Now is a great time to shop for auto insurance.
Along with the rest of the property/casualty insurance industry, the auto insurance industry is in a soft market. The nationwide average annual cost for auto insurance premiums in 2007 was expected to decrease for the first time since 1999, according to the Insurance Information Institute, a non-profit organization supported by the insurance industry. The institute attributes the more favorable conditions for consumers to a more competitive marketplace, safer cars and aggressive fraud-fighting that has reduced bogus claims.
Furthermore, if you're a do-it-yourselfer who likes shopping for insurance online, there's more good news. In June of this year, the Customer Respect Group released a study that found that auto insurer Web sites are improving. Most of the improvements cited stemmed from the sites' responsiveness to emails and their disclosure regarding personal data consumers must enter to get a quote. Both are steps in the right direction, so you should check out your online options.
The companies that performed the best in the study were GEICO, a subsidiary of Berkshire Hathaway; Progressive; Liberty Mutual; Farmers; American Family; and Cincinnati Insurance, a unit of Cincinnati Financial.Whether you're shopping for coverage now or in the future, you should always understand what you're getting. This excerpt from TheStreet.com Ratings' Consumer Guide to Auto Insurance (available for $49.95) walks you step-by-step through an auto policy and, more importantly, how insurers determine your premium.
Types of Coverage
At its core, auto insurance is simply a contract between you and your insurance company to protect against financial loss in the event that you have an accident. Depending on what type of coverage you purchase, the insurance can provide financial assistance to:
- Repair your vehicle or replace it in the event it is damaged or stolen.
- Reimburse others if you cause an accident that hurts them or their vehicle.
- Pay for any medical expenses arising from injuries you or your passengers sustain in an accident.
At a minimum, most states require you to have liability insurance coverage to protect others in case you are at fault in an accident. There are two primary kinds of liability coverage that you need:
- Bodily Injury: This covers injuries you might cause to someone else. Most states stipulate a minimum amount of this coverage, although you can elect to purchase higher policy limits if you're willing to pay higher premiums. (See our Consumer Guide which shows your state's minimum required policy limits.)
- Property Damage: This covers damage you might cause to someone else's property. Typically this will be damage done to another person's car, but it also covers any other object you hit, including buildings, fences, or street signs. Again, most states stipulate a minimum amount of this coverage per accident, with more coverage available at higher premiums.