier way is to get your quotes online. You can always go directly to insurance company web sites such as those for well-respected GEICO but it’s faster and easier to visit the site of a major independent broker such as Netquote .  

The benefit of an indpendent broker is that they work with many insurance companies and can do most of your legwork for you, at no cost to you. They know which insurance companies are licensed in your state, they know which have the best rates for your particular situation and needs, and they know which companies have the best service. Netquote is one of the best of this kind of service, but we can also recommend InsureMe.com. 

Check your Insurance Commissioner’s web site

All states have an office of the Insurance Commissioner. The purpose of the office is to approve, license, and regulate insurance providers in their states. Many states maintain a database of insurance companies and customer complaints against those companies, which is available for public viewing on the state’s web site.  You should check the database for problems with any insurance company you may be considering. Check this web site for links to insurance commissioners in each state.

Get your CLUE report and credit score

When you make claims against your car insurance, a record of those claims can appear in a little-known database called CLUE (Comprehensive Loss Underwriting Exchange). Insurers use the database to set your premium cost. Sometimes, even questions about your coverage to your insurance agent that do not result in a claim end up in the database. It’s common for errors to appear in the database, which directly affects what you pay for your insurance.

When you shop for new insurance, the company will order a CLUE report. If your information is inaccurate, you can be left without insurance while you work to correct the errors. You are entitled by law to get a free CLUE report once each 12 months from www.ChoiceTrust.com. The report shows you what insurance companies see about you. If you find errors or mistakes, you’ll be given instructions for filing a dispute.

Check your credit score

Most insurance companies also use your credit history report as a basis for setting your premium cost. They create an insurance score that is directly related to your conventional FICO credit score. If you have a low score that is related to late or missed loan payments or credit card payments, you’ll pay more for car insurance. Credit reports often have outdated data and mistakes that will increase your insurance cost.

You can get your credit report and FICO credit score from MyFICO.com . Look for mistakes and get them fixed as quickly as possible to minimize the affect on your loan rates and insurance cost.

Summary

Auto insurance for your first car can be expensive, but you can minimize the cost by shopping around for the best rates from the best companies.

###