The Car Insurance Cheat Sheet
(The nuts and bolts of finding the right coverage)
It doesn’t matter if you drive a rust bucket or luxury four-door, your car is probably one of the most important/priciest things you own. Yet instead of guarding it with your life, you drive it at high speeds on an obstacle course full of unpredictable hazards and bad drivers. And like it’s no big deal. Crazy, right?
Since most drivers don’t bubble wrap their cars, car insurance is the most logical AND practical way to protect your vehicle. Our independent insurance agents will walk you through a sweet selection of policy options to make sure you have the right coverage.
What Is Car Insurance?
In short, it’s a contract between you and an insurance company. The insurer will help you recover financially from a number of scenarios that involve bad things happening to or caused by your car. Bad things can range from medical expenses to roadside assistance.
Why Do I Need Car Insurance?
In almost every state, it’s illegal to drive without car insurance. Every state has a minimum of liability coverage that is legally required. If you don’t have it, you could be fined. If you make a habit of getting caught without it, you could end up in jail.
The other good reason to have car insurance is consistency. It’s easier to pay monthly or quarterly premiums than to swallow the sudden cost of a bad accident. Unless you have an emergency stash of cash lying around, you should get yourself covered.
What Does Car Insurance Cover?
Car insurance covers your car, other people’s cars, the people inside the cars and the people around the cars (such as pedestrians and bikers). It really depends on the type(s) of coverage you have.
There are three main auto insurance coverage types—liability, collision and comprehensive. There are also a number of specialized extras available. Here’s an overview of what you can expect from each:
- Liability: This is the legal minimum of coverage—the other types are recommended, but not required. It covers your medical expenses (up to a point). If you’re at fault for an accident, it also covers the other driver’s medical expenses and car repairs. It does not cover repairs to your car.
- Collision: This covers repairs to your car in case of a collision with another vehicle or inanimate object, like a mailbox.
- Comprehensive: This covers everything else that can happen to your car: fire, wild animal collisions, riots and even missiles. It’s more accurately called “other than collision.”
Other options for more extensive coverage:
- Uninsured/Underinsured motorist: This covers medical or repair expenses that are more expensive than what the other person’s insurance covers. (For example, if they’re driving uninsured—illegally—or if they carry only the cheapest coverage.)
- Medical payments: This covers medical bills that go over what your liability insurance covers. If you don’t have health insurance, this is especially important.
- Rental car: This covers rental car costs while your car is being repaired after an accident.
- Road service/Roadside assistance: This covers emergency tows, battery jump starts and other roadside mishaps.
What Types of Car Insurance Coverage Do I Really Need?
It depends on your car’s value and how much you need your car. If you drive an old rust bucket that would be cheaper to replace than repair, you probably only need liability. (Because your premiums could be higher than actual repair costs.)
On the other hand, if you absolutely must have your car for work, dropping off your kids, or other mission-critical tasks, consider adding the other types (especially rental car coverage). They’ll help you cover bills and other expenses to get you back on the road.
How Much Does Car Insurance Cost?
An average driver with a good record will likely pay about $800 a year for full coverage for one car. If they choose liability coverage only, costs could be as low as $600.
Auto insurance costs are based mostly on the coverage you choose, the value of your car and your driving history. Driving a luxury car and getting DUIs or other violations will push costs higher. Your rates will drop as you get older, especially after turning 25.
Who Is Included in My Car Insurance Policy?
Car insurance costs are based on your record as a driver, but insurance coverage follows your car. That means that anyone driving your car is technically covered, including friends and family who borrow it.
Family members who live at your address and share your car (such as a spouse, partner or teenage kids) should be explicitly covered by your policy. If they have a bad driving record, it can drive up your costs.
How Can I Get Car Insurance Discounts?
Penny pinchers and savvy shoppers rejoice: Chances are that there are car insurance discounts you can qualify for. Here are the most common discounts that insurance companies offer:
- Multi-policy: Discount for bundling multiple types of insurance with one provider, e.g., homeowners and car insurance
- Multi-car: Discount for insuring multiple cars with one provider, e.g., your car, your spouse’s car and your kid’s car
- Safety: Discount for your car’s safety features—this is unrelated to your driving record
- Accident-free: Discount if you’ve gone an exceptionally long time without an accident
- Loyalty: Discount if you’ve been at your insurance company for a long time
- Age: Discount if you’re over a certain age, usually 55