Is car insurance considered a utility bill?

Is car insurance considered a utility? Car insurance is not considered to be a utility. Utilities are needed each month, but car insurance is only there if you need it.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jan 21, 2021

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Here's what you need to know...

  • Some people are confused as to what type of expense car insurance is
  • Insurance is for the purpose of protection
  • Think about the insurance you have now and evaluate its value in protecting your vehicle and legal responsibilities

When it comes to car insurance, people tend to categorize it as “other” in their monthly budgets. They don’t quite know what to call car insurance because it doesn’t seem to fit into any other category.

Some people view it as a commodity because it is something that is used and it is something of value. But calling it a commodity tends to group it more with agricultural resources or tools that people use that come from nature.

Do you need better auto insurance? Enter your ZIP code above and compare at least three to four policies today to find the best rates for you!

Commodity vs. Utility

Similar to a commodity is a utility. What is considered a utility bill? What are considered utilities expenses? Utilities are resources that are tied to a consumable source such as water, electricity, or gas. So utilities don’t seem right either.

Is car insurance a utility bill? Unlike actual utilities, you do not use insurance or consume it each month. It is only there if you need it. Additionally, it is usually a “fixed” expense for the most part while utilities vary based on use. In fact, insurance is neither a commodity nor a utility.

Even though it is something you use, it is safe to say that insurance is in a class by itself.

For purposes of your budget when you are planning how to pay for your auto insurance, you should group it under “insurance.” Most people have at least four basic types of insurance:

  • House insurance
  • Car insurance
  • Health insurance
  • Life insurance

If you rent your home rather than own it, you may have renters’ insurance rather than home owner’s insurance.

Regardless of the type of insurance, insurance is a service that you use when you need it that guarantees you that you will have your financial investment taken care of. It promises to cover you if you lose your car to some event that is not your fault.

Sometimes insurance will cover loss even if you are negligent. But this depends on the policy.

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Coverage Options

Car insurance comes in a variety of types of coverage. The most important ones are listed below along with optional coverage choices that you may want to consider:

  • Liability – Liability literally means your legal responsibility to others. Liability insurance is the only kind that is required, and you are legally responsible for carrying proof of this insurance in your car at all times.
  • Collision – Collision insurance is not usually required, unless you are purchasing your car through a car loan agency or lending institution. Collision insurance only covers damages that occur in an accident.
  • Comprehensive – Comprehensive insurance covers damages that do not result from an accident. These include things such as vandalism, theft, or acts of nature.
  • Uninsured/Underinsured – Uninsured/underinsured coverage protects you from having to pay out of pocket for an accident that was not your fault. It is particularly useful in “fault states” where the negligent party was responsible for your damages, but they have no insurance or insufficient insurance to pay for the damages.
  • Personal Injury Protection (PIP)Personal injury protection covers damages that go beyond the reach of your standard insurance. They usually involve much more severe injuries or damages.
  • Roadside Assistance – Roadside assistance will cover you for lockouts, wrecker costs, and other expenses if you ever find yourself stranded on the road.

There are additional coverages like medical coverage or car rental insurance options.

One rule of thumb with insurance is that you should never buy more insurance than you can afford to pay every month.

But you should also consider the cost if any of these accident or damage situations happens to you.

The more you are on the road, the higher your risk is. When shopping for insurance, you should consider your level of risk and decide how much insurance you need to feel secure, no matter what the situation.

How to Find the Best Insurance for Your Needs

It can be confusing when you are shopping for car insurance. Should you keep your current insurance or look elsewhere?

Even if you are happy with your current car insurance, take the time to read the fine print of what your insurance covers. Then compare your current policy to at least three other plans and see how it compares.

Don’t be afraid to get a free quote on several policies and see what kind of discounts you may qualify for.

Taking the time at the front end will pay off big down the road.

If you’d like to shop and compare auto insurance quotes, enter your ZIP code below to find the best quote for you!

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