What is car insurance and how does it work?

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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...

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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...

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Reviewed byJoel Ohman
Founder, CFP®https://res.cloudinary.com/quotellc/image/upload/insurance-site-images/ciccom-live/41b5e36b-joel-ohman.jpg

UPDATED: Jun 12, 2020

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Common Car Insurance TermDefinition
Insurance PremiumThe amount of money an insurer charges you
in order to provide the coverage described in the policy.
Insurance RateThis is another term for your insurance premium. It's the amount of money you might pay monthly or yearly to your insurance provider for your policy.
Insurance DeductibleThe amount of money your insurance provider will deduct from the loss
before paying up to its policy limits; the amount you need to pay for any costs from an accident before your provider will pay for their part.
Liability CoverageThe catch-all coverage that pays for damages incurred by other drivers if you're in an accident. It breaks down into two categories: bodily injury liability and property damage liability.
Collision CoverageThis is a type of car insurance that helps to pay for any repairs to your car if it is damaged in an accident. It's very useful coverage if you ever find yourself the victim of a hit-and-run accident.
Comprehensive CoverageThis type of coverage will pay for damage to your vehicle that is not caused by an accident, such as damage from a natural disaster or vandalism.
No-Fault StateWhen you get into a car accident in no-fault states and someone else causes the accident, you are still required to file a claim with your own insurance company. No-fault insurance typically covers hospital and medical expenses resulting from an accident, funeral expenses, and income losses resulting from the accident.
At-Fault StateIf you're at-fault for an accident in an at-fault state, this means you are responsible to cover the costs of damage repairs and medical expenses resulting from the accident. If you've caused an accident in an at-fault state, you must file a claim with your insurance provider.
Bodily Injury LiabilityThe type of liability coverage that pays for any bodily injuries
to another party (or death(s)) that occur as a result of an accident.
Property Damage LiabilityThe type of liability coverage that pays for any property damage
that occurs as a result of an accident.
Medical PaymentsAlso known as MedPay, this is a type of additional liability coverage that will pay for your own medical costs incurred as a result of an accident.
Personal Injury ProtectionAlso known as PIP, this is a type of additional liability coverage
that pays for the costs of any medical bills/funeral expenses incurred as a result of an accident, regardless of who was at fault. Unlike MedPay coverage, however, this type of additional liability coverage is mandatory in some states.
Uninsured/Underinsured Motorist CoverageThis is a type of additional liability coverage that will pay for expenses incurred if you are involved in an accident caused by another driver who has either less than the minimum required liability coverage, or who has no coverage at all.

Do you have some questions about what car insurance is and why you need it? Is it just a state-mandated scam, or is it really something that can protect you when and if you get into a car accident?

As defined by the Insurance Information Institute, auto insurance is a contract between you and the insurance company that protects you against financial loss in the event of an accident or theft. In exchange for your paying a premium, the insurance company agrees to pay your losses as outlined in your policy.

Whether you agree with the idea of a car insurance policy or not, if you own a vehicle, you must have car insurance for that vehicle. It’s the law.

Maybe you’ve just gotten your driver’s license and you’re wondering why in the world you need car insurance. Maybe you’d like to brush up on your car insurance terms. Either way, you’ve come to the right place.

In this guide to car insurance basics, we will go over what car insurance is, how it works, why you need it, policy types, and much more. Then, if you’re still not convinced, we will clue you in on some of the many reasons why car insurance is necessary.

You can also use our free car insurance comparison tool to find the best car insurance rate in your area. To begin, simply enter your ZIP code in the box above to get started.

Now without further ado, let’s dig into the history of the car insurance industry.

The History of the Car Insurance Industry

Who invented car insurance and how did it come to fruition?

According to the Ohio History Connection, the world’s first automobile insurance policy was issued in Dayton, Ohio, in 1897.

Throughout most of the 20th century, the city of Detroit, Michigan, was synonymous with American automobile manufacturing. In the late 19th and early 20th centuries, that was not the case. Instead, Ohio innovators in Cleveland and elsewhere were at the forefront of this new form of transportation technology.

Because of Ohio’s important role in the early automobile industry, the state was the site of numerous firsts in automobile history. Among these firsts was the first automobile insurance policy.

In 1897, Dayton, Ohio, resident Gilbert J. Loomis purchased a $1,000 liability insurance policy from the Travelers Insurance Company. This policy protected Loomis if his car killed or injured someone or damaged their property.

IRMI says Ronald W. Vinson and John Cosgrove, in their unpublished manuscript, “Challenging Risks: The Saga of American Insurance,” report that Loomis remembered paying $7.50 for $1,000 of liability protection.

Insurance for auto, fire, and theft did not exist before 1902. Collision coverage came even later, and typically insurance was not available for claimants, often forcing lawsuits. In 1912, Aetna Life and Casualty Company combined liability, property, and fire coverage — and so the modern-day auto insurance policy was born.

Types of Insurance Coverage

There are many different types of auto insurance policies out there. How do you know which one is right for you and your family?

In this next section, we’ll talk about insurance requirements, define different types of coverages, and discuss optional insurance add-ons and endorsements.

Buckle up as we dive right into these auto insurance requirements below.

How much car insurance do you really need?

Every state has different laws about auto insurance requirements. Some states might require you to carry more insurance than others, and the cost can also vary from state to state.

To find out how much insurance is required by your state, you can visit your state’s Department of Motor Vehicles office, or visit their website.

Nolo also has a good source of information about car insurance requirements by state.

What is liability coverage?

To be liable for something often means you are responsible for it — and that’s exactly what liability insurance (sometimes referred to as minimum liability coverage or basic auto insurance) is. You have a legal and financial responsibility to others when you cause a car accident and it results in either bodily injury or property damage.

Many times, states only require drivers to carry liability insurance. This is why it’s called “minimum liability coverage.” It’s often the cheapest type of insurance you can purchase, which is why drivers don’t have more insurance than liability if their state permits it.

The average cost for minimum liability car insurance across the United States is $516.39 per year.

Put plainly, if you are involved in a car accident, your liability car insurance coverage will pay for the injuries or damages that you inflict upon another person. The table below shows the minimum liability insurance requirements for all 50 states. What are the requirements for your state?

StateType of Insurance RequiredCoverage Amount
AlaskaBodily injury liability$50,000 per person
$100,000 per accident
Property damage liability$25,000 minimum
ArizonaBodily injury liabilityMinimum $15,000 per person and $30,000 per accident
Property damage liabilityMinimum $10,000
Uninsured motorist
Bodily injury
Minimum $15,000 per person and $30,000 per accident
Uninsured motorist
Property damage
Minimum $10,000
ArkansasBodily injury$25,000 per person /$50,000 per accident
Property damage liability$25,000 per accident
CaliforniaBodily injury or death of one person in an accident caused by the owner of the insured vehicle$15,000
Total bodily injury or death in an accident caused by the owner of the insured vehicle$30,000
Property damage per accident caused by the owner of the insured vehicle$5,000
ColoradoDeath or injury of one person$25,000
Death or injury of more than one person$50,000
Property damage liability$15,000
ConnecticutBodily injury or death of one person in an accident caused by the owner of the insured vehicle$25,000
Total bodily injury or death in an accident caused by the owner of the insured vehicle$50,000
Property damage per accident caused by the owner of the insured vehicle$25,000
DelawarePersonal injury protection (PIP)$15,000 per person
$30,000 per occurrence
$5,000 in funeral services coverage
Bodily injury or death of one person in an accident caused by the owner of the insured vehicle$25,000
Total bodily injury or death in an accident caused by the owner of the insured vehicle$50,000
Property damage per accident caused by the owner of the insured vehicle$10,000
FloridaPersonal injury protection (PIP)$10,000 Personal Injury Protection (PIP)
Property damage liability$10,000 Property Damage Liability (PDL)
GeorgiaBodily injury liability$25,000 per person and $50,000 per accident
Property damage liability$25,000 per accident
Uninsured motorist
Bodily injury
$25,000 per person and $50,000 per accident
Uninsured motorist
Property damage
$25,000 with a $250, $500, or $1000 deductible
HawaiiBodily injury liability$20,000 per person
$40,000 per accident
Property damage liability$10,000 minimum
PIP/"No-fault" coverage$10,000 minimum
IdahoBodily injury or death per person resulting from an accident you cause$25,000
Total bodily injury or death liability resulting from an accident you cause$50,000
Property damage per accident resulting from a collision you cause$15,000
IndianaBodily injury liability$25,000 per person
$50,000 per accident
Uninsured motorist$25,000 per person
$50,000 per accident
Property damage liability$25,000 minimum
Underinsured motorist$50,000 minimum
IowaInjuries of one person$20,000
Injuries of more than one person$40,000
Property damage liability$15,000
KansasInjury or death per person in an accident caused by you$25,000
Total injuries or the death per accident the insured caused by you$50,000
Property damage in an accident the insured driver caused by you$25,000
Uninsured/underinsured motorist$25,000 per person
$50,000 per accident
KentuckyBodily injury liability for one person$25,000
Bodily injury liability total for an accident$50,000
Property damage liability$25,000
Personal injury protection (PIP)$10,000
LouisianaInjury/death per person$15,000
Injuries or death per accident$30,000
Property damage per accident$25,000
MaineDeath or injury per person$50,000
Total death or injury per accident$100,000
Property damage per accident$25,000
Uninsured/underinsured motoristN/A
MedpayN/A
MarylandBodily injury liability of one person$30,000
Bodily injury liability two or more people$60,000
Property damage liability$15,000
MassachusettsBodily injury liability$20,000 per one person
$40,000 total per accident
Property damage liability$5,000 per accident
No-fault personal injury$8,000
Uninsured motorist$20,000 per one person
$40,000 per accident
MichiganPersonal injury protection (PIP)$50,000 (for drivers enrolled in Medicaid)
$250,000 all others
Personal property protection (PPI)$1 million
Bodily injury liability$50,000 per person
$100,000 per incident
Property damage liability$10,000 per incident
MinnesotaPersonal injury protection (PIP)$40,000 per person per accident. ($20,000 for medical expenses and $20,000 for non-medical expenses)
Bodily injury liability$30,000 per person
$60,000 for two or more people (per incident)
Property damage liability$10,000
Uninsured motorist
Bodily injury
$25,000 per person
$50,000 for two or more people (per incident)
Underinsured motorist
Bodily injury
$25,000 per person
$50,000 for two or more people (per incident)
MississippiBodily injury per person$20,000
Total bodily injury per accident$40,000
Property damage per accident$10,000
MissouriInjury or death per person in an accident you caused$25,000
Total injuries or death per accident you caused$50,000
Property damage per accident you caused$10,000
Uninsured motorist$25,000 in bodily injury per person
$50,000 in bodily injury per accident
MontanaInjury or death of one person in an accident you caused$25,000
Total injuries or death of more than one person in an accident you caused$50,000
Property damage in an accident you caused$20,000
NebraskaInjury or death per person in an accident you caused$25,000
Total injuries or death per accident you caused$50,000
Property damage per accident you caused$25,000
Uninsured/underinsured motorist$25,000 to cover your own injury per person
$50,000 to cover total injuries or death per accident
NevadaBodily injury or death of any individual resulting from an accident the vehicle owner/driver causes$25,000 per person
Total bodily injury or death liability resulting from an accident the vehicle owner/driver causes$50,000 per accident
Total property damage resulting from an accident the vehicle owner/driver causes$20,000 per accident
New Hampshire
(Drivers aren't technically required to carry insurance)
Bodily injury or death of one person in an accident caused by the owner of the insured vehicle$25,000
Total bodily injury or death in an accident caused by the owner of the insured vehicle$50,000
Property damage per accident caused by the owner of the insured vehicle$25,000
Medpay$1,000 to cover medical expenses after a crash
Uninsured/underinsured motoristSame amount of coverage as liability
New JerseyBodily injuryNone required, but optional starting at a minimum of $10,000 per person and $10,000 per accident
Property damage liability$5,000
Personal injury protection (PIP)$15,000 per person, per accident
Up to $250,000 for brain and spinal cord injuries
New MexicoInjuries to one person in an accident$25,000
Injuries to all people in an accident$50,000
Property damages caused by an accident$10,000
New YorkPersonal injury liability$25,000 per person with a maximum of $50,000 per accident
Liability coverage for death$50,000 per person with a maximum of $100,000 per accident
Property damage liability$10,000 per accident
Personal injury protection (PIP)$50,000 per person
Uninsured motorists$25,000 per person with a maximum of $50,000 per accident
North CarolinaInjuries to one person$30,000
Injuries to more than one person$60,000
Property damage liability$25,000
North DakotaBodily injury liability$25,000 per person
$50,000 per accident
Property damage liability$25,000
OhioBodily injury liability$25,000 per person
$50,000 per incident
Property damage liability$25,000
OklahomaInjury or death of a single person$25,000
Injury or death of more than one person$50,000
Damage to personal property$25,000
OregonInjuries of ONE person$25,000
Injuries of MORE THAN ONE person$50,000
Property damages$20,000
Personal injury protection (also known as Medical Payments/MedPay)$15,000
Uninsured motor$25,000 per person and $50,000 per total accident
PennsylvaniaMedical benefits coverage (also known as First-Party Benefits), a form of personal injury protection, to cover medical expenses for yourself or others, regardless of fault$5,000
Liability insurance to cover medical costs for injuries to one person, capped at $30,000 per accident$15,000
Property damage if you’re at fault$5,000
Rhode IslandBodily injury coverage to cover the injuries of just one person$25,000
Injuries of more than one person$50,000
Property damaged in a car accident$25,000
Uninsured/underinsured motorist$25,000
South CarolinaBodily injury or death of one person in an accident caused by the owner/driver of the insured vehicle$25,000
Total bodily injury or death liability in an accident caused by the owner/driver of the insured vehicle$50,000
Property damage per accident caused by the owner/driver of the insured vehicle$25,000
South DakotaBodily injury liability coverage per person to cover the costs associated with the injury or death of an individual as the result of an accident you cause$25,000
Bodily injury liability coverage per accident to cover the costs associated with the total bodily injury or death liability resulting from an accident you cause$50,000
Property damage liability coverage to cover the costs associated with property damages incurred by another individual or individuals resulting from an accident you cause$25,000
Uninsured/underinsured motoristSame amount of coverage as liability
TennesseeBodily injury or death of an individual resulting from an accident you cause$25,000
Total bodily injury or death liability resulting from an accident you cause$50,000
Property damage liability coverage to cover the total costs of another party or party’s property damage resulting from an accident you cause$15,000
TexasBodily injury liability$30,000 per person
$60,000 per accident
Property damage liability$25,000
UtahInjury or death to any one person in an accident$26,000
Injury or death to two or more people in an accident$65,000
Damage to property in an accident$15,000
PIP coverage per person$3,000
VermontDeath or injury of one person$25,000
Death or injury of more than one person$50,000
Property damage liability$10,000
VirginaDeath or injury of one person$25,000
Death or injury of more than one person$50,000
Property damage liability$20,000
WashingtonBodily injury liability$25,000 per one person
$50,000 total per accident
Property damage liability$10,000 per accident
West VirginaBodily injury or death of one person in an accident caused by the owner of the insured vehicle$25,000
Total bodily injury or death in an accident caused by the owner of the insured vehicle$50,000
Property damage per accident caused by the owner of the insured vehicle$20,000
WisconsinBodily injury or death of one person in an accident caused by the owner of the insured vehicle$25,000
Total bodily injury or death in an accident caused by the owner of the insured vehicle$50,000
Property damage per accident caused by the owner of the insured vehicle$10,000
Injury to one person for both Uninsured/Underinsured Motorists$25,000
Injury to more than one person for both Uninsured/Underinsured Motorists$50,000
WyomingBodily injuries/death of ONE person$25,000
Bodily injuries/death of MULTIPLE people$50,000
Property damage$20,000

Remember that liability insurance does not cover property damage or bodily injury for your own vehicle or person if you were the one who caused the accident.

What is covered by a basic auto insurance policy?

According to the Insurance Information Institute, a basic auto insurance policy covers the following:

  • Bodily injury liability – Bodily injury liability coverage applies to injuries that you, the designated driver or policyholder, cause to someone else.
  • Property damage liability – This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else’s property.
  • Medical payments or personal injury protection (PIP) – This coverage pays for the treatment of injuries to the driver and passengers of the policyholder’s car.
  • Collision – Collision coverage pays for damage to your car resulting from a collision with another car, an object, such as a tree or telephone pole, or as a result of flipping over (note that collisions with deer are covered under comprehensive). It also covers damage caused by potholes.
  • Comprehensive – This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object.
  • Uninsured and underinsured motorist coverage – This coverage reimburses you, a member of your family, or a designated driver if one of you is hit by an uninsured driver or a driver who doesn’t have sufficient insurance to pay for your total loss.

We’ll dig a little deeper into these terms below, but for now, let’s discuss the definition of full coverage.

What is full coverage?

Full comprehensive car insurance covers just about every type of damage that your car endures. Watch the video below.

Don’t be deceived: full coverage auto insurance does not cover maintenance issues, so if your car goes kaput in the middle of the street one day all by itself, you can’t call up your insurance provider and ask them to replace it.

The average cost of full coverage across the country is $908.43 per year. Some of the things covered by fully comprehensive car insurance include:

  • Fire damage
  • Theft
  • Vandalism
  • Weather damage
  • Animal damage
  • Acts of God (storms)

Theft, whether it’s the whole car, parts of the car, or personal belongings inside the car, is also covered.

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Comprehensive Coverage

We discussed this a little bit above, but according to the III, comprehensive insurance provides coverage against theft and damage caused by an incident other than a collision, such as fire, flood, vandalism, hail, falling rocks or trees, and other hazards — even getting hit by an asteroid.

If you were to purchase stand-alone comprehensive coverage, you would pay an average of $138.87 per year.

Additionally, comprehensive coverage will pay for repairs resulting from an accident involving an animal.

Collision Coverage

According to Nolo, if you’re involved in an accident while driving your vehicle, collision coverage will pay to repair or replace it, regardless of who was at fault. This coverage will apply if your accident involves another vehicle, you hit a stationary object, or your vehicle rolls over. However, collision coverage does not usually cover vehicle damage that is the result of a collision with an animal.

If you were to purchase stand-alone collision coverage, you would pay an average of $299.73 in the U.S. per year.

Remember that you are always able to bundle your insurance; this means that at any time, you can add collision and comprehensive car insurance to your policy.

What are some added endorsements I can add to my car insurance policy?

Your car insurance policy should fit your lifestyle and your budget. Below, we have a list of optional endorsements (extra insurance) that you can add to your policy at any time. Click on each link to learn more.

You can add one or add them all — the choice is completely up to you.

Settling a Car Accident Claim

When and why would you ever need to file a car accident claim? The answer is actually in the question. As a driver who has just been involved in a car accident, you must file a claim with your insurance company immediately. So if steam is coming out of your car after an accident, the first thing you should do after getting out of the car is calling your insurer.

Broke-Down Car

Think of it this way: your insurance provider can’t cut you a check to fix the vehicle damages that resulted from the accident you were in until you tell them about it.

Filing a claim with your insurance company means that you’re telling them about your accident, how the accident might have happened, and any damages or medical bills resulting from that accident that you need to take care of.

In this next section, we’ll go over everything you need to know about settling a car accident claim.

How does car insurance work in an accident?

As we stated above, you’ll need to file a claim with your insurance company after you’ve been involved in an accident. But there are some things you need to take care of before your insurance policy can help you.

Follow the steps below if you’ve been in an accident:

  1. Collect the following information:
    • Names of the other drivers involved in the accident
    • Other drivers’ insurance companies’ names
    • Names of any witnesses to the accident
    • Names of any law enforcement officers that came to the scene
  2. Take photographs.
    • The locations of the areas of the vehicles
    • Physical damage to the vehicles
    • Vehicle license plates

Nolo says that the best way to pursue and settle a claim with the other driver or their insurance company is to understand that the insurance company will require a lot of information from you.

After you’ve collected information and photos, the next thing you’ll need to do is file a claim.

Follow these steps below to file a claim.

  1. Call your insurance company – Make a call as soon as possible, even if you don’t know who was at fault. Find out if your auto insurance policy will cover your losses.
  2. If your provider has an app, use it – Report a claim, snap a few photos, check your deductible, reserve a rental car, and schedule an appraisal all on your mobile phone.
  3. Find your “proof of claim” form – You should have filled this out at the scene of the accident; it will be in the police report. You’ll need this to complete your claim.
  4. Avoid missing the claim deadline – Don’t wait years to file a claim with your insurance company. Submit all your information for your claim in a timely fashion and check back often to see if your provider needs more documentation to reimburse you for your losses.

How does an insurance deductible work?

What is a deductible?

A car insurance deductible is the amount of money you have to pay before your insurance policy kicks in.

For instance, if you get into an accident and your deductible is $2,000, you’ll need to pay $2,000 first before your insurance will pay for the rest of the medical bills or the damages to be repaired.

Keep in mind that when you purchase a car insurance policy, you are usually able to choose how much you generally want your deductible to be. Your deductible could be as little as $500 or as much as $5,000. It just depends on your yearly premium cost. The cheaper your premium is, the more expensive your deductible will be and vice versa.

How does car insurance work when you are at fault?

What does the term “at-fault” mean?

Thirty-one states in the nation are considered to be “fault” or “at-fault” car accident states.

When you get into an accident in an at-fault state, it means that you are financially and legally responsible for the outcome of that accident.

In other words, the person at fault for the crash (or, more accurately, the at-fault driver’s insurer) will be liable for the losses of other drivers, passengers, and anyone else harmed by the accident. That includes vehicle damage, medical bills, lost wages, and pain and suffering.

How does car insurance work when you are not at fault?

According to Nolo, no-fault insurance means that if you’re injured in a car accident, your own car insurance coverage will pay some or all of your medical bills and lost earnings, regardless of who was at fault for the crash.

The III says that a no-fault claim is made through personal injury protection or PIP provisions of a car insurance policy (this kind of coverage is mandatory in no-fault states, but you can also purchase PIP-type coverage on top of traditional liability coverage in non-no-fault states).

Twelve states and Puerto Rico have no-fault auto insurance laws.

Florida, Michigan, New Jersey, New York, and Pennsylvania have verbal thresholds. The other seven states — Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah — use a monetary threshold. Three states have a “choice” no-fault law. In New Jersey, Pennsylvania, and Kentucky, motorists may reject the lawsuit threshold and retain the right to sue for any auto-related injury.

In its strictest form, the term no-fault applies only to state laws that both provide for the payment of no-fault first-party benefits and restrict the right to sue, the so-called “limited tort” option.

How does car insurance work with other drivers?

Usually, your car insurance policy will cover you and your other family members on your policy if you are driving someone else’s car (with their permission).

On the other hand, your policy will also cover you if someone else who is not in your family drives your car.

Please note that if you use your vehicle for ridesharing services or jobs that require you to use your vehicle commercially, your vehicle will not be covered unless you have purchased ridesharing insurance or another type of supplemental insurance.

Buying Car Insurance

So far, we’ve talked about some basic car insurance terms, types of car insurance coverage, and how to settle a claim with your insurance company. But after all of that, you still might be wondering how to purchase car insurance.

Before purchasing a policy, you might want to ask yourself a few of these questions below:

  • What type of coverage do I need?
  • What type of coverage can I afford?
  • Do I want to buy additional insurance that isn’t required by the state I live in?
  • What documents do I need to purchase car insurance?

Have you answered some of these questions? If you haven’t answered them, don’t worry. We’re going to answer them below.

How do I buy car insurance?

We’ve already mentioned that if you have a car, you must have car insurance. It is the law.

Yes, it can be overwhelming to think about purchasing an auto insurance policy, and somehow it never gets easier, even if you’ve bought many policies during your lifetime. It can sometimes feel like the whole process just gets more difficult as time goes on.

But don’t be discouraged. If you’ve had trouble in the past while purchasing a car insurance policy, or you just don’t know how you want to go about purchasing a new one today, we’ve got you covered.

Take a look at some of these easy steps to buying car insurance:

  1. Decide on how you want to buy car insurance – Do you have homeowner’s insurance or renters insurance? Do you have existing coverage on another vehicle in your household?If you add your currently uninsured vehicle to an existing policy, you may qualify for a bundle discount. If you want to shop around for a better quote, you can do that too — it just might take some extra time. You can also use our free car insurance comparison tool at the top, middle or bottom of this article. Simply enter your ZIP code to get started.
  2. Figure out how much car insurance you actually need – For example, if you want minimum liability insurance, make sure you’ve checked your state laws so you know exactly how much insurance to buy. If you’re not sure how much insurance is required by your state, the provider you speak will know the laws and will be able to tell you what they are.
  3. Fill out a car insurance application – Filling out an application is usually the longest process when buying a new car insurance policy. You’ll need to know information including names, dates of birth, Social Security numbers, and the driver’s license numbers of all drivers in your household, plus vehicle information numbers or all vehicles owned, your address, and your declarations page from your most recent prior car insurance policy.
  4. Get and compare your quotes – After filling out all of the annoying paperwork, your quotes will start pouring in. Remember that insurance companies will include coverage options that you don’t need or didn’t originally ask for. Pay attention and read over all of the fine print to see what is included in your potential policy and what isn’t.
  5. Choose your insurer – After doing some extensive research and reading up on your potential insurer, you can decide which insurer you want to go with. You can pay for your policy by the month or all at once. Some insurers might also request the first and last month’s payments up front before your policy is active.

Remember that you can cancel your policy at any time. Some companies might allow you to cancel your policy over the phone, while others might have you send in paperwork declaring cancellation. Just make sure that if you’re going to cancel a policy, you need to have another one in its place.

Car Insurance Benefits

Throughout this article, we’ve touched on many of the major reasons why you need to have car insurance, but we haven’t quite scratched the surface about some of the benefits of having a car insurance policy.

In conclusion, we would like to mention a few benefits that car insurance can provide you with.

  1. It protects you against a potential lawsuit – Everyone gets into accidents — no one is above them. But just because you’ve been in an accident doesn’t mean you should have to file for bankruptcy over lawyer fees. Legal defense fees are included in most auto insurance policies so that you’re not caught between a rock and a hard place when someone files a lawsuit against you.
  2. When an accident occurs, you won’t be personally responsible to cover all of the losses – The Insurance Institute for Highway Safety said that, in 2017, 34,247 crashes occurred in the United States. Those crashes involved 52,645 motor vehicles, and 37,133 people died.You are always at risk of a crash whenever you operate a vehicle. Without coverage, you could be personally financially responsible for the losses.
  3. Pay less if an accident occurs – The average cost for an auto insurance policy in the United States, according to the Insurance Information Institute, was $935.80 per year in 2016. A single head-on crash can cost thousands of dollars in losses. If you have a good insurance policy, you’re not going to pay more than your deductible in a single year for losses due to an accident.
  4. Avoid devaluation to your vehicle – If you have a great insurance policy, (one with comprehensive coverage) and a hail storm causes damage to your vehicle, your policy will cover the costs to repair your vehicle. Paying for comprehensive coverage might seem expensive up front, but it can save you a lot of money in the long run. Car insurance can also help you to return the car to its original condition in case you ever want to sell it.

Well, there you have it. Car insurance isn’t just required, it’s also very beneficial. We hope you’ve learned everything you need to know about what car insurance is and how it works.

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