The purpose of buying insurance is to transfer the risk from us (the consumer) to the insuring agency. In case of auto insurance, it is quite tricky, as it’s a balance between being adequately covered vs. paying a high premium. Here are 12 steps to follow to buy auto insurance:
1) Learn the terms associated with an auto policy
An auto policy contains several terms critical to your coverage and monthly premium. As a consumer, it is critical to understand those. A synopsis of all the terms can befound at Mayanah Financial Coaching’s Blog.
2) Identify what influences your rates
For a given coverage, insurance premiums can vary wildly depending on the following 13 factors:
- Geographic location
- Marital Status
- Driving Records
- Driving Experience
- Vehicle Type
- Vehicle Use
- Annual Miles Driven
- Coverage and Deductibles
- Claims History
- Credit History
- Length of previous insurance coverage
3) Control the controllable
Based on the above list, some factors like age and location cannot be controlled. However, factors like claims, credit history and coverages can be controlled. Following are the steps to obtain favorable rates
- Pull your credit report to eliminate scams and incorrect information. You are entitled to a yearly free credit report.
- Create a list of both at-fault and not-at-fault claims before starting the process. The more the number of at-fault claims, the riskier the provider considers you as a consumer.
- Continued coverage is critical for favorable rates. If in case, there is a lapse in coverage, please be prepared with the dates and the reason for the lapse.
4) Check Driving Records
Your driving record defines how safe you are as a driver which affects the rates widely. It is important that your driving records are clean. If you have a major violation like DUI, then your rates can go up 100% or more in some cases. You can also consider the possibility of defensive driving courses to clean up driving records. You can retrieve your driving records at the Department of Public Safety.
5) Identify the required coverage for you and your family
Required Coverage has two parts – one is mandated by the state and varies from state to state. The second part is based on personal preferences. If coverage is not sufficient in an accident, it can cost you an arm and a leg, and you may also face legal charges if your liability portion is not sufficient to cover the expenses. On the other hand, the best coverage will lead to a huge premium every month. To resolve this challenge, we recommend third party reviews by experts like Mayanah Coaches.
6) Review your current insurance policy
Identify current coverage and premiums as this will be your baseline in shopping for new rates. If you do not have the policy handy, call the provider and request them to mail you a copy.
7) Gather quotes from at least 3 providers
Since providers obtain statistical information from different sources, we recommend obtaining quotes from at least 3 providers. If the quotes are not comparable, we recommend to increase the number of quotes. Usually direct sellers like Geico may be cheaper than agency based providers like State Farm or Allstate
8) Conduct normalized comparison
Since most insurance policies do not use the same coverage criteria, it is important to look at them carefully. We recommend normalizing the data to compare the rates. Mayanah coaches can help you with that.
9) Identify available discounts
Available discounts vary from provider to provider. However, the best way to identify those is to call them and ask for the applicable discounts. The Department ofMotor Vehicles can provide you a list of common discounts in your area.
10) Research on providers’ records
Remember that the purpose of taking an insurance is to have adequate coverage in cases of undesirable events/circumstances. Hence, availability, responsiveness and credibility of insurance companies is very critical. The National Association of Insurance Commissioners can provide details on insurance providers and their records.
11) Cancel Old policy
Once your new policy is confirmed and in effect, cancel the old one. You need to make sure the coverage of the new one starts before the expiry of the current policy. It is better to pay a day or two of coverage to both providers instead of having a gap in coverage.
12) Retain and Communicate
Many states require drivers to retain a copy of their insurance in their automobiles. It is also important to send a copy to your lienholder, if you have a lien on your automobile.
We recognize that this process is challenging and we are here to help you at any stage. Please contact Mayanah Coaches at (281) 435-1888 or visit us at www.themayanah.com