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Car insurance questions: What do I need to know?

Fact-checked with HomeInsurance.com

Diving into the world of car insurance can bring up a lot of questions. We found the answers for common car insurance questions to help you get behind the wheel with a policy that works for you.

We’ll cover all the basics and cut through the confusing complications that usually hang people up when searching for a new provider or adjusting an existing policy.

Is car insurance required?

In most states, an active car insurance policy is mandatory. Anyone who drives without insurance is breaking the law. However, there are two states that do not require auto insurance: New Hampshire and Virginia.

New Hampshire has no mandatory auto insurance laws but may require some high-risk drivers to get SR-22 car insurance. Virginia also has no laws against driving uninsured, but the state requires drivers without insurance to register the car, which comes with a fee.

Is the minimum amount of car insurance required enough coverage?

This is a common automobile insurance question, and the answer is: it depends on the individual and the car. Most states only require drivers to have liability insurance, which protects other drivers and vehicles from accidents, not the policyholder themselves.

If you have the ability to cover your car repair or replacement without insurance, or if the car is old with a low value, liability insurance may be enough. Liability insurance, while cheaper than full coverage, increases the financial risk of driving. 

What are the different types of car insurance?

Car insurance policies can change quite a bit from provider to provider. Still, policies generally fall under six coverages commonly offered by many auto insurers:

  • Liability: This pays for the other driver’s injury and property damage.
  • Collision: Collision coverage pays for your car after a moving accident with another car or obstacle. 
  • Comprehensive: This pays for damage from an event besides an accident, like theft or a natural disaster. 
  • Uninsured motorist: This pays for damages caused by an uninsured motorist.
  • Underinsured Motorist: This pays for damages when the at-fault motorist’s policy falls short.
  • Personal injury protection: Also known as PIP, this coverage pays for your medical expenses after an accident. 

Do I need gap insurance?

Gap insurance is an optional coverage offered by many providers. If a car is totaled but the car’s value is less than the value of the car loan, gap insurance will pay the difference.

We recommend getting gap insurance when buying a new car. The dealership usually offers it, but adding it with your current auto insurance provider may be the cheaper option.

Do you need car insurance if you don’t own a car?

Non-owner car insurance is helpful for people who frequently drive cars they don’t own. This kind of insurance is specialized and only offered by some insurers.

In terms of coverage, non-owner car insurance operates similarly to liability insurance in that it only protects the other driver and their car, not the policyholder. 

How much car insurance do I need?

Once again, the answer to this question depends on the individual and the car they drive. Liability insurance is cheaper than full coverage, but it also offers less financial benefit to the driver, and therefore, more risk.

A good way to think about how much insurance you need is what would happen after a serious accident where your car is totaled and you have medical bills to pay. Can you pay those expenses out-of-pocket? If not, full coverage is probably the best bet.

Do my personal details affect my car insurance?

A car insurance quote is a highly individualized process that draws on a number of factors, and many of those factors will be personal details, such as driving history, age, sex, location and even credit score.

Expect the quoting process to be thorough. Car insurers use these details to determine the amount of risk they are taking on by insuring the driver.

Does my credit affect my car insurance rate?

Some car insurers take a driver’s personal credit history into account when deciding on a premium during the quoting process. Nationwide, for instance, is one provider that takes credit history into account.

Here’s a helpful primer from the National Association of Insurance Commissioners on how insurance companies can use your credit information to determine an insurance premium.

How do my car insurance rates change as I age?

Statistically speaking, younger drivers get in many more accidents than people who are older, and car insurers take this into account when pricing an auto insurance policy.

Drivers over 25-years-old usually receive lower auto insurance rates than people younger than 25. If you had a birthday recently, it’s worth checking with your insurer to see if you get a lower rate.

What kind of car insurance discounts are there?

There are several discounts for car insurance, but which discounts are available will depend on the car insurance provider, and which discounts a driver can qualify for will depend on the individual.

According to the Insurance Information Institute, here are commonly offered car insurance discounts:

  • Accident free for a certain amount of time
  • Antitheft devices
  • Bundling policies
  • College students away from home
  • Driving courses
  • Good credit 
  • Good grades
  • Higher deductibles
  • Low mileage

Ask your provider to see which discounts it has and what you might qualify for.

Should I bundle my car insurance?

Many insurers offer discounts to people who sign up for multiple kinds of insurance, commonly known as a multi-policy discount. Signing up for auto and home insurance with the same provider could net you a lower rate on both premiums.

However, there is no guarantee that the premiums will be lower than if you went with another insurer, so do your homework and get a few quotes before signing up for a second policy to get the discount.

How much does car insurance cost?

The cost of car insurance is based on many individual factors, so the cost of each person’s premium will be different. The average annual cost of car insurance in the U.S. was $1,555 in 2020.

Location has a big effect on the cost of car insurance, with some state residents paying substantially more than others. For example, the average cost of auto insurance in Louisiana is $2,351, while auto insurance in North Dakota only costs $1,211, on average.

How do I lower my car insurance premiums?

Aside from staying claims-free, there are many other ways to lower auto insurance premiums. Do these things when shopping for car insurance:

  • Shop around for different quotes 
  • Compare cost before you buy
  • Ask for higher deductibles 
  • Reduce insurance coverage on older cars
  • Bundle home and auto policies
  • Maintain a good credit history
  • Ask employers about group insurance discounts
  • Seek out and ask about other possible discounts

Do I need rental car insurance?

Rental car insurance is often expensive and only recommended if the driver has no other car insurance that will cover them while driving the rental car.

Before renting the car, check with your auto insurer to have a clear idea of how they handle rental car accidents. 

The takeaway

  • Auto insurance laws change from state to state.
  • Different providers also have different guidelines for auto insurance .
  • It’s always better to ask than guess.

Auto insurance questions are common, and most people don’t have all the information they need on hand. If there’s something you don’t understand, don’t hesitate to ask.

With the right information, you can find lower insurance rates on policies that will do what you expect. Remember, auto insurance companies work for you, and they will be happy to answer any questions you might have during the process.

Julian Dossett

Julian is a freelance writer for Coverage.com, where he writes about auto and home insurance with an eye toward consumer advocacy. His work has appeared at The Simple Dollar, Bankrate, Reviews.com, Blockchain Beach and MSN.com. He’s currently based in New Mexico.

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