Benefits of Having Car Insurance Coverage

Car insurance protects you against lawsuits, jail time, and other penalties. Driving without car insurance is illegal in 48 out of 50 states.

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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: May 12, 2020

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Here's what you need to know...

  • Car insurance is a requirement in almost every state in the U.S.
  • Minimum liability coverage can meet the requirement of financial responsibility
  • Car insurance can help you avoid severe consequences while driving
  • There are several ways you can save on car insurance policies

One of the most important benefits of car insurance in most states is that it will help keep you on the right side of the law.

Car insurance will keep you from the hefty fines, possible impoundment of your vehicle, suspension of your license, and even jail time that can result if you are convicted of driving without this important form of protection.

Read on to learn about even more of the benefits of auto insurance coverage. Then enter your ZIP code into the FREE car insurance comparison tool on this page so that you can find the best auto insurance rates!

Different Types of Car Insurance

There are several types of coverage drivers should consider:

#1 – Liability

Liability car insurance is the most important element of insurance because it protects you from the financial and legal repercussions of an accident affecting another vehicle, driver, or property.

The benefits of liability car insurance will apply if find yourself responsible for damages to others—not to yourself or your own vehicle—in an accident.

Most states require a minimum level of liability insurance.

Having only this minimum level of insurance means that you are leaving yourself open to a significant amount of risk if damages from the accident exceed your coverage levels.

On the other hand, having too much car insurance means you might be paying excessive premiums for coverage you don’t need.

#2 – Collision Coverage

Collision coverage is the form of car insurance that will pay for damages to your own vehicle in an accident. If you owe any money on your car, you will likely be required by the bank to purchase collision insurance.

Choosing the right deductible for you is an important consideration.

The deductible refers to the part of any damages that you must pay yourself before your policy kicks in.

  • Paying a higher deductible means forking over less each year in premiums because you are taking away some of the risk from the insurance company.
  • If you choose a lower deductible, you will pay more for your policy because the insurance company is assuming more risk.

If you own an older car, you will have the option to consider whether collision insurance is the wisest option.

Some financial planners suggest that you should decline collision coverage if your premium comes out to less than 10 percent of what you will receive when your car is totaled.

#3 – Comprehensive Coverage

Comprehensive car insurance coverage is an extension of collision insurance that covers your vehicle when it is on the receiving end of damages from theft, weather or fire.

When your windshield is struck by a rock over the course of your travels, for example, comprehensive insurance will pay to repair the crack.

As with collision car insurance, most banks require comprehensive coverage if you are financing or leasing your vehicle.

#4 – Uninsured/Underinsured Motorist Insurance

Uninsured or underinsured motorist insurance will cover you if you get in an accident with a driver who is either uninsured or underinsured.

There are more un- or under-insured drivers now than ever because of the current downturn in the economy.

Certain areas are more prone to the problem than others. You should carefully evaluate your own situation as well as the situation of those around you in figuring out how much of this insurance to purchase.

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How can I save money on car insurance?

Now that you’re convinced that you need car insurance, there are ways to save money on the premiums.

  • The first thing is to set as high a deductible as you can afford. The higher the deductible, the lower the premium.
  • When signing up for car insurance, ask for discounts. Insurance companies offer a large variety of discounts, so talk with your agent.
  • Buying car insurance from the same company as you buy homeowner’s or renter’s insurance will save money. The companies bundle the services and give a discount.
  • When you’re in the market for a new or used car, go to sites like Kelley Blue Book to see what cars are more expensive to insure.

The best way to look into all the benefits of car insurance is to compare the offerings from different car insurance companies.

Online quote comparison tools like ours let you do this.

Compare quotes today with the FREE tool at the bottom of this page by entering your ZIP code below!

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Average Monthly Car Insurance Rates by State