When accidents happen, car insurance helps protect your finances by covering the resulting bills. The amount of coverage you have depends on your specific policy, but policies vary in cost and terms. That’s why choosing the best car insurance to meet your needs is important.
In this guide, we’ll review the types of car insurance and how to decide which ones fit your situation. Then, we’ll review how to buy car insurance, including potential costs and ways to save money. Finally, we’ll look at how to file a claim with your car insurance company in case of an accident or other damage.
Key Takeaways
- Car insurance financially protects you if you’re involved in an accident or if your vehicle is damaged.
- Some types of car insurance are required by state law, while others are optional.
- Almost every state requires some type of liability coverage for drivers.
- Shopping around is important for finding the best deal on car insurance rates.
- The cost of car insurance depends on factors like your location, age, driving record, vehicle type, and more.
What Is Car Insurance?
Like other types of insurance, car insurance helps protect you against financial losses that occur as a result of accidents, theft, and weather-related events.
A car insurance policy is a contract between you and an insurance company. You agree to pay premiums to the company, and in return, the company agrees to cover the costs of medical bills, vehicle repairs, and other property damage. The wording of that contract spells out exactly what is covered by your insurance policy.
How Much Car Insurance Do You Need?
The biggest factor in determining how much insurance you need is where you live. Each state legally requires certain types and amounts of car insurance coverage. There are two exceptions:
- New Hampshire doesn’t require car insurance. However, if you cause an accident, you’re responsible for all damages.
- Virginia allows drivers to opt out of buying car insurance by paying a $500 fee. However, this doesn’t provide any financial protection in case of an accident.
Even in states where insurance isn’t required, you could be held liable for damages if you cause an accident. Without insurance, you will also have to cover medical costs and repair bills on your own.
If you have a car loan or lease, your lender may require you to have collision and comprehensive coverage to protect their financial interest in the vehicle.
Even if you own your car outright, you may want coverage that exceeds state minimums. A higher coverage amount may cost more but provides greater financial protection in case of a major accident.
Types of Car Insurance
A car insurance policy is typically a bundle of multiple types of coverage. The composition of your policy depends on your state’s requirements and your personal preferences. Understanding the types of car insurance will make it easier to create a policy that fits your needs.
Liability Coverage
Almost every state requires minimum amounts of liability insurance, which covers other people’s expenses related to an accident you cause. It can also protect you financially from personal lawsuits.
It comes in two types:
- Bodily injury liability: Covers medical expenses, lost wages, and legal fees if you injure someone in an accident.
- Property damage liability: Covers the cost to repair or replace damaged vehicles and property, such as a fence or mailbox.
Liability insurance limits are often written as three numbers that represent coverage for bodily injury per person and per accident, and for property damage per accident. For example, California’s minimum required liability insurance is 15/30/5, which translates to:
- $15,000 per injured person
- $30,000 per accident if more than one person is injured
- $5,000 for damaged property
Medical Payments (MedPay) or Personal Injury Protection (PIP) Coverage
Both MedPay and PIP cover medical expenses for you and your passengers after an accident, regardless of fault.
- MedPay is optional in most states but required in Maine and New Hampshire if you buy car insurance.
- PIP is required in some states and may also cover a portion of lost wages and child care costs while you recover from injuries.
PIP is sometimes called “no-fault insurance” because it covers you no matter who caused the accident.
Uninsured and Underinsured Motorist Coverage
- Uninsured motorist coverage protects you if you’re hit by a driver who doesn’t have insurance.
- Underinsured motorist coverage protects you if the at-fault driver has insurance but not enough to cover your costs.
Some states require uninsured motorist coverage, while others make it optional.
Collision and Comprehensive Coverage
If you’re in an accident that’s not your fault, the other driver’s insurance (or your uninsured motorist coverage) pays for your repairs. But if you cause the accident or your car is damaged by another event, you need your own coverage.
- Collision coverage pays for damage from an accident, whether it involves another vehicle or an object like a fence or tree.
- Comprehensive coverage pays for damage from non-collision events like fire, flooding, theft, vandalism, and natural disasters.
Comprehensive coverage also covers car theft and break-ins.
Other Types of Coverage
Depending on your state laws and insurer, you may be able to add optional coverages, such as:
- Roadside assistance: Covers towing, flat tires, lockouts, and jump starts.
- Gap insurance: Covers the difference between your car’s loan balance and its value if totaled.
- Rental car reimbursement: Pays for a rental car while yours is being repaired after a covered accident.
- Rideshare insurance: Covers you if you drive for Uber or Lyft.
- Accident forgiveness: Prevents your rate from increasing after your first at-fault accident.
If you have a classic car, you may need specialized insurance that accounts for its value and limited use.
The Cost of Car Insurance
The price of car insurance varies widely based on factors like:
- Your age and driving experience
- Your vehicle’s make, model, and age
- Your driving record and claims history
- Your credit score (in most states)
- Your selected coverages and limits
- Your deductibles (higher deductibles usually mean lower premiums)
- Applicable discounts (such as bundling home and auto insurance)
Paying more doesn’t necessarily mean better coverage. Likewise, a lower price may indicate less protection.
How to Buy Car Insurance
To find the best car insurance, follow these steps:
- Decide on the coverage you need based on state requirements, lender requirements, and personal needs.
- Compare quotes from multiple insurers online, through a broker, or directly with companies like Progressive, Nationwide, and Geico.
- Check customer reviews to assess satisfaction and complaints.
- Ask about discounts for safe driving, bundling policies, or being a student.
How to Save Money on Car Insurance
- Compare quotes from multiple insurers to find the best price.
- Maintain a clean driving record to qualify for lower rates.
- Improve your credit score if your state allows insurers to consider it.
- Choose higher deductibles if you can afford to pay more out-of-pocket in a claim.
- Drop unnecessary coverage on older vehicles.