5 questions to ask an insurance agent or AI guide before choosing car insurance

• When shopping for car insurance, asking the right questions can help you find the best policy to fit your situation, budget, and overall finances.
• Make sure your coverage limits are enough, ask about discounts, and check an insurance company's reputation.
• You'll want to understand the relationship between deductibles, policy limits, and the cost of premiums.

According to data from J.D. Power, only 58% of drivers say they completely understand their auto policy and what it covers.

The goal with shopping for car insurance is to "find a good balance between protecting yourself financially and keeping your premiums affordable," says Jovan Johnson, a certified financial planner and partner at Piece of Wealth Planning. "You don't want to overpay for coverage you don't need, but you also don't want to be underinsured just to save a few dollars each month."

To help you stay out of the dark and pick coverage that's right for your unique needs and situation, we've rounded up the top five questions to ask an insurance agent or AI guide when shopping for car insurance:

1. Are my coverage limits high enough?

Most states require a minimum of liability coverage, which helps cover bodily injury or property damage. Some states may also require coverage to help pay for lost wages or medical bills. And if you have a financed or leased car, the lender might require you to have full coverage, which includes liability, comprehensive, and collision insurance.

That said, while you might be able to squeak by with getting only the state minimum coverage, you'll want to be sure it provides enough protection. Otherwise, you'll find yourself with a gap in coverage.

To make sure you have sufficient coverage, you might not want to settle for your state's minimum liability coverage, says James Mayo, a certified financial planner and principal at IronFjord Wealth Management. "You might want to get as much as you can reasonably afford, because a lawsuit resulting from an accident could be financially catastrophic," he says.

According to data from AI-powered insurance comparison platform Luva, the coverage gaps US auto insurance agents and brokers most frequently correct are comprehensive coverage (65.6%), state minimum liability limits (58.1%), and uninsured motorist coverage (44.7%), followed by collision coverage (39.5%) and underinsured motorist coverage (37.2%).

"If there were a multi-car accident and people were injured, would your limits realistically cover that?" says Josh Glenn, a certified financial planner at Focused Wealth. "If not, would you be comfortable with an opposing attorney coming after your assets to make up the difference?"

If your coverage falls short and you don't have enough to cover the difference, it could deplete your savings or lead to debt. Factoring your entire financial situation (income, assets, debt, and net worth) can help you pin down the types of coverage and the amounts you should consider.

2. What discounts are available?

To tap into savings on your policy, you can ask what discounts might be available if, say, you bundle insurance, pay in full for your policy or set up auto-payment, have been claim-free for several years, or are enrolled in an insurance carrier's usage-based telematics program. That's savings you can enjoy by just checking what you might qualify for.

If you're looking to lower premiums, on top of discounts, rather than bumping down your liability coverage, Mayo recommends considering increasing your deductibles, which also can bring down the cost. "Most people can figure out how to cover a $1,500 or $2,000 deductible," Mayo says. "A six-figure lawsuit is a different story."

You can also check how policy adjustments could change your monthly premiums, Johnson says. When comparing quotes from different companies, make sure the quotes are identical in terms of type of coverage, limits, and deductibles.

3. When does it make sense to change my deductible?

Because deductibles impact your monthly premium, ask if increasing or decreasing your deductible might make sense.

You'll want to understand what you're actually getting for the premium you're paying, says Jessica Smith, a certified financial planner and cofounder of Vitality Wealth. Besides being familiar with terms like liability, collision, and comprehensive coverage, the deductible you choose plays a big role.

"A higher deductible typically comes with a lower premium, which may be a good fit if you have sufficient savings to comfortably cover out-of-pocket costs in the event of an accident," Smith says. "The goal is to have coverage that protects you from significant financial loss, not necessarily every potential expense."

Going from a deductible of $500 to $1,000 can lower your premium, adds Alvin Carlos, a certified financial planner and cofounder of District Capital Management. "If you have an emergency fund that can absorb the extra $500, the trade usually makes sense," he says. "You're basically self-insuring the small stuff."

4. What isn't covered under this policy?

Exclusions can be just as important as the coverage itself, Mayo points out. Not combing through the details of a car insurance policy to spot exclusions can leave you with a denied claim or lead to a cancellation of your coverage.

In fact, research from Luva finds that 67.8% of US insurance agents and brokers say customers are somewhat or much more often surprised by claim exclusions than by deductibles. For example, maybe a policy covers rental cars, but excludes personal travel, unauthorized drivers, or off-roading.

5. What is the track record of this insurance company?

Ask to look carefully at a carrier's financial strength ratings, customer reviews, claims handling reputation, and overall customer experience, Johnson says. "You want a company that not only offers competitive premiums but also has a good track record of handling claims," he says.

An insurance company may also have minor differences in the process for handling claims, in terms of deadlines for filing a claim, ways you can submit a claim (i.e., mobile app, portal), and how and when your deductible is applied. So it's a good idea to check the particulars of a carrier's claims process.

"Asking these questions gives you a good foundation for comparing different policies," Johnson continues. "You want to make sure you're getting the right coverage, but also that the premiums fit comfortably within your budget."

Created by the Commerce team at Business Insider with Luva.

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