A step-by-step guide to comparing auto insurance policies, understanding coverage types, and finding the best rates for your driving profile and vehicle.
Review liability coverage (bodily injury and property damage)
Most states require minimum liability of 25/50/25 ($25,000 per person, $50,000 per accident, $25,000 property damage). Financial experts recommend at least 100/300/100 if your net worth exceeds $100,000.
Evaluate collision coverage for your vehicle
Collision covers damage to your car in an accident regardless of fault. If your car is worth less than $4,000, the annual premium may exceed 10% of its value, making it not cost-effective.
Assess comprehensive coverage needs
Comprehensive covers theft, weather damage, animal strikes, and vandalism. It typically costs $150-$400 per year and is required if you have a car loan or lease.
Consider uninsured/underinsured motorist coverage
About 14% of drivers in the US are uninsured according to the Insurance Research Council. This coverage protects you if an at-fault driver has no insurance or insufficient limits.
Review medical payments or personal injury protection (PIP)
PIP covers medical expenses for you and passengers regardless of fault. In the 12 no-fault states, PIP is mandatory. Coverage typically ranges from $2,500 to $50,000.
Check State Liability Minimums
Look up your state's minimum liability requirements
State minimums vary widely. Florida requires only $10,000 in property damage liability with no bodily injury minimum, while Alaska requires 50/100/25. Your state's DMV website lists current requirements.
Determine if your state requires PIP or med-pay
Twelve states operate under no-fault insurance laws requiring PIP: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah.
Verify uninsured motorist coverage requirements
About 20 states require uninsured motorist coverage. Even in states where it's optional, carrying it adds only $50-$100 per year to most policies and covers a major gap.
Calculate coverage above minimums based on your assets
If you cause an accident and damages exceed your policy limits, your personal assets are at risk. A general rule: your total liability coverage should equal or exceed your net worth.
Select Deductible Options
Compare $250, $500, and $1,000 deductible premiums
Raising your deductible from $250 to $1,000 typically saves 15-30% on collision and comprehensive premiums. Run the math: if you save $200/year, the $750 difference pays for itself in under 4 years.
Ensure your emergency fund can cover your chosen deductible
Pick a deductible you can pay out of pocket without financial strain. If you have less than $1,000 in savings, a $500 deductible is more practical even though premiums are higher.
Check if collision and comprehensive deductibles differ
You can set different deductibles for collision and comprehensive. Since comprehensive claims (theft, hail) are less common, some drivers choose a lower comprehensive deductible and higher collision deductible.
Qualify for Discounts
Ask about safe driver discounts
Most insurers offer 10-25% discounts for drivers with no accidents or violations in the past 3-5 years. Some also offer accident forgiveness after 6+ years of clean driving.
Check for good student or young driver discounts
Students under 25 with a B average or higher (3.0 GPA) typically qualify for 5-15% discounts. Completing a defensive driving course can save an additional 5-10%.
Inquire about vehicle safety feature discounts
Anti-lock brakes, airbags, anti-theft systems, and dashcams can each reduce premiums by 2-10%. Newer vehicles with automatic emergency braking may qualify for additional reductions.
Explore low-mileage or pay-per-mile options
If you drive under 7,500 miles per year, low-mileage discounts of 5-15% may apply. Pay-per-mile programs charge a base rate plus 2-6 cents per mile driven.
Ask about paperless billing and autopay discounts
Enrolling in autopay and paperless billing typically saves $20-$60 per year combined. Paying the full 6-month or annual premium upfront can save another 5-10%.
Evaluate Multi-Policy Bundling
Get a bundled quote with homeowners or renters insurance
Bundling auto with home or renters insurance typically saves 5-25% on premiums. The average savings is about $700 per year when combining auto and homeowners policies.
Compare bundled price against separate best-rate policies
Bundling isn't always cheapest. Get standalone quotes from 3-5 companies for each policy type, then compare the total against bundled offers. Sometimes two separate insurers beat one bundled price.
Ask about multi-vehicle discounts if insuring more than one car
Insuring 2 or more vehicles on the same policy saves 10-25%. Each additional vehicle after the first usually receives a larger per-vehicle discount.
Annual Policy Review
Shop quotes from at least 3 insurers every renewal period
Insurance rates change frequently. Getting quotes from 3-5 companies every 6-12 months takes about 30 minutes online and saves an average of $400-$700 per year for those who switch.
Update your insurer on life changes affecting rates
Moving to a new zip code, changing jobs (shorter commute), getting married, or improving your credit score can all lower premiums. A credit score increase of 50+ points can reduce rates by 10-20%.
Review coverage limits as your financial situation changes
If your net worth has grown by $50,000 or more since your last review, increase your liability limits accordingly. Raising limits from 100/300/100 to 250/500/250 often costs only $50-$100 more per year.
Drop collision on older vehicles when it no longer makes sense
Check your car's current market value on a pricing guide. If annual collision premium exceeds 10% of the car's value, dropping it and banking the savings is often smarter.
Frequently Asked Questions
How much auto insurance coverage do I actually need?
Most financial experts recommend at least 100/300/100 liability coverage ($100K per person, $300K per accident, $100K property damage), which far exceeds most state minimums of 25/50/25. If your net worth exceeds $300,000, consider an umbrella policy for additional protection. The premium difference between minimum and recommended coverage is often only $200-$400 per year.
Does my credit score affect my car insurance rates?
In most states (except California, Hawaii, Massachusetts, and Michigan, which ban the practice), insurers use credit-based insurance scores that can swing premiums by 40-60%. A driver with poor credit may pay $1,500-$2,000 more annually than someone with excellent credit for identical coverage. Improving your credit score is one of the most effective ways to lower premiums over time.
How often should I shop for new auto insurance quotes?
Insurance pricing algorithms change frequently, so comparing quotes every 6-12 months typically yields savings of $200-$600 per year. Major life events like moving, marriage, turning 25, or paying off a car loan can trigger rate changes. Use comparison tools like Policygenius or The Zebra to pull multiple quotes simultaneously without affecting your credit score.
Is it worth increasing my deductible to lower my premium?
Raising your deductible from $500 to $1,000 typically saves 15-25% on collision and comprehensive premiums. If you have an emergency fund and file claims rarely (less than once every 5-7 years), the higher deductible pays for itself within 1-2 years of premium savings. Run the math: if you save $300/year with the higher deductible, you recoup the extra $500 risk in under two years.