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  • Writer's pictureCentral Financial Group

5 Things to Keep In Mind When Choosing an Auto Insurance Policy

An insurance policy document.

Auto insurance is one of those things you think about after you've been in an accident or after you've just purchased a car. In the event of an accident, having auto insurance is extremely important as it financially protects you and your vehicle. Even if you are a safe driver, it’s not something to disregard or ignore.

When it comes to choosing auto insurance, there are many factors to consider, including your driving record, age, and so on. With so many different plans and providers, it can be challenging to decide on one. So how do you go about choosing an auto insurance policy that is right for you?

Here are the top five things you should consider when choosing an auto insurance policy.

Questions to Ask Before Purchasing An Auto Insurance Policy

1. Know Your State's Minimum Requirements

Most states will have a minimum auto insurance requirement, which you’ll need in order to legally use your vehicle. There are six major kinds of auto insurance plans to choose from:

  • Bodily Injury Liability (BI)

  • Property Damage Liability (PD)

  • Personal Injury Protection (PIP)

  • Collision Coverage

  • Comprehensive Coverage

  • Underinsured/Uninsured Motorist

In most states, drivers must have liability insurance, which covers property damage or bodily injury you might cause to someone else. This type of coverage is usually mandatory and can't be waived.

Some states also require you to have uninsured/underinsured motorist coverage or comprehensive and collision insurance. These policies cover fire, theft, and weather-related damage that are not included in your basic liability policy.

2. Know How Much Coverage You Need

The next step is to figure out how much coverage you need. If you have other assets protected by homeowners' or renters' insurance, you may not need as much protection as someone who doesn't have any other assets.

You should also consider how much money you'd like to have in case of an accident—paying out of pocket for repairs can add up fast!

3. Know Your Deductibles

The deductible is the sum of money (usually a flat amount) you pay before your insurance premiums kick in. While you can choose a deductible amount that best fits your budget, keep in mind that a lower deductible will result in a higher premium and vice versa.

If you have an older vehicle with high repair costs or multiple drivers on one policy, consider a higher deductible to avoid paying too much each month.

4. Consider Your Credit Score

Your credit score greatly influences how much you'll pay in premiums since insurers use it to decide whether they should sell you coverage or how much they should charge you (also known as rating bands).

If your credit is good (700+), expect lower rates than those with poor credit (600 or below). If your credit is excellent (800+), you can expect even lower rates for your auto insurance policy.

5. The Type of Car You Drive

The model of the car you drive, its value, and how often you use it also matters when determining the premium. Basically, the more expensive your car is, the more premium you will pay, especially when compared to someone with an older model with fewer features and fewer miles on it.

Additionally, if your car is used around town or on highways during peak hours (usually when more accidents occur), expect higher rates. This is because these conditions increase risk exposure for auto insurers, resulting in higher auto insurance premiums.

Other Factors That Influence Your Auto Insurance Decision

A person sitting behind the wheel of a car.

1. Driving Record

When it comes to determining the cost of auto insurance, your driving record plays a very important role. You can expect an increase in your insurance premium if you have been involved in many accidents or received traffic tickets.

2. Age

When it comes to auto insurance policies, many insurance companies tend to charge more for teens and young adults. They believe that, unlike older and more experienced drivers, these individuals are more likely to be involved in accidents or commit traffic violations like speeding or running red lights and stop signs.

3. Coverage Limits

A good car insurance policy will usually include several types of coverage. Before choosing an auto insurance policy, be sure to check whether it includes liability coverage, which would cover damages caused by your vehicle, or comprehensive coverage, which would cover damage caused by vandalism or theft.

4. Policy Pricing

Be sure not to choose the cheapest policy. A lower premium could mean you're not covered for all of your needs, especially if you have an older car or you live in a high-risk area.

5. Demographics

While car insurance rates vary greatly depending on where you live, there are also significant differences between insurers—even within the same state or region. It pays to compare quotes from several companies before choosing the right one.

Choosing the right auto insurance policy is an important decision. It is about protecting you and your family from potential financial disaster in the case of a collision or an accident.

At Central Financial Group, we understand that picking the right policy can be tricky, especially if you're new to the process or you’re unaware of what to look for. The best way to determine how much coverage you need is to speak with a local agent.

Get in touch with us for a free evaluation. We’ll ask about the value of your car, how often you drive it, and whether you have additional assets that need protection. We’ll help with your financial planning and find affordable auto insurance coverage for your vehicle.

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