Car insurance is an essential purchase for all drivers. In addition to being a legal requirement of driving a car, it protects you financially in an accident and can even help cover repairs or replacement costs if your car is damaged or stolen. What type of car insurance you need and want will depend on where you live, what amount of protection you want to pay for, and what your budget is. While there are many different types of car insurance available, not all of them may be right for you.
Perhaps you’re buying a car for the first time in a while and need to shop for insurance, or maybe you’re looking to trade out your current insurance for different coverage or a better deal. If you’re looking for the best possible coverage for your needs, here are five of the best options available in 2022. We’ll also cover how car insurance works, the different types of car insurance available, and things to consider when choosing car insurance, so that you can make the best choice for you.
What Is Car Insurance?
Car insurance is a contract (policy) between you and an insurance company that protects you against substantial financial loss in an accident resulting in vehicle damage or bodily injuries that call for medical attention. It also protects you from legal trouble, as 49 of the 50 states in the US require you to carry at least liability insurance.
Your insurance contract details how much you will pay to the insurance company monthly or annually in the form of a premium. It also details what the insurance company will pay to mitigate your expenses and losses related to accidents or other damage to your car when you file a claim.
How Does Car Insurance Work?
In very simple terms, auto insurance works by gathering resources together from different people who have similar risks. Everyone pays into a collective pot, knowing that most people won’t need to take from the pot to cover substantial losses. At the same time, if you do need to pull from the pot, you have access to far more financial resources than you would if you had just been saving your monthly insurance payment in a piggy bank. Insurance companies manage the pot, and they also carefully manage risks, so that people who are more likely to need to file a claim are also paying more.
If you want to have more access to this pool of money, you’ll need to pay more. So if you want your insurance to cover all of the costs of an accident, or to cover you in the case of weather damage or theft, you’ll need to pay more. The more circumstances in which you are covered, the more likely it is that you’ll be making a claim. Insurance companies will mitigate their own risk by charging you more each month or year.
Types of Car Insurance
There are different types of car insurance available, each with its own set of benefits. Here are some of the most common types of car insurance:
- Liability Coverage: This is the most basic type of car insurance. It covers damage to property and injuries to people if you’re found at fault in an accident. It won’t cover any repairs that your vehicle may need or medical attention that you require if you cause an accident
- Collision Coverage: This insurance covers is a step above liability coverage, and will cover damage to your car if you’re involved in an accident, regardless of who is at fault.
- Comprehensive Coverage: This type of insurance covers damage to your car from events other than accidents, such as; fire, theft, or weather damage.
- Uninsured/Underinsured Motorist Coverage: The insurance protects you when you’re in an accident with an at-fault driver with no liability insurance or low limits to cover the injured parties. Even though insurance is legally required for all drivers, not everyone follows that law, and being hit by an uninsured driver can leave you with a lot of unexpected expenses.
- Personal Injury Protection: This type of insurance covers medical expenses and lost wages for you and your passengers if you get in an accident, regardless of who is at fault.
- Gap Insurance: gap insurance protects you if you’re still paying off your car. The value of a car depreciates quickly, and if your car is totaled while you’re still paying off your car loan or lease, it’s likely that what the insurance company will offer you for the car won’t be enough to finish paying off your loan or lease. Gap insurance covers that precise gap.
Things to Consider When Choosing the Best Car Insurance
You should consider a few things when choosing the best car insurance for you. Here are some of the most important factors to keep in mind:
-Understand your requirements: What does your state require of your insurance? Different states require you to obtain insurance that will pay out different amounts in the case of bodily injury or property damage when you are at fault.
-The amount of coverage you need: Would getting into an accident and totaling your car be disastrous? Can you afford to replace your car? Are there alternative ways for you to get to where you need to go if you had to be without a car? If losing your car would significantly impact your life for the worse, you’ll want to opt for coverage that will pay out regardless of who is at fault, and that will pay out enough to get your car back in good working order. This means you’ll want coverage that is more than just liability coverage.
-Your deductible: Your deductible is the amount of money you’ll have to pay out of pocket before your insurance kicks in. The higher your deductible, the lower your rates will be. If you have a decent savings tucked away for a rainy day, and are a very careful driver, it might make sense to opt for a higher deductible in exchange for lower monthly payments. In this case, you’ve made the assessment that it would be unlikely for you to end up with a large, unexpected cost, but you would also be financially okay if that were to happen.
-The length of your policy: The length of your policy will also affect your rates. If you choose a shorter policy, you’ll pay less for insurance than someone who chooses a longer policy.
5 Best Car Insurance Companies for 2022
1. GEICO: Best Overall
Geico is the second-largest auto insurance known for its low rates. It is a perfect match if you are looking for an affordable policy giver. Geico is best for minimum and full coverage. It also covers teen and young drivers between 18 to 25, drivers with clean records, poor credit drivers, and senior drivers aged 65 and above.
Overall it offers the lowest premiums rate and has many discounts for full coverage. However, it has a limited network of local agents, and charges very high rates for people who have had a recent DUI or are charged with a DUI while covered by Geico.
2. Auto-Owners Car Insurance
Auto-Owners Car Insurance has multiple discounts for safe drivers that help them to lower insurance premiums. It is best if you plan to pay your premiums in total on an annual basis, as that will save you money in the long run.
Additionally, Auto-Owners Car Insurance has slightly better-than-average car insurance rates for good drivers (meaning you have a clean driving record without at-fault accidents, tickets, or traffic-related violations). It also offers gap insurance and new car replacement coverage. However, it becomes costly when adding a teen driver to your policy. It also has the highest rates for drivers with poor credit.
3. Travelers Car Insurance
Travelers car insurance has the best price for gap insurance users. The insurance offers good discounts to safe drivers, good students, and young drivers. Also, it has a rich history with the highest ratings in financial strength overall and a 500 fortune long-standing company.
Travelers also offer below-average rates for most drivers and forgiveness for minor violations and accidents. The only downsides are that it’s not available in most parts of the country; and has higher rates for the addition of a teen driver to a policy.
4. USAA: Best for Veterans
The United States Automobile Association(USAA) offers car insurance coverage to members of the armed forces and their qualified families. USAA is best for military members, veterans, and their families. It also gives low rates to drivers with an accident or speeding ticket on their driving record.
In addition, USAA has solid customer service and a low base rate. However, USAA only offers services to the military, veterans, and their families and has fewer discounts than its competitors.
5. Nationwide Auto Insurance: Best for Bundling
Nationwide Auto Insurance is one of the ten largest insurance companies in the U.S. It offers a pay-per-mile insurance option for drivers who don’t use their cars to travel long distances and want to lower their rates. It also offers excellent customer service, and compared to its competitors, it has the cheapest motorcycle policies. The insurance offers the best coverage to seniors, tech-savvy drivers, and safe drivers.
Nationwide is another insurance company that will charge you very high rates in the case of DUI, and generally don’t offer competitive rates for minimum coverage options. If you’re looking for liability only coverage, then it’s probably best to look elsewhere.