Oct 5, 20215 min
This article is strictly the opinion of the author and is to not be considered financial/investment advice. Call to Leap LLC and the author of this article does not claim to be a registered financial advisor (RIA) or financial advisor. Please visit our terms of service and privacy policy before reading this article.
Ah, car insurance. Probably the most exciting topic out there when it comes to personal finance.
Just kidding. Car insurance can be a real pain sometimes. Itâs one of those things that we need, but donât want to have to deal with.
But thatâs why itâs important to learn all the ins and outs of what it is!
Understanding car insurance will help you know what youâre looking for when youâre shopping around for the best insurance company.
Knowing what youâre looking for can save you hundreds of dollars a month because youâll know what insurance policy is right for you.
Let's break down the basics of car insurance. Whether youâre young and new to car insurance, or a seasoned driver and want to know more about whatâs out there, youâll walk away with some value after reading this article.
Weâll talk about what car insurance is, whatâs included in it, and some tips on finding the best policy for you.
48 out of 50 U.S. states require drivers to have auto insurance. (Virginia and New Hampshire being the outliers)
Each state has different requirements for the minimum amount of insurance you need. And youâll have to do some research to find out what your state requires of you.
In some cases, your state wonât require you to have all six types of coverages that weâll talk about in a moment. But it would be in your best interest to have all six despite what your state requires so you can have whatâs called a âfull coverageâ auto policy.
A basic auto insurance policy is comprised of six different kinds of coverage:
1. Bodily injury liability
If you are responsible for an accident that injures another person, bodily injury coverage helps pay for any medical and âlost incomeâ expenses that occurred as a result of the accident.
So, if you cause a car accident. And you cause someone else to be out of work, then your bodily injury coverage may compensate for their lost income.
2. Medical payments or personal injury protection (PIP)
This covers anyone in your car including you and your passengers. PIP can cover medical payments or lost wages. PIP can also cover funeral costs.
3. Property damage liability
This covers any damage you cause to someone elseâs vehicle or property. Usually, this includes damage to another vehicle but can also include damage to street signs, walls, buildings, etc.
4. Collision
Collision coverage helps fund repairs for any damage to your vehicle whether or not you were at fault for the accident.
5. Comprehensive
Comprehensive coverage helps you pay damage to your vehicle in the case of events other than collisions like fire, theft, or vandalism.
6. Uninsured and underinsured motorist coverage
This is coverage if you are hit by an uninsured driver or a driver who doesnât have sufficient coverage to pay for the loss.
Damage caused by someone else driving your car
Damages that exceed your liability coverage
Exotic or vintage cars
Vehicle repairs
General maintenance
Now that you know what car insurance consists of, your next step is to find a policy thatâs affordable for you.
There are several steps to think about when youâre shopping around for car insurance.
Youâll want to decide how much coverage you need, which insurance company you want to choose, and what you can afford.
Letâs talk about choosing how much coverage you need first.
The six different types of coverage we discussed earlier makeup whatâs called a âfull coverageâ auto policy.
When looking for a good car insurance company, youâll want to find a company that has fast response times to claims and questions you might have. Check ratings and talk pick up the phone to check out their customer service quality.
You can think of this process as finding a reliable bank. Youâre not always gonna be contacting them. But when you have to, youâre gonna want someone reliable, efficient, and easy to deal with.
You can check ratings on third-party sites like J.D. Power to read ratings and reviews of different insurance companies.
In addition to the service quality, youâll also want to shop around and get different quotes.
Your premium is how much car insurance you pay per month. Your premium is what keeps your policy active. In general, the more risk you pose to the insurance company, the higher your premium will be.
So if you have a history of accidents or DUIs, then your premium will likely be higher. Figuring out your premium isnât always a straightforward process.
A premium can be unique to each driver. So youâll have to call different insurance companies and get separate quotes to compare rates.
Your age
Age of your car
City and state
Claims history
Credit score
How much you drive (mileage on a car)
Safety features in your vehicle
Type of car
If you get into an accident without insurance, you will have to pay out of pocket. This could include paying for damaged vehicles, medical bills, towing fees, property damage. And the list goes on.
And in most states, itâs illegal to drive your vehicle without insurance. So, car insurance is a natural part of our monthly financial expenses as Americans.
Picking the right car insurance is not a walk in the park. In some cases, people know that theyâre overpaying for car insurance but donât switch their policies just because of how much of a chore it is.
So if you can, letâs get it right the first time so you wonât ever have to deal with hopping around different insurance companies.
Now if you havenât done so already and want to learn about investing and trading in the stock market, why join our membership. We teach all our exclusive members on how to not only invest in great long-term stocks, but also sell covered calls and cash-secured puts, trade LEAPs options, and generate anywhere from $800-8000 each month. Once you sign up for a membership and join our community of wealth builders, youâll have access to all of our content, which teaches you step-by-step on how to use this strategy. Youâll also be able to ask Steve and our team any questions you have, so we can coach you each week. Not only that, we post weekly positions and tell you which stocks weâre trading and investing in, so you donât have to go through the hassle of doing a lot of research. Sign up for a membership right now and we promise youâll be amazed by how much youâll learn.