Need car insurance? Statistically speaking, you probably do. About 86% of Americans own or lease a car, and it’s legally required almost in almost every state to have an insurance policy. But for something so common, auto insurance remains a confusing, opaque, and often frustrating issue for most of us.
How exactly does car insurance work? How many kinds should you buy? What makes an insurance policy “good”? How much should it really cost? Basic questions like these are astonishingly common. That’s why we put together this comprehensive guide to buying car insurance. We’ll answer the five most common questions, and walk you through exactly what you need to know to get an auto insurance policy you love.
1. What is car insurance?
First things first! At its heart, auto insurance is a simple idea. When you buy it, you’re making a deal with the insurance company: If there’s an accident, the company will pay to fix or replace your vehicle (or the other driver’s vehicle), and / or cover your medical costs. In exchange for this commitment, you have to pay the insurer - sometimes called the “carrier” - a certain monthly fee.
It gets more complex from there, but that’s the gist. You’re paying an insurer for protection in case of an accident. As we mentioned above, this kind of coverage - an insurance “policy” - is legally required to drive almost everywhere in the United States.
2. How many kinds of auto insurance are there?
Broadly speaking, there are 5 types of car insurance you should know about:
- Liability insurance covers property damage (PD) you do to someone else - e.g. by damaging their car - and medical bills (BI, for “bodily injury”) in case they’re injured.
- Collision insurance pays for the repairs to your car if it’s damaged in an accident - or covers its replacement cost if the car is totaled.
- Comprehensive insurance covers the repairs to your car in case of issues beyond your standard car accident, such as theft, hail damage, falling tree branches, etc.
- Personal Injury Protection (PIP) insurance covers medical bills after an accident - be they for you, your passengers, or the other vehicle’s passengers.
- Uninsured / underinsured motorist insurance pays for repairs or medical treatments if you’re involved in an accident with another driver who doesn’t have any insurance - or doesn’t have enough to cover the damage. It can also protect if you’re the victim of a hit-and-run accident.
There’s also a slew of less crucial types of insurance coverage, such as gap insurance (which covers the “gap” between the what you owe on a new car and the lower insurance payout for its technical value), towing insurance (to protect you from the towing fee after an accident), and rental reimbursement insurance.
3. Which kinds of insurance do I need?
If you only want to meet the bare legal requirements, this question has a simple answer: it depends on where you live. Insurance is regulated at the state level. That means each state has its own requirements, and there’s a tremendous amount of variation between them. Some states only require you to have liability insurance. In others, you must have liability coverage, a personal injury protection plan, and an underinsured motorist policy.
Additionally, the_ size_ of the required policy varies from state to state. In Florida, your Personal Injury Protection plan only needs to cover a $10,000 accident. But in New York, your PIP plan needs to cover at least $50,000.
But this is important: Buying the bare legal minimum for car insurance can be a huge mistake. A serious accident can easily cause hundreds of thousands of dollars in medical and property damage. If you only have a tiny insurance policy, you’re dangerously exposed to those financial and legal costs. That’s why many responsible drivers by larger policies than are required, and additional, unrequired types of insurance (such as comprehensive coverage, which is usually optional).
4. How do I find good car insurance?
As with any consumer product, you need to shop around! First, use OnlineAutoInsurance to get car insurance quotes from a number of major service providers. Note that you’ll need to provide fully accurate details to get a real quote for car insurance, including:
- Your name, address and date of birth
- Your driver’s license number
- The make and model of your car
- Your Vehicle Identification Number (VIN)
- Your current insurance details, if you have any
- Your driving history, including past tickets and accidents
The reason it’s crucial to use a service like OnlineAutoInsurance is that we make it easy for you to get a large range of quotes that you compare, apples-to-apples. If you want to visit individual insurance carrier websites to request a quote, that’s great. You can even talk to an insurance agent. But don’t stop there - you have to shop around to find a good policy at a fair price.
5. How should I compare different insurance quotes?
When you narrow down the list of policy options to a few quotes that look appealing, you should do three things:
First, set aside some time to review them carefully. You don’t want to run into ugly little surprises down the line, and there’s just no substitute for reading the fine print. Make sure each policy covers you in the situations you’d expect. (We wrote a whole post about the mistakes people make in this process. Read more here about the art of shopping quotes for car insurance.)
Second, compare the deductibles and premiums. This step is _very _important. The “premium” is simply the monthly cost you have to pay to be a policyholder. If an insurance company offers you a quote of $110 per month, that’s your monthly premium. The deductible is how much you have to pay before your insurance “kicks in” and begins covering damages. Think of it as “your share” of the financial burden to bear.
Generally speaking, policies with low premiums have high deductibles - and vice versa. An insurance quote with a tiny monthly premium might _seem _inexpensive. But if you have to pay a gigantic deductible after an accident, it could cost you a lot more in the long run.
Third, do some research to compare the insurance companies. After all, an affordable policy won’t do you much good if the carrier is a constant headache to deal with. Various consumer review websites can help you in this task, but the crucial things to look for in an insurer are fast response times, clarity of communication, and fairness in their dealings with customers.
The Bottom Line
Finding car insurance can seem daunting, but a little bit of knowledge goes a long way. Learn the basics of how auto insurance works, research what kinds of insurance are necessary and appropriate for you, and be savvy about comparing different quotes to make sure you find a policy you’re satisfied with.