Vehicles

Auto Insurance

How Much Car Insurance Do You Need?

When considering car insurance needs, each woman driver has a unique situation and many different factors that dictate their car insurance requirements. The state a person lives in, the car she drives and the type or level of protection she prefers to name a few. The challenge, when buying insurance, is to weigh the amount of coverage desired with the associated premium costs to find the optimal balance for each person's unique circumstances.

The History of Car Insurance

The first auto insurance policy was written in 1895 in England and the first U.S. car insurance policy was written for Dr. Truman J. Martin, in 1898. The idea of automobile insurance came from marine insurance, dating back to a time when the Chinese would ship cargo to the colonies. Shipments would periodically get lost at sea due to storms or pirates. Groups of investors owned each ship, and they would take out an insurance policy on the vessel and its contents for financial protection.

What Does the Law Require?

The purpose of car insurance is simply to provide financial protection to individuals from personal loss or injury as a result of an accident, and to have financial means available to cover any liability for another's accident-related loss, injury or death.

Every state requires drivers to have at least liability coverage. The law requires each licensed driver to carry a state-mandated level of liability insurance or other evidence of financial responsibility. Each state regulates its own insurance, and car insurance requirements vary from state to state. Wisconsin did not previously require insurance, then changed its laws in 2010. New Hampshire and Florida remain the only states that will accept evidence of financial responsibility instead of a liability insurance policy.

To save money, some drivers carry only liability insurance. However, this may not provide nearly enough coverage, especially if their state requires coverage limits on the low end of the spectrum.

Can Women Carry Less Insurance than Men?

Everyone knows women drive more safely than men. That makes for a bold statement, however, accident statistics back this up in many cases. A few surprises have shown up in the research, though.

A study performed at Carnegie Mellon University for the American Automobile Association says 82-year old women have a 60 percent greater chance of death in an auto accident than 16-year-old males. However, this is due to the frailty of older women, rather than risk-taking behavior since the elderly are more likely to die if involved in an accident.

Men stand a higher chance of dying in an accident than women, because they take more risks, drive more, speed more and drink more. According to the study, men overall have a 77 percent higher risk of dying in a car accident than women, based on the number of miles driven.

Here is where it gets interesting. In a study by Johns Hopkins University's Department of Emergency Medicine, the fatal-crash involvement rate per 10,000 drivers was 1.7 for women, vs. 5.3 for men with the highest age group consisting of teenagers. However, when the same study used a technique called "decomposition" to analyze the data, it took into consideration other factors, such as exposure prevalence, which means annual average miles driven per driver, and crash incidence density, defined as the number of accidents per million miles. The results showed that despite lower fatal crash involvement, females do not seem any safer than males when exposure factors in. This study is almost 15 years old but still relevant today.

Additionally, the Johns Hopkins study found teenage boys had about 20 percent more crashes than teenage girls. Male and female drivers from ages 20 to 35 ran about the same level of risk. However, once over the age of 35, females were significantly more likely to crash than males.

So, it looks like an adequate amount of insurance is every bit as necessary for women as for men.

Types of Car Insurance Coverage

Liability coverage takes care of expenses when a driver causes an accident, and the insurance will only cover injury or property damage to the other party to the accident, not the insured.

Liability insurance consists of two main components. Bodily Injury liability pays the injury or death-related expenses of the person or persons in the other car, and Property Damage liability covers damage done to another car or personal property in an accident. Some states also require drivers to carry Uninsured/Underinsured motorist coverage and Personal Injury Protection to guard against problems with drivers who do not have insurance.

Insurance companies will state liability coverage as three numbers that represent the two types of liability coverage, in terms of dollars. For example, in Arizona the liability limits are 15/30/10, which translates into $15,000 of Bodily Injury liability for each person, $30,000 Bodily Injury liability for each accident, and $10,000 Property Damage coverage.

Comprehensive insurance covers any non-accident problems, such as a car that sustains damage from natural causes or gets stolen. This encompasses everything other than collision damage, and takes care of damage caused by fire, animals, floods, vandalism, theft, earthquakes, tornadoes, broken windows or windshields, and falling objects such as tree branches. The deductible is important because a $1,000 deductible may lower insurance costs, but that means paying out-of-pocket for any damages up to that amount. On the other hand, if a person is driving a car several years old with a market value not much more than $1,000, comprehensive insurance may not make sense, since it only covers up to the value of the car.

Collision coverage takes care of repairs to a driver's car following an accident. It covers damage to a car when one hits, or gets hit by, another car or type of object. This coverage pays regardless of who or what causes the accident. Collision only pays for damages up to the amount of the vehicle's market value; an important consideration when making a purchasing decision. If it is an older car, it may not make sense to carry collision insurance since this is usually the most expensive part of auto insurance coverage. However, for a relatively new car, collision makes sense to carry, even with a deductible set higher to reduce premiums.

Before purchasing any type of auto insurance policy you need to become familiar with the types of car insurance available as many common accidents are not covered under state minimum requirements. Most car insurance companies offer direct auto insurance quotes but they also provide a wealth of information online so there is no excuse about learning about your policy coverage options before purchasing insurance.

Defining Auto Insurance Needs

The basic liability requirements of the states a driver lives in make a good starting point. One thing to note is that liability requirements may not come close to covering the costs of an accident, and the person at fault will likely get sued for the difference. The Insurance Information Institute recommends drivers carry at least $100,000 Bodily Injury per person, and $300,000 Bodily Injury per accident.

States with the lowest legal requirements for liability coverage are Florida and Louisiana, with 10/20/10. Alaska and Maine have some of the highest requirements, at 50/100/25. Wisconsin started legally requiring liability insurance starting June 1, 2010, and it has the highest liability limits in the nation, at 50/100/55.

Reviewing the dollar amount of coverage levels is an important first step to estimating insurance needs, then adding other components as needed or desired. This may include Uninsured/Under-insured Motorist, Personal Injury Protection, or comprehensive and collision insurance. Depending on the financing a person has for her vehicle the lender or lessor may require full coverage that includes liability, comprehensive and collision.

A driver may desire extra protection above the standard insurance limits. If he resides in an area that has a higher rate of uninsured drivers, he may choose to carry uninsured/underinsured motorist protection even if not required by law. Personal Injury Protection is an additional coverage, which covers medical, hospital and funeral expenses for the insured and her family. Loan/lease gap insurance pays off a financed car in the case of a total loss that reimburses less than the amount owed on the vehicle. Rental car reimbursement and Towing and Labor are other common add-ons.

Additionally, if a person wants insurance for a classic or collector car, he will need to work with an insurance company that specializes in these types of vehicles since they have special coverage requirements, and these vehicles have different types of risk than that of an every-day use vehicle.

Lastly, if a driver has been convicted of a DUI (driving under the influence) or other traffic offenses, she will usually need to carry SR-22 insurance. Her DMV or the court will notify her of this requirement. This type of insurance provides only basic liability coverage, but carries a much higher price tag because of the driver's high-risk status.

Finding the Right Car Insurance Company

After determining the right coverage needs for an individual's unique situation, it is time to look for the right insurance company. It is important to shop around and compare auto insurance companies because so many variables factor into insurance pricing, and every insurance company calculates its premiums differently by giving different weights to different factors. One insurance company may offer more discounts, but still comes out slightly more expensive than a company with fewer discounts but a specialization in higher-risk drivers, meaning those who have one point or more on their driving record. Many car insurance websites can provide quotes online in less than 10 minutes, and other insurance websites can search several providers at once to help consumers comparison-shop efficiently.

Should I look for Cheap Car Insurance?

As with any purchase you definitely want to find the best deal however auto insurance is most valuable when you need to file a claim and if you simply look for cheap car insurance quotes based only on the dollar cost then you really are missing out on the most important details. Car insurance comparison should consist of comparing policy with equal levels of coverage, deductibles and policy limits and then (only then) should you compare potential quotes by the dollar cost.

Ultimately how much car insurance you need will depend on your profile and unique needs however driving with no car insurance should never be an option. Not only are you exposed to great personal liability but also breaking the law where your driver's license and vehicle registration can quickly be suspended not to mention the hefty fines and penalties.

We know car insurance isn't as fun to shop for as a new pair of shoes but in the event of an accident you need the right type of coverage otherwise you might not even be covered at all. Always start a car insurance comparison search online to find providers, compare rates and learn about insurance. The right policy may take a few moments to find but it will take a lot less time than fighting for a claim which you thought was insured down the road.

This post was written by Alan Dunn, a car insurance enthusiast and serial entrepreneur who operate a number of money saving websites including HowtoSaveMoney.com