Protect Against Collisions and More If you drive a car in the United States, liability insurance must cover it. This type of policy pays for medical and property damage resulting from a vehicular accident. You can also purchase comprehensive and collision insurance to cover other costs. These additional coverages help protect the value of your car should it be damaged. If you are calculating how much it will cost to buy a car, you need to take into consideration the cost of insurance as well. In this article, we’ll review the basics of car insurance and the best auto insurance companies in America, including costs, pros and cons. This is a brief introduction to automobile coverage. Liability Coverage When an accident occurs, liability insurance covers you, household members and authorized drivers for the costs associated with property damage and bodily injury. It covers the cost to repair or replace property damage that you caused. [youmaylike] You are also covered if you cause the bodily harm or death to someone else while you are driving the car. This includes medical expenses, loss of income and specified legal defense costs. Collision Insurance If you are involved in a collision, this type of insurance will help pay for repairing or replacing your vehicle. If the collision is your fault, the coverage may extend to other damaged vehicles involved in the accident. States do not mandate that you buy collision insurance, but your lender or car dealer will if you finance or lease the car. Policies offer a range of deductibles, which is how much you’ll have to pay for repairs before the insurance kicks in. Larger deductibles lower the policy premiums but expose you to more out-of-pocket expenses if a collision occurs. Comprehensive Insurance Comprehensive insurance covers damage to your car that occurs for reasons other than a collision, including theft, fire, vandalism, weather and natural disasters. This coverage is often required if you finance your automobile. You can add riders to this insurance to provide coverage of additional costs, including auto towing, glass repair, daily rental while your car is in the shop and emergency roadside service. As with collision insurance, you can set the deductible on your comprehensive insurance policy to cut your premium costs. Gap Insurance If your car is severely damaged in an accident or other incident, you might find that your comprehensive and collision damage won’t provide enough coverage to pay off the amount you owe on the vehicle. Many policies pay only the fair market value of a totaled car, which might be only 80% of the amount you owe. You can buy additional insurance to plug this gap and ensure you can pay off the car loan in full if the vehicle is destroyed or stolen. Normally, car leases require you to buy gap insurance. If you pay cash or pay off your loan, you can save money by avoiding or dropping gap insurance when no longer needed. Top Five Auto Insurers These five insurers all offer full coverage policies and many additional services. Amica Amica is a superstar among car insurers, winning accolades from Consumer Reports and J.D. Powers. It’s known for handling the claims process smoothly. The average annual cost for full coverage: is $1,360. Pros You can have your car repaired at any body shop, without restrictions. Offers a premium package which, for an additional cost, provides full glass coverage, rental coverage, good driving rewards and identity fraud monitoring. Superior financial stability rating from A.M. Best. Cons Missing some discounts, such as military, low-mileage and prepay discounts. Must speak on the phone to get a quote. Sparse website when it comes to customer education. State Farm State Farm is the country’s largest multi-line insurance company. It excels in customer service and regularly garners high marks from customers. The average annual cost for full coverage: is $1,337. Pros Superior financial stability rating from A.M. Best. Excellent online quote tool, getting customers a quote in as little as five minutes. Easy claim handling and top service from its more than 18,000 agents and its easy-to-use mobile app. Cons Doesn’t offer coverage for new car replacements or uninsured motorists. Missing prepayment and automatic payment discounts. The Hartford While only 11th in size, The Hartford is big when it comes to policy options. It offers rates based on your actual driving as well as full replacement of new cars when destroyed shortly after purchase. Average annual cost for full coverage: N/A. Pros Solid benefits, including superior roadside assistance and towing programs. High marks from customers for their purchase experiences. One of the few insurers with mechanical breakdown coverage for out-of-warranty repairs. Cons Mediocre service interaction according to J.D. Power surveys. Sparse online learning materials. Geico Geico is the second-largest U.S. car insurer. It is a favorite among tech-savvy geeks who appreciate the insurer’s mobile app and excellent online service. The average annual cost for full coverage: is $1,627. Pros Geico offers plenty of ways to save, such as multi-vehicle, driving history and vehicle safety equipment discounts. Special savings for active and retired military members and federal employees. Full-featured mobile app for getting quotes, buying insurance, managing your policy, submitting claims, summoning roadside assistance and making payments. Cons Human help may be in short supply, as just about everything is handled online. No gap insurance is offered. USAA No insurer matches USAA for service to military members. Unfortunately, it's only available to active service members, their families and retired veterans. Average annual cost for full coverage: $896. Pros Superior financial stability rating from A.M. Best. Top-ranked purchase experience score from J.D. Power. Cons Missing gap coverage. Doesn’t offer interior vehicle coverage or new car replacement coverage. Limited availability. The Right One for You Competition in the insurance industry helps drive down prices and prompts insurers to offer money-saving features. For example, your carrier might reward you for a safe driving record and for having a long-term relationship with the insurer. The right insurer for you is highly rated for service, offers the exact coverage you want and does so at an unbeatable price. You should always gather multiple quotes before selecting an insurer, and make sure you get credit for all applicable discounts.
Are You Ready to Take the Plunge?
I firmly believe every ambitious person needs at least some portion of their net worth invested in the stock market. Investing in America’s top companies is perhaps the best way to grow your wealth.
Look at it this way. From 1968 through 2018, the S&P 500 returned 11.26% annually. This means an investor who put $100 to work in an index comprising of the 500 largest American companies a little more than 50 years ago is sitting on an investment worth more than $12,000 today. This required absolutely no work except setting up the investment and opening up some account statements a few times a year.
Betting on American business has been a winning strategy since 1776, and I don’t see that changing any time soon. Despite events like The Great Recession, the dot com bust, and even the granddaddy of them all, The Great Depression, America industry has shrugged off adversity to soar ever higher.
The best way to get exposure to the American economy is to buy stocks. Here’s everything you’ll know to get started.
Safe or Risky?
The first question you want to ask yourself is what kind of investor you are. You can either pick and choose individual companies or invest in many different companies at once through special products called exchange traded funds (ETFs).
Let’s start out with choosing your own stocks. It isn’t enough to listen to your neighbor or trust your gut when choosing companies to invest in. You must do the research before buying, and much of that time spent will be trying to understand a company’s accounting, its value compared to other stocks, and its future prospects.
This is not an obligation to take lightly. It takes years of study to become a good stock analyst. Some folks who invest in stocks for a living don’t do any better than the stock market as a whole. But others manage to do quite well despite having no formal training. Picking your own stocks can be a profitable endeavor if you’re willing to put in the work.
Most people don’t have much interest in researching individual stocks, so they should stick to buying a basket of different names through an ETF. An ETF gives an investor access to hundreds of different stocks through one security that trades on the stock exchange.It’s a simple way to build a diverse portfolio without going to all the work of picking and choosing individual stocks.
Popular ETFs include ones that own all 500 (505, actually. It’s complicated.) S&P 500 stocks, worldwide ETFs that own large American and international companies, and more niche ETFs like funds that invest in smaller companies or ones that focus on something specific like dividends.
Some investors like the challenge of picking their own stocks. Others think the practice is foolish and smart people shouldn’t even bother trying. There is no right or wrong answer to this debate; the secret is picking the strategy that’s right for you. The important thing is getting your capital to grow. The rest is just details.
The Process
Once you’ve decided what kind of investor you want to be, the next step is setting up a brokerage account.
If you want to invest primarily in ETFs, you can either choose a self-directed account or work with a financial advisor. A good advisor can be useful. They will help you choose ETFs that meet your risk tolerance, help with rebalancing the portfolio, and even do the work of buying and selling the funds for you. But be warned; these services are not free. You’ll pay for them through higher fund fees.
Doing all the work yourself might seem daunting, but it really isn’t so bad. You’ll need to do three steps before you can invest in the stock market:
- Open a brokerage account
- Fund that account
- Tell the brokerage what you want to buy
The first step is opening the account. If you’re looking for the easiest way to do so, I’d recommend seeing if your bank also offers an online brokerage. Many of the big banks do. The bank will share your information with the brokerage, making the account setup much easier.
If you have to open an account from scratch, don’t sweat it. It’s not a hard process, but it is a little tedious. Expect to spend an hour or two filling out forms telling the brokerage who you are, how much you have to invest, and so on.
Once the account is open, you’ll have to fund it. Your brokerage will give instructions on how to do this. The easiest way is to add your brokerage account as a payee in your bank account and transfer money just like paying any other bill. It’s the quickest way to transfer money over; but be warned, it still might take a couple of days to show up in your account.
Buying Stock
We’re now to the moment of truth. It’s time to actually buy stocks.
The basic steps are the same no matter what you’re buying. You’ll need to tell your brokerage what stock (or ETF) you’re buying, how many shares, and whether you’re okay to pay the going price (this is a market order) or if you want to hold out for a specific price (a limit order).
You’ll also want to make sure you build a diversified portfolio if picking individual stocks. It’s irresponsible to put all of your dollars into one or two stocks. Pros say you need at least five stocks to be somewhat diversified, with an ideal portfolio of 15 to 20 different companies spread among different industries.
If you don’t have much to invest today, it might not make sense to build a diverse portfolio right now. That’s fine! Just commit to putting more cash in regularly and diversify with additional stocks over time.
The Bottom Line
Every American who is trying to save for retirement should be in the stock market. You’re missing out on fantastic potential long-term returns by avoiding it.
The market seems complex, but it’s really not. If you commit to it, your cash can be invested in America’s top companies in no time, slowly making you rich. There is no better way to passively grow your capital than the stock market. So what are you waiting for?