I recently bought a car, and I have no idea what auto insurance company is good and has great deals. What should I do?

The definition of “good” auto insurance coverage is largely dependent on your specific needs. If an insurance policy provides the coverage you need and adequately protects your financial well being, it is good coverage.  On the other hand, if it leaves you exposed to the potential for significant financial harm, then it is not good coverage for you.

One of the most important things you can do when shopping for auto insurance is to take an objective look at your financial needs. If your car is totaled in an accident, will you be able to replace the car without going into unmanageable debt? If you cause an accident that injures other drivers, passengers, or pedestrians, will you be able to pay for their medical expenses?

For most consumers, these scenarios represent significant financial loss. The primary purpose of auto insurance is to transfer the risk of these and other events from you to the auto insurance company. When you buy insurance, you are paying a relatively small amount, when compared to the risk you transfer, for the insurance company's assumption of those risks. It is important to choose coverages that minimize your risk at a cost you can afford.

Generally speaking, the more responsible you are, the better auto insurance deals you will find. If you have a clean driving record, maintain an excellent credit score, and own your home, insurance companies will see you as a lower risk. Thus, they will be willing to provide adequate auto insurance coverage at a lower price.

The best deals can be found through “standard” insurance companies - that is, those who prefer only to insure responsible drivers. If you have a poor credit score, or have caused several accidents, you may be limited to obtaining auto insurance through a “high risk” insurance company. You may pay higher prices initially, but as your driving record and credit score improve, these companies will gradually lower your rates.