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You've just bought a new car, and now you need to insure it. Or maybe you already have auto insurance, but you're
looking to make a change. How do you cut through all the sales jargon and find a policy that suits you at a good
price? Knowing how to compare policies is a big piece of the puzzle.
Comparing auto insurance policies makes the most sense when the policies you're comparing are similar. The more
similar they are, the more useful your research will be. Fortunately, the personal automobile policy is a fairly uniform
contract that's used throughout the industry. This means that policy exclusions, limitations, and other provisions
shouldn't vary significantly between policies. But you have some leeway when it comes to choosing your coverage.
For example, collision coverage for your vehicle is optional in virtually every state. Medical payments (med pay) and
uninsured motorist coverages may also be optional, depending on where you live. You can also choose the limits of
your coverage in each area of auto insurance, though you can't have less than state law requires.
Before you start comparing policies, ask yourself how much liability coverage you need to protect your home and
other assets in case of an accident. If med pay is optional, do you need this type of coverage (and how much) if you
have good health insurance? Do you need collision/other-than-collision (also known as comprehensive) coverage if
you drive an older used car? Should you have the same limits of uninsured motorist coverage as liability coverage?
The answers to these and other questions will allow you to determine your particular auto insurance needs. This is an
important first step because you'll then be able to compare policies that provide the same types and amounts of
coverage. It's best to have a qualified insurance professional help you make these decisions.
Compare premiums
The premium is obviously important when you're comparing policies. After all, your main goal is to get the coverage
you need at the lowest possible price. This is especially true when you're on a tight budget, though no one wants to
pay more for coverage than necessary. You should get premium quotes from at least three reputable insurers and
compare the results. Before giving you a quote, a company representative will ask you a series of questions about
the coverage you're seeking and other matters. If you're working with an agent or broker, he or she will select the
insurance companies and provide them with your information. Another option is to use an independent on-line quote
service.
The quotes you receive will depend on the types and amounts of coverage you want. There are also many other
factors that a company may use to reach a quote, such as your age, your gender, your marital status, where you live,
what type of car you drive, how much you drive, your driving record, the amount of your out-of-pocket deductibles,
how many people will be covered, and any discounts you may qualify for. But even though different companies use
similar variables to price coverage, don't expect their quotes to be the same or even close. Annual premiums for the
same coverage can vary by hundreds of dollars among companies. That's because each company's rates are based
on its own priorities, customers, and claims-paying history.
If the quotes you get are for policies that provide basically the same coverage, the lowest-priced policy may very well
offer the best value. However, that's not always the case. Sometimes a more expensive policy may actually be a
better deal when you look at issues other than cost. Though auto insurance policies are standardized to a large
extent, you should still compare the provisions and features of the policies you're considering. It's also important to
learn as much as you can about the companies behind the policies. If you compare only premiums, you might end up
regretting it down the road. Here are some good questions you should try to answer with the help of an insurance
agent or broker:
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