Repairing your car or covering medical bills due to an accident can be expensive out of pocket.
Shopping around can save you money on your plan
Insurers typically raise their rate over the years and drivers may save money by switching plans.
What is car insurance?
Car insurance is a contract between you and an insurer where the insurer agrees to pay for damages and liabilities related to a car accident so long as you continue to pay your monthly premium. The amount your insurer will cover, how long the policy is good for, and how much your monthly premium will be are all decided when you take out the insurance policy.
- Car insurance can help protect you against financial loss due to medical bills, legal costs, property damage, etc.
- Car insurance plans offer varying levels and types of coverage. Knowing how much coverage you need and what types of damage and liabilities you want to cover are key when picking out a plan.
- State and local laws also impact the minimum insurance coverage you may need, so be sure to check those and speak to your insurance provider if you are unsure.
- Aside from mitigating some of the costs in case of an accident, many states require proof of insurance to register your car. If you’re financing your car, some lenders may require proof of insurance before completing your auto loan.
Types of Coverage:
Liability Coverage: Auto insurance plans include liability coverage, which covers damage you cause to someone else or their property in the event of an accident you cause. It typically comes in three parts:
- Bodily injury — covers costs for injuries other people incur due to an accident you cause.
- Property damage — covers any damage you cause to another person’s property, whether it’s their car itself or a mailbox you ran over.
- Uninsured motorist — protects you in the event someone without insurance hits you or if someone hits you and doesn’t leave their information.
- Underinsured motorist — pays you in the event someone hits you and their insurance limits aren’t enough to cover the damaged you incurred.
You may see this coverage shortened to three numbers. For example, 200/500/50. What this typically means is that the plan provides $200,000 in coverage for per-person bodily injury, $500,000 for total injury liabilities, and $50,000 for property damage.
Car Coverage: In addition to covering liabilities you are responsible for in causing an accident, you can also choose two types of insurance to protect the car itself:
- Collision — your insurance provider will pay out in the event you are in an accident with another object, whether it’s another car, a tree, light post, etc.
- Comprehensive — this pays for any loss not caused by a collision with another object. If your car is broken into, stolen, damaged by weather, etc., then your provider would pay out for this damage.
Note: Be aware that car coverage typically comes with a deductible. For example, if you select a $1000 deductible, this means you would be responsible for paying the first $1000 out of pocket to cover damages and your insurance company would cover the rest. Typically, the higher the deductible, the lower the cost of coverage.
You may or may not be offered additional types of coverage to purchase. Depending on how much money you have available to spend on a plan and how comfortable you feel with your policy, you can choose to add these on. You may see rental reimbursement, medical payment coverage, or towing or emergency road service on your policy as options.
Anything else you should know?
When it comes to purchasing insurance, it’s important to understand exactly how much is covered, what will be covered in the event of you causing the accident vs. someone else, and how much coverage makes you feel the most comfortable. You should also consider the minimums applicable by local and state laws. When comparing quotes from different companies, be sure the coverage they are offering is the same when comparing quotes side by side.