Introduction
Buying auto insurance for the first time can be confusing and complicated. With so many options, coverage types, and factors that determine your rates, it’s hard to know where to start. This comprehensive beginner’s guide to auto insurance covers all the basics you need to know when getting coverage for the first time. Read on to learn the essential information about minimum coverage requirements, the different types of auto insurance coverage, strategies to save money on your premiums, and how to choose the right policy for your needs.
What is Auto Insurance?
Auto insurance is a contract between you and an insurance company that protects you financially if you get into an accident. Basically, you agree to pay a premium, and the insurance company agrees to pay for certain damages and losses you experience in a covered accident.
Auto insurance also pays for damage you may unintentionally cause to another person’s vehicle or property. So if you cause an accident that’s your fault, liability coverage helps pay for repairs to the other driver’s car and covers their medical bills if they were injured. This protects your assets if you get sued.
Minimum Auto Insurance Requirements
The minimum auto insurance requirements vary by state. Most states require you to carry at least:
- Bodily injury liability coverage: Pays for injuries you cause to others
- Property damage liability coverage: Covers damage you cause to another vehicle or property
- Uninsured motorist bodily injury coverage: Covers injuries to you and your passengers caused by an uninsured driver
Some states require additional types of coverage, such as personal injury protection and underinsured motorist coverage. Fail to carry the minimum required auto insurance in your state, and you could face fines, license suspension, or inability to register your vehicle.
Main Types of Auto Insurance Coverage
Beyond the minimum requirements, there are lots of optional coverages you can add to a policy. The six main types are:
- Liability Insurance: Protects you if you’re at fault for an accident that causes injuries or property damage. Includes bodily injury and property damage coverage.
- Collision: Pays to repair or replace your vehicle after an accident with another car or object, like a tree, even if you’re at fault.
- Comprehensive: Covers damage to your vehicle that’s not from a collision, like theft, vandalism, fire, flood, hail, or animal strikes.
- Uninsured/Underinsured Motorist: Protects you if you’re hit by a driver who doesn’t have sufficient insurance (or any at all).
- Personal Injury Protection (PIP): Pays for medical expenses and lost wages for you and your passengers after an accident, regardless of who is at fault.
- Additional Coverages: Things like rental reimbursement, roadside assistance, custom parts coverage, etc.
How Insurance Companies Determine Your Rates
Insurance companies look at a variety of factors about you and your vehicle to evaluate risk and determine what premium to charge you. These include:
- Driving and credit history
- Years of experience
- Type of vehicle and safety features
- Typical mileage
- Location and primary use of vehicle
- Age, gender, and marital status
- Claims history and prior coverage
Strategies to Save Money on Auto Insurance
Here are some proven ways to cut costs on car insurance premiums:
- Compare quotes every renewal cycle
- Take advantage of multi-policy and multi-car discounts
- Ask about discounts for mature drivers, good students, defensive driving course completion, etc.
- Raise your deductible amount
- Improve your credit score
- Consider usage-based “telematics” programs
- Ask about Group Insurance discounts
- Move vehicles used infrequently to a separate policy
How to Choose the Right Auto Insurance Policy
Choosing adequate coverage you can afford is key when shopping for a policy. Consider your budget, assets to protect, risk tolerance, and minimum requirements in your state. Usage, driving habits, vehicle type, age, and gender also impact rates significantly.
Get quotes from multiple insurers so you can compare coverage options and pricing side-by-side. Read policy documents carefully and ask questions before signing anything so you know exactly what’s covered.
An independent insurance agent can also explain different companies’ products and help determine appropriate coverage levels unique to your situation.
Conclusion
Finding the right auto insurance policy takes some research upfront, but pays off in the long run. Now that you understand the basics of minimum requirements, coverage types, money-saving strategies, and how to choose a good policy, you can shop insurance with confidence. Visit an independent agent or use an online comparison tool to start comparing quotes. With a little effort, you’ll secure coverage at a competitive rate.
