Frequently Asked Questions
Unless you’ve had to look up information about auto insurance to get a policy for yourself, you might not know a whole lot about it, and that’s okay, a lot of people don’t. At renewal time it seems as good a time as any to teach people about auto insurance and how it works, but it’s seldom covered.
If you’re confused or unsure about how to get an estimate of cost or how auto insurance works in general, we are here to help.
Most people buy car insurance on the fly — You will need a policy to drive a new ride off the lot. We can’t knock a flash purchase. Having insurance right away is important — and not just because states mandate coverage. There’s no guarantee you won’t get into a car accident on your drive home.
Still, it’s not ideal to get a policy at the last minute. For starters, you can save money by comparison shopping for car insurance. Plus, auto policies are complex. To help you understand what you’re buying, here are the answers to 20 car insurance questions you might be too embarrassed to ask.
1. Did you say foregoing car insurance is illegal?
Yes, because, most state it is mandatory to carry basic coverage.
2. Is the minimum amount of car insurance required by my state enough?
I mean, you won’t face a legal penalty. (They vary by state, but usually involve hefty fines. Plus, your license could get suspended.) In terms of adequate coverage, it depends on where you live. Some states have low minimums. In fact, many only require liability insurance, which covers property damage or bodily injury you cause other people. You would need other types of car insurance if you wanted coverage for damage to your car.
3. There are different types of car insurance?
Oh, yeah. Here are the big ones:
- Bodily injury (BI) and property damage (PD) liability coverage,which pays for damage you cause to other people or their property
- Personal injury protection (PIP), which pays for medical expenses and usually lost wages regardless of fault
- Collision coverage, which pays for damage done to your car in a collision
- Comprehensive coverage, which pays for damage done to your car in non-collisions (i.e., fire, vandalism, or theft).
- Uninsured and underinsured motorist (UM/UIM) coverage, which protects you if you’re in an accident and the driver at fault doesn’t have insurance.
There’s also gap insurance, which covers the — you guessed it — gap between what your car is worth (what your insurer will pay if the car is totaled or stolen) and what you still owe on it.
4. Do I need gap insurance?
Gap insurance is important if you put down a small down payment, have a long auto loan term (60 months or more), drive a lot, are low on emergency funds or bought a car that depreciates quickly or gets stolen a lot.
5. Should I buy every other type of car insurance?
Not necessarily. Say, for instance, you don’t own a car, but drive …
6. You need car insurance if you don’t own a car?
If you rent or drive other people’s cars frequently, then, yes, you should look into a non owner, which provides basic liability coverage. Non-owner policies don’t include collision or comprehensive coverage, because you don’t need it. Remember, collision and comprehensive coverage pays for damage to your car and, in this scenario, you don’t have one.
7. Huh. I have a car. How much auto insurance should I buy?
You should buy as much car insurance coverage as you feel comfortable with and can afford. Having said that, the price difference between a bare-bones policy and a robust policy is sometimes negligible.
8. How is that possible?
Car insurance premiums are based on a laundry list of factors, including your driving record, vehicle, how often you drive, age, gender, marital status, zip code, credit …
9. Wait … what do personal details, like my marital status, have to do with car insurance?
All insurers base their rates on risk. We’re talking car insurance, so the company is primarily trying to determine how likely you are to get into an accident. Obviously, if you have a poor driving record or you’re on the road all the time, the odds are less in your favor. But statistics show women get into fewer accidents than men as do married individuals versus single ones. Younger drivers, conversely, get into more accidents than older drivers. All that data on your demo can influence what insurers charge.
10. Is that legal?
By and large, but it depends on where you live. A few states have laws barring auto insurers from using credit scores, marital status, gender, education level, income and more when setting rates. Some also prohibit basing rates on your age, though they permit companies to look at how many years of driving experience you have.
11. Why do car insurers care about my credit?
Most insurers — and we’re not just talking about auto insurance companies here — use some type of credit-based insurance score to help determine how risky a potential customer is. The practice is a bit controversial, which is why some states have laws against using it (see above). But the general thinking behind insurer credit checks is:
12. OK, but while we’re on the subject: Do red cars cost more to insure?
No. That’s a myth. The make and model of a car impact your rates, given some cars are just more expensive than others.
13. Will my car insurance rates automatically drop as my profile changes?
It’s hard to say. You might see rates change as you age, but they don’t always go down, so much as they level out or increase at a lower rate. (Remember, the rules of inflation are in effect.) And that assumes you don’t incur any red marks on your driving record. As for a change in marital status, you generally have to contact your insurer to get a rate decrease — and if your spouse has a less-than-stellar driving record, well, again, you mind wind up paying more.
14. So I’m stuck with whatever rates my insurer initially gives me?
No, you just have to get proactive. You can call your agent to see if you qualify for a lower rate or you can shop around for a new policy. In fact, car insurance rates fluctuate so often and so widely that, no matter how you feel about your policy, it’s a good idea to at least window-shop every one to three years. You can also ask your insurer if you qualify for any discounts.
15. What kind of car insurance discounts are there?
Oh, there are a whole bunch. The big ones include good driver discounts (for going long enough without a moving violation); affiliation discounts (for belonging to a group, like AAA or AARP, that partners with the insurer); low-mileage discounts (for, you know, low mileage) and car safety feature discounts (for installing stuff like emergency break assistance or collision avoidance systems).
16. Should I bundle my car insurance with another policy?
Probably. In many instances, bundling car insurance with homeowners or renters insurance saves you money. But don’t blindly assume you’re getting a discount, even if the quotes are lower. You want to check that you’re not losing any coverage if switching policies.
17. How will I know I’m not losing coverage?
Check the coverage limits in each category of insurance to make sure you’re not paying less in exchange for lower amounts of coverage.
18. How much does car insurance usually cost?
The average cost of car insurance in the U.S. is around $866 a year ($72 a month), according to the National Association of Insurance Commissioners.
19. Is there any other way to lower my car insurance premiums?
There are two other methods that come immediately to mind. First, you could Some car insurers offer anywhere from a 3% to 10% discount for doing so. The other thing you can consider is increasing your deductible. That’s the amount of money you pay out of pocket before insurance kicks in, so you’d pay more in case of an accident, but your monthly premium would be lower.
20. Can you tell me once & for all if I need rental car insurance?
We can help you figure out if you need rental car insurance. The short take: If you don’t have auto insurance, yes, you most likely need coverage. If you have robust car insurance, you might simply need a collision damage waiver as it’s the only way to ensure you won’t pay the rental company any damages in case of an accident. Of course, it gets more complicated from there. For the long take
Disclaimer: This editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
Frequently Asked Questions
So you’ve never had to look up auto insurance information before? That’s okay because not everyone does. When it’s time to renew the license, we can get acquainted with our vehicles and what they’re capable of with auto insurance. But most people don’t learn about this part until after their policy expires.
We’re here to help you learn about auto insurance and how it can be an excellent investment for your family.
When you buy a new car, it’s essential to have insurance. Even if your state doesn’t require drivers in all 50 states to be covered by some auto policy, having protection for what could happen when things go wrong.
The key thing here? Ensure that any vehicle being driven on public roads has its own set or registered owners so as not to risk fines from traffic tickets because they were uninsured at the time.
When you need to buy car insurance, it can be challenging. Not only are there a lot of different types and features that might confuse the crap out of you but also many questions remain unanswered: such as what does my policy cover? How much do I pay annually for this thing, or would monthly payments work better in your case since we’re both driving around town every day?
Well, don’t worry because here’s an easy-to-read FAQ on everything auto insurers should provide – plus all those juicy details hidden within.
1. Did you say preceding car insurance is illegal?
That’s right because most states require you to have basic coverage.
2. Is the minimum amount of car insurance required by my state enough?
You won’t face any legal penalties, but you may be financially responsible for the damage done. Plus, your license could get suspended, and there’s always risk involved when driving without insurance coverage.
The severity of these outcomes depends on where they happen to take place in America. So, please do some research before risking it all by not having enough protection at hand while behind the wheel.
3. Are there different types of car insurance?
There are five different types of car insurance,
- If you cause damage to other people or their property, Bodily injury (BI) and property damage (PD) liability coverage will pay for it.
- Personal Injury Protection (PIP) is a type of insurance that provides coverage for medical expenses and usually lost wages regardless of whether you’re at fault.
- Collision coverage pays for damage done in collisions, so you don’t have to worry about your finances when something happens, and repairs are required because of this unfortunate event.
- Comprehensive coverage pays for damages done in non-collision
- Uninsured and underinsured motorist (UM/UIM) covers you if the driver of the car at fault doesn’t have insurance or their auto policy.
4. Do I need gap insurance?
Putting down a small amount on your car can be risky if you have an expensive emergency, have low cash reserves, or are prone to vehicle theft. That’s why gap insurance is so important.
5. Do you need car insurance if you don’t own a car?
If you rent or drive other people’s cars frequently, then the convenience of not having to carry around insurance can be worth considering. Basic liability coverage is enough for most situations and will protect against accidents in which there’s no-fault involved (such as parking lot fender benders).
6. Huh. I have a car. How much auto insurance should I buy?
The best way to buy car insurance is by figuring out what you need and then getting a policy that fits your needs. The price difference between the two can be negligible, so it doesn’t hurt if this feels too overwhelming at first.
7. How is that possible?
When shopping for car insurance, it’s important to remember that premiums are based on a laundry list of factors, including your driving record and how often you drive.
8. Like my marital status, what do personal details have to do with car insurance?
The company is trying to determine how likely you are to get into an accident. If your driving record or time on the road suggests that it’s unlikely for this risk, then rates will be higher than someone with good stat who doesn’t drive as much. They might have a few accidents now and again because they were in one too many cars after hours at work.
9. Is that legal?
The best way to lower your car insurance rates is by ensuring that the insurer cannot use any of these factors when setting them. Most companies are allowed under state law. Though they may look at how many years’ driving experience someone has or what kind they seem so far. This can lead people who don’t drive much into overpaying. If you live in a few states with laws against it, there’s still hope for some good news.
10. Why do car insurers care about my credit?
Some states have laws against using credit-based scoring systems when it comes to insurance. This is because the practice of doing so can be controversial and lead many people who are considered at high risk for defaulting on their policies into even more debt than they were in danger before.
11. Okay, but while we’re on the subject: Do red cars cost more to insure?
This statement makes a lot of car insurers laugh. The only factor that impacts the cost of insurance is the make and year of car manufacturing.
12. Will my car insurance rates automatically drop as my profile changes?
We all know that as you age, rates may change. However, they don’t always go down. Instead, there’s a chance of them leveling out or increasing at lower rates. Remember the rules of inflation. This assumes no new red marks on your driving record.
When it comes to changing marital status, you’ll have difficulty getting any rates to decrease unless your spouse has records that are less than stellar. In this case, there may be better options available through private insurance companies.
13. So I’m stuck with whatever rates my insurer initially gives me?
Getting a better rate on car insurance isn’t as difficult or impossible to do as one might think. You should call your agent and see if you can qualify for any discounts. It’s also wise to shop around every few years anyway because rates constantly change so often.
14. What kind of car insurance discounts are there?
There are many different types of discounts available to drivers. Some may offer reasonable driver pricing for going without committing any traffic violations. In contrast, others provide special rates because you’re a member of an organization like AAA or AARP that partners with the auto insurer. You can also get discounts for things like low mileage or car safety features. The more you use it, the cheaper everything gets.
15. Should I bundle my car insurance with another policy?
Sure, you might think that getting a discount on your car insurance is easy if the quote comes from homeowners or renters. But don’t be fooled! You want to make sure there isn’t any loss of coverage when switching from one policy type and provider to another. This entity will ensure you don’t pay more than necessary in total dollars spent over time due to both increases and decreases within each category.
16. How will I know I’m not losing coverage?
Life insurers offer hundreds of different policies with differing amounts and types or sections to find one which suits all needs perfectly. But make sure they meet what’s required by law before signing anything. Any company found breaking these rules could face legal trouble themselves as well as fines from rating agencies.
17. How much does car insurance usually cost?
If you’re looking for the average cost of car insurance in America, it’s about $866 per year ($72 monthly). This number can vary depending on your state and personal information needed when filing a claim or wanting other services related to motor vehicles.
18. Is there any other way to lower my car insurance premiums?
You can also opt for a higher deductible. You pay out of pocket this amount before insurance kicks in. If there’s an accident and it happens to be your fault, all those funds will fix up whatever was damaged or lost because nothing else came with them from being uninsured.
The other two methods which come immediately into mind are looking at discounts offered by certain car insurers. Some offer 3% – 10%. Another thing might seem quite an expensive option at first, but think about how much cheaper monthly premiums would get since they wouldn’t have any riders attached.
19. Can you tell me once & for all if I need rental car insurance?
We’ll explain how to find out if you need car insurance, and the short answer is that it depends on your situation. Suppose there are no cars involved in an accident with yours. In that case, most people will be able to get by without any coverage because their auto insurance should cover everything they might encounter while driving around town. However, this isn’t always true! Collision damage waiver policies can also work for those who have robust protection.