Car accident


Imagine you are driving and the car in front of you slams on their breaks.  You don’t react quick enough and you hit them. Thankfully no one is hurt, but there is some serious damage to the vehicles. While this event is unpleasant and stressful, at least you have good auto insurance coverage to protect you and cover the expenses. Imagine how much worse this would be if you were uninsured.

Why Do You Need Insurance?

Because it is the law is the quick answer.  Every state requires drivers to maintain a certain level of auto insurance.  Check with your local DMV or ask an agent what the appropriate levels are for your state.

​Besides the legal aspect, carrying auto insurance is the smart thing to do.  Imagine the cost of fixing the damage on your vehicle, someone else’s vehicle and covering medical expenses all out of your own pocket.  This would be a financial disaster as bills can easily sore into the tens of thousands of dollars. Insurance provides you with a security blanket by covering these costs in exchange for a monthly premium.

What is 15/30/10?

Insurance can be confusing and how auto policy coverage is quoted can provide some particular frustration for those buying their first policy. When you are reviewing your state requirements for insurance you may see something like 15/30/10.  These numbers may vary by state. What this is saying is that you need a certain level of medical and property protection.  In our example above, you would be required to carry a policy that covers $15,000 per person for bodily injury, with no more than $30,000 paid per accident for bodily injury and $10,000 per accident for property damage.

​Once you understand what each number means, it’s not very complicated.  What coverage you will need depends on your state. You can check your state’s minimum requirements here, but be sure to confirm with your insurance broker before purchasing a policy as requirements may have changed from the time of this writing.

​Remember, the state only requires a minimum level of coverage. You might find it beneficial to purchase a policy with coverage more than the minimum.  This is a good idea and will help protect you in the event of a serious accident.

Types of Auto Insurance Coverages

Auto insurance companies offer a variety of different coverages you can add to your policy. While you are required to meet your state insurance minimums, many people find it beneficial to purchase additional protection.

Medical Payments

Covers medical bills for you and anyone in your vehicle who are injured in an accident.

Personal Injury Protection (PIP)

Similar to medical payments, but with additional protection. PIP pays for some rehabilitation services, funeral expenses, loss of work and some replacement services.

Uninsured Motorist Coverage

While insurance is required, not everyone follows the rules. Uninsured motorist coverage will provide bodily injury and property damage coverage if you are in an accident where an uninsured motorist is at fault.

Collision Coverage

Pays only for damages to your vehicle if you hit another car. This can also be used if you hit an inanimate object such as a light pole.

Comprehensive Coverage

Covers you in the event your car is damaged by an event other than an accident. Comprehensive coverage would be used if your car was in a fire, hail, a flood or broken into.

Guaranteed Auto Protection (GAP) Coverage

If you are in an accident where your car is totaled, you may find that the amount paid out by comprehensive and/or collision insurance doesn’t cover the full amount of the loan you have on the car (if you are financing your vehicle). GAP insurance will cover what comprehensive and/or collision does not.

For example, you bought a car for $25,000, put down $1,000 and have a loan for $24,000. You get in an accident after a few months and your car is totaled. You owe $20,000 now, but the car is only valued at $15,000. You would be responsible for paying the lender the $5,000 balance if you didn’t have GAP insurance.

How is Your Premium Calculated?

Insurance companies love statistics.  How much you pay for any policy will be based on the odds that you will have to file a claim. When determining your auto insurance premium the following factors will be taken into consideration:

  1. Driving Records – Accidents and tickets create higher premiums.
  2. Age – If you are under age 25 expect higher premiums.
  3. Where you live – If your zip code has higher rates of crime and auto theft the insurance company will factor this into your premium.
  4. Gender – Women tend to be safer drivers statistically speaking, so they usually get lower rates.
  5. Your car – Insurance on a Nissan GT-R will be much higher than on the Nissan Leaf.
  6. Your credit – Those will higher credit ratings are assumed to be more responsible, thus a lower risk and lower premiums.
  7. State requirements – Every state has different requirements and this will affect how much coverage you will need to purchase.

How to Keep Your Costs Low

You never want to go without insurance or be under-insured. With that said, there are a few ways to try and reduce your rates while maintaining quality coverage.


If you watch TV, you’ve probably seen insurance companies promoting their discounts. Good driver, good student, paperless and bundling are just a few options. Speak with your insurance company and ask what discounts they have. If you have been a customer for a few years, ask if they have a discount for loyal customers. If you don’t ask, you won’t get it.

Maintain Good Credit

Maintaining good credit shows financial responsibility and this plays into how your risk is calculated. Higher credit ratings generally indicate a more responsible individual, thus a lower risk and lower rates.

Shop Around

There are many auto insurance companies around and they all want your business. Shop around to see if you can get better rates by switching providers.

If you decide to switch, it’s important that you don’t let your policy lapse. There can be large fees if your insurance lapses for even one day. For example, in Nevada if your policy lapses for 1 – 30 days, the reinstatement fee is $251!

Select an Appropriate Vehicle

As mentioned previously, the car you select will play strongly into calculating your premiums. Cars that are newer models, two-door or sports cars and have certain colors, like red, are usually subject to higher premiums. Take this into consideration when you begin your search for a car.