What kind of insurance do drivers like me buy?

Watching every penny is the starting point for getting rich slowly. But there are also big moves you can make that will earn or save you a lot of money. Big wins include refinancing your mortgage, negotiating your salary, improving your credit score or evaluating your car insurance. Your car insurance probably comes up for renewal every six months. When was the last time you compared insurance carriers or revised your policy to see if you could save a few hundred dollars? I thought so.

Des Toups, senior managing editor of Insurance.com (a QuinStreet site, like GetRichSlowly.org), has a lot of good information and statistics about car insurance that we wanted him to share with the GRS community. So, here's Des!

Car insurance has only one real purpose: To stand between you and financial disaster.

Think about rear-ending a brand-new Jaguar, or your child causing an accident that puts other people in the hospital. Your car insurance only pays up to its limits. After that, you're on your own.

Got a house? A savings account? A regular paycheck?

When there's no more insurance, the other guy's lawyers will turn to you.

Sure, there are generally accepted guidelines out there when you decide how much coverage to buy. Homeowners need at least $100,000 in bodily injury liability protection, because a large, valuable asset like a house is an easy lawsuit target if you don't have enough to cover your victim's hospital bills.

Or maybe you own nothing and have no savings — nothing you could lose. Then you might go for the legal minimum in your state.

The space between those extremes is huge, though, and needs vary from state to state, by age and by financial standing.

Seeing the choices other drivers in your situation make can be a good guideline when you shop for car insurance yourself. Insurance.com recently analyzed more than 550,000 insurance quotes delivered through its price-comparison tool to find the most common choices made by drivers of similar age, who live in the same state, who drive the same model year of car, or who own their homes.

You can find data for your state in the “What Drivers Like You Buy” tool.

Nationwide, there are clear patterns. Three out of four drivers choose a $500 deductible. A third of drivers under age 25 shop for the lowest legal amount of liability coverage, but only 19 percent of drivers over 55 do.

Nationwide, the most common coverage profile looks like this:

  • Most common bodily injury liability coverage: $50,000 ($100,000 per accident), selected by 46 percent of all drivers.

  • Most common property damage liability coverage: $50,000, selected by 59 percent of all drivers.

  • Collision coverage, selected by 60 percent of all drivers.

  • Comprehensive coverage, selected by 61 percent of all drivers.

  • $500 deductible, selected by 74 percent of drivers who buy comprehensive and collision.

  • Towing and emergency road service, selected by 16 percent of all drivers.

  • Rental reimbursement coverage, selected by 16 percent of all drivers.

As you decide on what coverage to buy, consider these tips:

  • Extra liability coverage beyond the required minimums is generally quite cheap — you'll pay only a fraction as much for an additional $50,000 as you did for the first $25,000.

  • Raising your deductibles can save you money. Going from a $500 deductible to $1,000 on a 2012 Ford Explorer in Texas, for example, would cut the annual bill for comp and collision from $576 to $470. Saving $100 a year on your car insurance is nice, but only if you have $1,000 to get your car out of hock to the body shop.

  • Before you make big changes in coverage, shop around first. The more you pay for car insurance, the more you are likely to find savings by switching insurers.

More about...Insurance

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Beth
Beth
5 years ago

Please correct me if I’m wrong — If I’m understanding correctly, you can carry as little as $50K or $100K in liability? In Ontario, the legal minimum is $200K. Though none of these amounts is helpful if someone gets hurt and wants to sue you for $1 mill. (Don’t laugh, I’ve seen it happen.)

I’d rather save by reducing my deductible than reducing liability 🙁 I can handle a $1000 deductible with my emergency fund. I can’t handle someone wiping me out completely.

Adam
Adam
5 years ago
Reply to  Beth

Correct. It varies by state, my here in Ohio, the minimum coverage is $50K for bodily injury and $25K for property.

Like you, I buy much more, but have a higher deductible and pay my premiums bi-annually to keep the cost low.

Paul
Paul
5 years ago
Reply to  Beth

If you have assets, you should carry an umbrella policy. Mine covers me for liability up to $1,000,000 on top of my other insurance. But, it has minimum liability coverage for my other insurance (Auto – 250/500/100, Home – 300). My umbrella policy costs me ~$160 per year. I currently have a $1000 deductible on my house, and no collision insurance on my cars (though I do have comprehensive since I don’t have a garage), but hope to raise the deductible and eliminate the comprehensive insurance in the future. As you become more financially independent, you should be able to… Read more »

Mick
Mick
5 years ago
Reply to  Paul

We went with the umbrella policy as well, especially when we had 3 teenage drivers at once.

M
M
5 years ago
Reply to  Beth

Beth,
I’m getting quotes now for my insurance in ON. I dumped collision because I have an old car but have set Bodily Injury and Property Damage at 1M each. And since I’m a good (well, not caught) driver this all came in for less than $700. And we know that’s a good deal for ON.

Jon @ Money Smart Guides
Jon @ Money Smart Guides
5 years ago

I have a $1,000 deductible because as you’ve stated, it saved me money on my premium. I also make sure I pay every six months. My insurer gives me the option to pay monthly, but there is a fee tied to it. Instead, I just take my annual premium, divide by 12 and save that much from each paycheck. When the bill comes in the mail, I always have the money for it.

SavvyFinancialLatina
SavvyFinancialLatina
5 years ago

Our policy comes up for renewal in December or January. I will look at raising our deductible to see if we could save some money. Also, I hope my husband turning 25 and our cars getting older will reduce our premium. We paid $2000 for two cars this year!

Dianecy
Dianecy
5 years ago

You don’t have to wait until your policy comes up for renewal. Call them and start saving money right away. And yes, turning 25 should help.

JoeM
JoeM
5 years ago

Turning 25 does basically nothing to your premiums, especially if you have no tickets or accidents. There’s some myth out there about 25 being great for insurance (nope) and being able to rent a car (nope – can do that before 25) that I never understand.

The only way I’ve found at 25 with a 2010 used car to lower my premium is to increase the deductible from $500. At this time, that’s not really something I’d like to do.

Rail
Rail
5 years ago
Reply to  JoeM

Turning 25 made my insurance drop big time. Maybe things were different 20 years ago.

Beth
Beth
5 years ago

Speaking as a driver of a teenage car, your premiums won’t drop as much as you think when your cars age. (Mine didn’t drop at all because insurance goes up, just like everything else…)

Collision coverage may not be as important on an older car, but liability isn’t much different. Actually, in a older car you and your passengers are more likely to be disabled as a result of an accident because older cars have fewer safety features. Calling around for quotes as I think about replacing my car has been an eye opener!

JoeMal
JoeMal
5 years ago

A follow up – I asked my Dad what his premiums are. I believe same coverage, deductible, clean driving record for the past 10+ years and aged 57 – it was within $40 of mine for a 6 month policy. That pretty much settles it for me that my premiums are not going to go any lower, unless I raise my deductible or move to a state that does not have no-fault insurance like MI does. I pay a good 30%+ more than if I lived in Ohio for instance. I believe there’s also a health fund for the state… Read more »

Dianecy
Dianecy
5 years ago

Yawn. Nothing new or particularly helpful here. These vanilla statistics are rather meaningless. Homogenized lists are not “drivers like you”. If the focus of the article was how to get the most effective coverage for the least cost, then it might have been helpful for “drivers like me”. Nothing in this article entices me to “hop on over” to insurance.com. This “post” feels like one big generic ad. No thank you.

Christina
Christina
5 years ago

I thought the article would cover umbrella insurance – esp. important for those with assets.

Dave
Dave
5 years ago
Reply to  Christina

I would like to see an article on umbrella insurance.

Ucha Gavasheli
Ucha Gavasheli
2 years ago
Reply to  Dave

Dave,

Umbrella insurance is a topic which doesn’t seem to have tons of specific articles covering it. According to Wikipedia it is liability insurance with ” excess of specified other policies and also potentially primary insurance for losses not covered by the other policies” but yes as related to this topic I would have liked to see that as well.

Wes
Wes
5 years ago

Calling 100k a high extreme for a per person liability limit seems a little ridiculous. That is the minimum that my agency will offer. Our state requires a minimum of 25k, but good luck with that if you injure someone. Yes, shopping for car insurance is a great idea, but buying anything below 100k per person is not. Most of the readers of this blog should carry much more than that and probably have an umbrella overtop of their cars, home and whatever else they insure.

Ray
Ray
5 years ago

Not every reader is at the same level. Last year I purchased a car for the first time in my life (used to live in a city where public transit make it unnecessary), and I’ve found this helpful. Thanks!

Dianecy
Dianecy
5 years ago

Hi Ray, congratulations on your car! Did you pay cash for it? If not, did you make a big down payment and get a sub-2% loan? Does it get great gas mileage? Is it relatively economical to insure?

Your comment underscores my point. This article was entry-level. I hope you researched insurance before you bought the car. Had you done so, this article might feel the same to you as it does to me.

Jeff
Jeff
5 years ago

It amazes me the liability limits are so low in the US where the medical costs and the rate people sue are so high. In Alberta, Canada, the legal minimum is $200K like in Ontario and here the average person carries 1 million in liability coverage. I carry 2 million myself as it only cost $43 a year to get the extra million. It sure gives me a lot of peace of mind to know my financial life will not be ruined due to one accident.

Mike
Mike
5 years ago

1- Shop around, as there are huge discrepancies between insurers even ones that are highly rated. Remember cheap insurance is great unless you need to get a claim paid and its a problem. Check ratings and find the ones that having good ratings and reasonable rates, it PA its Erie Insurance. 2- Talk to your agent, have them compare the cost for different liabilities with different deductibles among other things. I found going from 100/300 liability to 500/1million was very little change in premium. I did the same for my home owners policy instead of getting an umbrella policy atleast… Read more »

Tina
Tina
5 years ago
Reply to  Mike

All of your tips are great pointers!

One more thing: insurance companies use your credit report to help compute your rates along with other factors.

We have been building our credit back up and our credit score is higher than it has been in a long time. We just got a 50% rate cut! So if your credit is bad, you will pay more for insurance. Just another reason to take care of your credit.

DesToups
DesToups
5 years ago

Agree, Dianecy, that this is very basic — but most of the inquiries we get at Insurance.com come from people who aren’t quite sure what they bought, or why. I’m sorry you found it unhelpful.

Dianecy
Dianecy
5 years ago
Reply to  DesToups

Maybe that’s because I’m over here at GRS, not at Insurance.com. Frankly, I don’t like being manipulated and that’s just how this post felt. Mike at #15’s tips were far more helpful. I appreciate your apology, Des, but it’s not really necessary. You’re just doing your thing. It’s the editors here that I have an issue with. Don’t they know us by now? Don’t they care about us? Seems like the need to cross-promote is higher than the need to publish material suitable for GRS readers. This is how you lose readers over time…

Rail
Rail
5 years ago

Motorcycles and “05” pickup with low miles have full coverage. “82” Buick work car has liability only. $1,000 deductible on all and $100K on the liability. Am also lucky I don’t drive that many miles other than to work and Iowa has generally low car ins. rates. I do need to shop my car insurance around though, have been with same company for over 20 years and the last time I shook them up was 10 years ago. One more thing for my Too-Do list. Also, pay bi-yearly or yearly and you can save money on premiums.

James Salmons
James Salmons
5 years ago

Some good ideas here but I would like to suggest something a little different. Explore with the agent (make sure you have a good one that will be helpful) what their options are. Getting less coverage in some areas may be OK, but can come back to bite you if you are not careful. Other factors can be equally if not more beneficial. For example, multiple policies. By getting my life insurance with my auto and another policy I really got it for free because of the combination. Also, by choosing a car with highly rated security and safety features… Read more »

Ace
Ace
5 years ago

There is a second reason to buy insurance: to compensate and help people who may be injured by your negligence. Saving money on a $50,000 policy is nice and all, but I just watched my coworker get his leg amputated because a driver was talking on her cell phone and slammed into him on his motorcycle while he was stopped at a red light. He is now facing multiple surgeries, a lifetime of medical costs, prosthetic limbs, etc. Her $50,000 per accident liability limit didn’t even cover the cost of his initial hospital say. They guy has a wife a… Read more »

James Salmons
James Salmons
5 years ago
Reply to  Ace

Extremely important point. I’m a fan of old sayings whether they go back to Ben Franklin’s almanac or not. One fits here:

“Don’t be penny wise and dollar foolish.”

I’ve seen what looked like small accidents cause people to end up thousands of dollars in debt, insurance or not.

Linda Vergon
5 years ago
Reply to  Ace

As a court reporter, I can’t even count how many personal injury cases I worked on where the coverage was completely inadequate to cover the loss, leaving people to fend for themselves — and one of the biggest reasons was because people scrimped on coverage to save a buck. Ace, your comment is exactly to the point and why I think this is actually an important post. Unfortunately, there are a lot of people for whom insurance is nothing more than a state mandate that must be fulfilled in order to drive legally. As a result, and also because they… Read more »

Dave
Dave
5 years ago

What a great and informative post! Thank you.

As someone who recently shopped around for car insurance to compare, the only thing I can say is: DO IT! I was very surprised to have learned how much I could save with other companies, and still get the same coverage I have now. Wow!

Carla
Carla
5 years ago

I’ve always carried the max and never regretted it. In 2012 a friend of mine was hit head on by a drunk driver the day after Thanksgiving. Two operations – foot and wrist, and months off work (grocery store checker and he didn’t have many resources), he eventually received a settlement to compensate for that. Though I’ve never had an accident, don’t drink & drive, don’t talk or text on a phone, eat, etc while driving, I know you never know what can happen and I want to be prepared for the worst. In terms of umbrella insurance, I have… Read more »

Amanda
Amanda
5 years ago

If you have ever had to use your insurance, you will know that not all insurance is equal and it’s not just about price and coverage. A good insurance company will fight for you, a bad one will accept that something that was in no way your fault is 25% or more your fault. We just had a hail damage claim on our brand new car. $2800 worth of damage and we only paid $100, everything was taken care of including rental car. Premiums we not effected by this claim. That is piece of mind.

James Salmons
James Salmons
5 years ago
Reply to  Amanda

Good point. And along with that (though of somewhat less importance) it is also worth considering the size and service of different companies in your service area. When I lived in Fresno, California, years ago I remember that all companies but one required at least three estimates and the repair shops charged a good bit for them unless you used their service. My insurance company had agreements with all of the local repair shops. You stopped by the insurance office and they gave you authorization to get the repair done; you could go directly to any of them, your choice.… Read more »

Eric
Eric
5 years ago

Only one person has mentioned personal injury protection (PIP). When we had our accident last year we only had a $10K in PIP on our insurance. This went very quickly. For those who don’t know, when you are in an accident that is not your fault, the other person’s insurance company will not pay a dime until you decide to settle. If you have any injuries that cannot be take care of immediately (whip lash) you are responsible for the medical bills until you settle. This can add up fast – especially if there is a hospital visit. Most people… Read more »

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