How Much Should I Budget For Auto Insurance

Oct 10, 2020 | Personal Insurance

When the budget is tight and you need the best auto insurance in Denver, CO (or any other state for that matter) at the most affordable rates.

Auto insurance protects you and your vehicle in the event of an accident. You can never say when an accident happens; hence, being prepared for it can be your best protection. Having auto insurance may be quite expensive. However, if you are going to make a comparison between the amount of your auto insurance and the cost for hospitalization, car repair, or a new car, and your life. It is certain, you will realize that having insurance is a must. 

Most states legally require all drivers to carry auto insurance. It is consists of different types of coverage such as: 

  • Comprehensive– A coverage that helps pay the replacement or repairs of your car in case it is stolen or damaged due to an accident that is not collision. 

What is covered under Comprehensive Insurance? 

Vandalism Fire Theft Natural Disasters like a tornado, hurricane, and Hail Damage to your car caused by an animal Damage due to civil riots and chaos Damage caused by falling objects 

What is not covered by Comprehensive Insurance? 

Any damage due to collision Medical expenses for you and your passenger ( if there is any ) Damage to another person’s car due to a collision 

  • Collision– This coverage helps you pay the repair from damage due to collision with another vehicle, objects like fence and signage. 

What is not covered by Collision Insurance? 

Damage to other person’s vehicle as a result of the collision Your medical expenses and your passengers will not be covered as well The driver from the other car you collided with as well as the passengers are not covered 

What is covered by Collision Insurance

Collision with another car or vehicle 

Single car roll-over accidents Collision with objects like signage and fence 

  • Personal Injury – It covers your medical expenses as well as your passengers. And its good feature is, it doesn’t matter who is at fault. When an accident happens, you will be covered no matter what. Even when you are just walking on the side of the road, and an accident happened, a car hit you. That should be covered as well because personal injury covers not only just when you are driving. Another example is when you are sitting inside your car while at a parking area waiting for your child then another car accidentally hits yours, that one must be covered too. 
  • Bodily Injury – It covers the costs of medical expenses for the person or people who you injured in your car. The coverage also includes the driver injured from the other car, passengers that are injured inside your car who are not your family, and even the pedestrians that might get injured during the accident. However, if you are the one who caused the accident, this coverage may help you pay your legal expenses in case you need to file a case in court. 
  • Uninsured / Underinsured Motorist – Underinsured coverage kicks in when an accident happens, and you are not at fault. The other motorist must pay for your medical expenses, however, if their coverage wasn’t enough to cover yours, underinsured coverage must take over. For example, your medical expenses and automobile damages reached $1,500. Unfortunately, the other motorist’s insurance’s maximum coverage is $1000. The remaining balance will be shouldered by your insurance provider as long as it is within the maximum coverage. 
  • Personal Property -This covers the fees for damages to another person’s property due to an accident you caused while you are driving. For example, you are trying to maneuver while parking your car in your garage, but you accidentally hit your neighbor’s fence, the personal property covers that. 

You will be required by your state to carry a minimum amount of coverage before you can drive legally. You will have the option to choose and add coverages to your policy if you wish to have more protection. But on average, auto insurance costs $1,548 per year. That is $774 if you choose a per six-month policy, and $129 if you choose monthly payment. However, auto insurance’s amount will still vary. The insurance provider will determine how much will be your premium depending on different factors 

Factors that can affect your insurance rate 

  • Which state and kind of place you are residing – The location is a great factor that can affect the amount of your auto insurance. Each state has its own rates and laws regarding auto insurance, just like in Louisiana. Areas that are vulnerable to natural disasters pay higher premiums. It is known as a hurricane-prone area, hence Louisiana ranks second in the U. S. for having the highest premium among all states. Moreover, areas that are densely populated tend to pay higher premiums, due to the fact that accidents are very common in such types of areas. Louisiana pays the highest auto insurance in the whole U.S. which has an average premium amount of $3,280 for full coverage, and $1,488 for minimum coverage. On the other hand, Indiana holds the first spot for the lowest premium rate in the whole country, with an average rate of $1,094 full the full coverage, and $430 for the minimum. Now here is an example of a state that is not densely populated: Iowa drivers pay the lowest rate for minimum coverage car insurance for just $300 per year. The majority of its states are rural rather than urban. That being the case, the fewer the car on the road, the less likely for accidents to happen.
  • Age- This factor has a huge impact on the amount of your auto insurance more than you think. Single men at the age of 25 and below pay more in their auto insurance than married men. Here are the reasons why: Younger men with no responsibilities, typically are more adventurous and wild. Most of us can relate to this for sure! This is the stage of our lives where everything new and risky sounds enticing. And these characteristics can be a risk for possible filing of claims.
  • The nature of your work and your driving habits – It is understandable that if you have a high-risk kind of job, the cost of your auto insurance is higher as well. So what exactly are the factors that can contribute to making your work and habits a high-risk? Driving your car daily going to and back from work is one. Being on the road alone can be a reason for you to meet with an accident. That being said, if your work requires you to travel often, expect a higher than average cost for your insurance. Also, having a garage (or even just being able to part in your driveway) at home and a safe parking space at work is a must. If you happen to just park on the street side or in a shared garage, those factors can affect the cost of your auto insurance. So just think of the things that can make you and your car prone to accidents. If you are doing any of those high-risk things, you already know what will happen to your premium.
  • The kind or type of car you have – When shopping for a car, always keep this in mind: The faster and the higher-performance car you choose, the more costly your auto insurance is. The reason why is that, if your car runs faster than an average car, the tendency to encounter an accident is immensely high. That being the case, buying a sports car will cause you higher auto insurance. On the other hand, if you happen to have a family car along the lines of the sedan, minivan, and SUV, your auto insurance will likely fall on the average amount. Aside from the fact that these types of cars don’t typically run extremely fast; bigger cars are as well considered safer. Due to the reason that bigger cars can absorb greater amounts of impact during an accident. Some factors can lower your auto insurance such as alarms, anti-theft devices, anti-lock brake, and other safety features that can be added in your car. Another way to save money is by buying a used car. Auto insurance for used cars is way cheaper than insuring a new one.
  • Your credit score – Credit ratings have always been a great factor not just in auto insurance but also in your homeowners’ insurance, and even bank loans. It is indeed important that your credit score must be good in order to get a great deal. Insures often check credit ratings to assess if the applicant can be a risk. If your credit score is good, the less likely you are to file a claim. The same analysis goes with if you have a bad credit score, then you are a big risk and might be more likely to file a claim. So how can you fix it? In spite of the fact that your credit score is something that you can’t fix overnight, what you can do is at least improve it by making sure to pay your bills on time. As well as trying to reduce your debt. This may be a long road to take, but if you are planning to get auto insurance, include this on your requirements to prepare you on your plans of having insured. However, there some states wherein using credit scores to assess the insurer’s risk is illegal. These states are the following: 
  1. Hawaii 
  2. California 
  3. Massachusetts 
  • Your driving and claims history – This factor can give any insurance company a red flag. If you have received tickets and committed violations before like DUI and reckless driving, expect a higher rate for your auto insurance. The same goes if you have a record of filing too many claims in the past. If you have homeowners insurance, this news can no longer surprise you. Just like in any other type of insurance, every insurer will make a background check in regards to what happened in your previous auto insurance if there is any. So don’t fret, this step is just normal because all insurance companies have this procedure. Better yet, talk to your insurance agent about it and they will surely provide you the best option that they can give. 
  • Marital Status – This may seem like a petty reason for some, but statistics show that married men and women are less likely to file claims. If we think about the reasons, maybe it is because one, married people are older and wise enough to be responsible and cautious drivers. And two, people with a family (like having a spouse and children) tend to be more careful about their actions because other people and lives can be affected by their behavior on the road. That being the case, married drivers are usually offered lower premiums. Now, tying the knot might not be so bad after all!
  • Deductibles – Deductibles are the amount you pay out of your own pocket before your insurance pays anything after you file a claim. The average cost of the deductible is roughly $500. But it can be as high as $1,000 to $2,000 and as low as $100. You can save a lot if you are just gonna be strategic when it comes to budgeting your insurance. It is better to pay a deductible worth $1,000 than playing safe and just pay $200 for your deductibles. Because once you file a claim, that $1,000 deductibles can save you a fortune. Being said, if you happen to have some extra money on your bank, you shall include this option because it can be beneficial for you in the future more than you think. 

Now that you already have a better understanding of how to determine how much should be your budget for your auto insurance; you can easily shop now from different insurance providers. It’s best to ask your insurance agent about all the things that you want to add to your policy; as well as let them know what you don’t need. Surely they will be happy to help!

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