Car insurance helps pay for bills from accidents to protect your finances. How much coverage you have depends on your policy, which can vary in cost and terms. Picking the right car insurance is crucial for your needs.
In this guide, we will discuss the different types of car insurance and help you choose the right ones for your needs. Next, we will discuss how to purchase car insurance, including the possible expenses and ways to cut costs. Next, we will explain how to submit a claim to your car insurance provider after an accident or damage occurs.
Main points
Car insurance is meant to provide financial protection in case of an accident or damage to your vehicle.
Certain car insurance is mandated by state law, while other types are voluntary.
Most states require drivers to have liability coverage.
It’s important to shop around to find the best deal on car insurance.
Car insurance costs are determined by your location, age, driving record, vehicle type, and other factors.
What Is Car Insurance?
Car insurance, similar to other types of insurance, safeguards you from financial losses caused by accidents, theft, and weather events.
Car insurance is an agreement where you pay premiums to an insurance company, and in exchange, the company will cover the costs of medical bills, vehicle repairs, and other property damage. The contract clearly outlines what is included in your insurance policy.
How Much Car Insurance Do You Need?
Where you live is the main factor in determining how much insurance you need.Every state (and DC)mandatesspecific types and levels of car insurance coverage. There are only two exceptions.
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Both states have financial responsibility laws,so you could be responsible for damages if you cause an accident. Without insurance, you will have to pay for medical costs and repairs by yourself.
Besides state requirements, you should also take into account any lender requirements if you have a car loan or lease. The lender may require specific coverage for the car because they have an interest in it.
Even if you own your car completely, it might be a good idea to get a policy that has more coverage than just your state’s minimum requirements. Increasing coverage can cost more, but it offers better protection in case of an accident. Optional coverages are available to help with large repair expenses that you may not be able to afford on your own.
Types of Car Insurance
Car insurance usually includes various types of coverage bundled together. Your policy will be determined by state requirements and your preferences for optional coverage. Knowing the different types of car insurance will help you create a policy that suits your requirements.
Liability Coverage
Most states require you to have liability insurance to cover expenses from accidents you cause and protect you from lawsuits. There are two types of it.
Bodily injury liability insurance pays for medical bills and lost wages resulting from injuries. You must have car insurance in the District of Columbia and 49 states, including New Hampshire and Virginia.
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Florida is the only state that doesn’t mandate bodily injury liability coverage.
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Liability insurance in a policy is usually represented by three numbers indicating coverage for bodily injury per person, bodily injury per accident, and property damage per accident. California requires a minimum liability insurance of “15/30/5.”
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Each injured person will receive $15,000.
If multiple people are injured, the cost is $30,000 per accident.
$5,000 for property that has been damaged.
Medical Payments (MedPay) or Personal Injury Protection (PIP) Coverage
MedPay and PIP both cover medical expenses for you and your passengers after an accident, regardless of fault, up to your policy limits. Some policies may cover funeral costs.
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In some states, PIP might cover lost wages and childcare expenses if you are injured.
Uninsured and Underinsured Motorists Coverage
Uninsured motorist coverage shields you if you are in an accident with a driver who isn’t insured. Underinsured motorist coverage helps when the driver who caused the accident has insurance, but not enough to cover all your expenses. Similar to liability insurance, uninsured and underinsured motorist coverage has two components: bodily injury coverage covers medical expenses and property damage coverage covers repair costs.
Some states require uninsured motorist coverage while others do not.
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Some states require underinsured motorist coverage, while others do not.
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Texas Insurance Dept. Car Insurance Guide.
Some states combine these coverages as uninsured or underinsured motorist coverage.
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Insurance coverage varies by state laws and policies, so read the fine print and ask your insurance agent for clarification.
Collision and Comprehensive Coverage
If you are in a crash that is not your fault, the other driver’s insurance or your uninsured motorist coverage will cover the repairs to your vehicle. If your car is damaged in an accident that was your fault or due to a natural disaster, you will need to use your own insurance. Two important optional coverages are available here.
Collision coverage will assist in covering the costs of damage caused by a collision with another vehicle or object.
Comprehensive coverage pays for damage from non-accident incidents like trees falling, floods, or fires.
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Other Types of Coverage
Depending on your state laws and insurance company, you may be able to add more optional coverages to your policy, including:141515
- Roadside assistance coverage
- Gap insurance
- Rental car reimbursement coverage
- Rideshare insurance
- Accident forgiveness
- Original equipment manufacturer (OEM) coverage
- Custom equipment coverage, which pays to replace modifications like an upgraded stereo, custom paint job, or off-road equipment
- Pet injury coverage
Coverage is also available for specialty situations. For example, classic car insurance covers vintage or collectible vehicles, while a non-owner policy offers liability protection if you occasionally drive someone else’s car.
The Cost of Car Insurance
Car insurance costs, known as premiums, vary greatly depending on factors like your:
Age
Gender is considered in states that allow it.
Car brand, type, and year.
A record of your driving history.
Insurance and claim background.
Credit score may be taken into consideration in some states.
Chosen insurance options and amounts.
Deductibles are an amount of money that must be paid out of pocket before an insurance company will start to cover costs.
Discounts apply to certain situations, like having safety features on your vehicle or having multiple policies.
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Spending extra on car insurance doesn’t always mean you’re getting a superior policy. Paying less for car insurance is good, but it could mean risking insufficient coverage in a big accident.
How to Save Money on Car Insurance
Comparing quotes from different insurance companies is the best way to save money on car insurance. A Consumer Reports survey in 2022 found that 1/3 of over 40,000 readers had changed insurance companies in the past six years. 58% of them switched due to finding a cheaper premium.
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Inquire about discounts that can reduce your premium. Some insurers offer discounts to military members, federal employees, homeowners, and students with a B average.
Maintain or improve your driving record by driving safely and avoiding speeding. You can also work on improving your credit score, which some insurers factor into their calculations when setting your premiums—though this practice isn’t allowed in California, Hawaii, and Massachusetts
Safeguard your driving reputation and carve out a stellar record by embracing the art of safe driving and steering clear of the temptations of speed. Enhancing your credit score can be a strategic move, as certain insurers take this into account when determining your premiums. However, it’s worth noting that in states like California, Hawaii, and Massachusetts, this practice is off the table.
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The Consumer Federation of America: a powerful alliance advocating for the rights and interests of everyday consumers across the nation. This dynamic organization champions fair practices, ensuring that the voices of individuals are heard and their needs addressed in a world of commerce. Through tireless efforts, they navigate the complexities of consumer issues, striving to create a marketplace that is not only just but also transparent and accessible for all. “New Findings Reveal Significant Impact of Credit Scores on Auto Insurance Rates.”
Think about trimming your insurance portfolio by letting go of unnecessary coverages or those that overlap with existing protections. Take, for instance, the case of a AAA member—this savvy traveler might find that roadside assistance isn’t necessarily a requirement, given their already robust support system. If you have an alternative ride or can hop on public transit while your vehicle gets fixed after a covered accident, you have the option to forgo rental reimbursement. If your vehicle has seen better days or has reached its twilight years, it might be a wise move to forgo comprehensive and collision coverage. This could save you money in the long run, especially if the premiums exceed what you’d get back in the event of a mishap. However, if you’re still tied to a loan or lease, your lender may insist you keep these protections in place.
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Take a moment to revisit your policy following significant life milestones or shifts. These changes could open the door for you to reassess your coverage options or even unlock enticing discounts waiting for you. Reexamine your policy if you:
Trade in your trusty ride or embark on an exciting journey to find your next four-wheeled companion!
Whether you’re taking the leap to cohabitate with your partner, embarking on the journey of marriage, or finding that it’s time to part ways, you may need to adjust your policy to reflect these new chapters in your life.
Choose to plant roots in a new home or embrace the thrill of a fresh adventure.
Got a teenager who just earned their wings on the road with their shiny new driver’s license?
Switch careers and embark on a new journey to work, or embrace the freedom of remote work and watch your travel distance shrink dramatically.
How to File a Claim With Your Car Insurance
In the aftermath of an accident, your first priority should be ensuring the safety of all involved. Take a moment to assess the situation, and if anyone is in need of help, don’t hesitate to summon medical assistance right away. It’s wise to ring up the police, too, since you might need to file a police report when you submit your car insurance claim.
Capture snapshots of the scene along with any visible damage, and make sure to collect the names, contact details, and insurance information of all other drivers involved. Reach out to your insurance provider without delay, and collaborate closely with your designated claims adjuster to evaluate the extent of the damage. Together, you’ll navigate the process of calculating the compensation your insurer will allocate for the repairs. You might find yourself gathering snapshots, towing receipts, or other essential details to send in.
Your insurance provider might suggest a trusted repair shop, but the choice is ultimately yours—explore the options and pick a place that suits your needs! Your insurer’s payout hinges on the coverage and deductible options you selected. Imagine you’ve got collision coverage with a $500 deductible. In the event of an accident, you’d foot that initial bill, but fear not! Your insurance company swoops in to take care of the rest. They might settle up directly with the repair shop, or, if you’ve already covered the costs, they’ll swiftly reimburse you for the remainder. It’s like a partnership where you share the burden while they take on the heavy lifting!
What Car Insurance Do You Need?
Across nearly every state and the bustling District of Columbia, carrying bodily injury and property damage liability coverage isn’t just recommended—it’s a legal requirement. Once you hit the road, safeguarding not only yourself but others is non-negotiable! In a unique twist, New Hampshire offers drivers the unconventional freedom to forgo car insurance altogether, allowing them to hit the open road without the safety net that most states require.
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In Virginia, drivers have the unique opportunity to forgo traditional car insurance by simply paying an annual fee, giving them the freedom to hit the road on their own terms.
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In the Sunshine State, drivers enjoy a unique freedom: Florida does not mandate bodily injury liability coverage for personal vehicles. This means that behind the wheel, one can experience the open road without the obligation of this specific insurance requirement!
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To discover the type of car insurance that suits your needs, visit the website of your state’s department of motor vehicles. It’s your go-to guide for navigating the world of automotive coverage!
What Is the Best Car Insurance Coverage to Have?
Ensuring you meet at least the basic requirements for mandatory coverage in your state is essential. If you’re cruising around in a car that you’ve either financed or leased, your lender might just ask you to buckle up with some extra insurance coverages. From there, the ideal insurance will hinge on your unique requirements and financial considerations.
What Happens If You Don’t Have Car Insurance?
What Is the Best Car Insurance Coverage to Have?
It’s important to have at least the minimum amounts of mandatory coverage in your state. If you have a loan or lease on your car, your lender may require additional coverages. After that, the best coverage for you depends on your needs and budget.
What Happens If You Don’t Have Car Insurance?
If you’re named on a housemate or partner’s policy, or you borrow a friend’s car occasionally, their insurance covers you while you’re driving.25 But if you drive your own car without insurance, you may face penalties including fines and even jail time. For example, the first-offense penalty for driving without insurance in Massachusetts is a fine of up to $500.17
What Isn’t Covered By Car Insurance?
The answer depends on the coverages and limits you chose when you purchased your policy, so you’ll need to read the fine print. Ask your insurance agent if you’re not sure about your coverage. Typically, personal car insurance doesn’t cover commercial driving, racing, or using your car for illegal activities. Car insurance also doesn’t cover regular maintenance or repairs needed due to wear and tear.26 It may also not cover driving in Mexico.27
The Bottom Line
Buying car insurance is a critical part of car ownership, but not all policies are the same. Check your state-required minimum coverages, and then consider whether you need any optional coverage to make sure you’re protected in the event of an accident. Shop around by requesting quotes from multiple insurers to find the best car insurance for your needs.
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