Insurance: everybody needs it, nobody likes it.
Often, insuring an automobile is a person's first experience with buying insurance. People often say, "I'm a good driver, so why is my premium so high?" There are many reasons for this, too many to delve into here. Suffice it to say, even if your driving record is accident and violation-free that doesn't mean you will have a reasonable auto insurance premium. Particularly if you live in the northeastern United States.
First, the basics. In most cases, auto insurance premiums are going to have two big-ticket items: your auto liability coverage, protecting everyone else against bodily injury and property damage you cause, and collision insurance for your own car. The more expensive and sportier your car is, the higher your collision insurance premium is going to be.
So, how much liability insurance should someone buy? There is no simple answer since liability claims involving bodily injury are incalculable. Insurance companies can't estimate just how much it will cost to settle a claim. So, ask not how much coverage should I buy, but what assets do I have that need protection?
Generally, while younger drivers usually have fewer assets, they are the less experienced, riskier drivers. Older, more experienced drivers, will own a house, have savings, perhaps a 401K. So they stand to lose much more, if found at fault for an accident. But even using the example above - younger buy less liability coverage, older more, is not a slam-dunk. Historically, the first group has more accidents than the second.
So make the decision to buy as much auto liability coverage as you can reasonably afford. Someone with significant assets can and should buy the maximum limits available in their state. Younger drivers should buy at least one level about the minimum, then add more coverage later. Remember, rates start out high for young male drivers, moreso than for female drivers, but lessen as the young male driver gets a little older or gets married, and maintains a good driving record. Employment close to home, or commuting to work by mass transit, helps reduce costs, too.
In states like New Jersey, make sure your auto liability coverage is purchased, including a lawsuit verbal threshold. This will limit your right to sue, if you are hurt in a car accident caused by someone else, but it also, on average, makes your auto liability premium 30 percent lower than if coverage is purchased with no lawsuit threshold.
As far as collision insurance is concerned, the more expensive your car is, the more you need to look at a higher deductible. Today, a $500 collision insurance deductible is often a baseline standard. The next level is $1,000, then $2,000 or $2,500. The question that needs to be asked is: if I have an accident, and have to have my car repaired under my collision insurance, will my higher deductible be an inconvenience to pay, or will it be too big a blow to my ongoing finances?
Another area where cost needs to be balanced against coverage involves Personal Injury Protection. If you are hurt in a car accident, your "PIP" coverage will pay your medical bills, provide some loss of income coverage if you are unable to work, and provide funds for other essential services. The basic deductible for this coverage is $250, so consider raising that to $500, if available in your state. It's important, however, to include additional PIP coverage, in amounts close to or equal to your weekly income. These "additional PIP options" are inexpensive, so don't ignore them, particularly if you are established, with a good job.
Driving carefully will help you maintain a good driving record - perhaps the most important factor in controlling auto insurance premiums. Buy a reasonably-priced car, suiting all your driving needs. Splurging here, especially if you are under 30, will cause your insurance premium to rise, often unnecessarily. And, at least every few years, shop around for the best deal, making sure full explanations of all options are provided by your agent or company.