Car insurance is something that nearly every vehicle owner will have to deal with, since it's required by law almost everywhere in the U.S. It can also be intimidating, since car insurance policies are loaded with fine print and a multitude of options to choose from including deductible levels and types of coverage.
Because buying auto insurance can be complicated and expensive, it's especially important to know how policies work and how to find the best provider for your needs.
First off, what is car insurance, exactly? Car insurance is a kind of insurance that protects you financially if you get into an accident or if your car is damaged in other ways. It covers the cost of medical care for injuries, and often for lost income due to a crash, too. Other auto insurance policy provisions typically include coverage for damage you cause to others' property, as well as for the cost to repair or replace your own vehicle due to a collision, theft, vandalism and other perils.
Money's main takeaways for getting car insurance
- To request price quotes and buy car insurance, you'll need to provide some basic info, including your driver's license number, the car's vehicle identification number (VIN) and your address.
- Many insurance companies and third-party sites will give you confirmed auto insurance price quotes online. Others may require you to call and provide information over the phone. Independent insurance agents or brokers can be helpful because they'll browse policies from multiple companies for you, including some local insurers that may be off your radar.
- Car insurance prices can vary widely based on where you live, the age and type of vehicle being insured, coverage levels, your credit score and other factors.
- To choose the best policy for you, it's important to understand the different types of car insurance and what each covers (and doesn't cover).
- To decrease car insurance costs, you should look for discounts and consider choosing a higher deductible or lower coverage levels.
- Because car insurance premiums tend to rise every six months or year, and because your needs may change, it's smart to reconsider your coverage and shop around for new policies annually.
- While it's easier to buy car insurance if you already own a vehicle that's insured, getting car insurance for the first time is not that difficult. The process is very similar to a car owner shopping around for policies with new insurance companies.
How to buy car insurance guide: Table of Contents
- Types of car insurance
- What information do I need to get car insurance?
- Choose your car insurance coverage
- Shopping around and getting the best car insurance
- When should I start thinking about auto insurance?
- How much does car insurance cost?
- What determines car insurance premiums?
- How does car insurance work?
- Who needs car insurance?
- Final tips for buying car insurance
Types of car insurance
Before shopping around and gathering price quotes, it's important to understand all the different types of auto insurance coverage — and that not all are needed. Among the decisions you'll have to make are what optional coverages you want and what levels of different coverage make the most sense for you. Here are the types of car insurance you'll encounter when shopping for policies:
- Liability insurance includes property damage and bodily injury liability. It only covers damages that you cause others in an at-fault accident.
- Comprehensive coverage pays for repairs if your car is damaged by something other than being involved in an accident with another vehicle (including hail, fire, floods, theft and vandalism).
- Collision coverage covers repair costs to your vehicle if you're involved in an at-fault accident.
Full coverage car insurance is a term referring to having comprehensive and collision policies along with the state minimum. When a vehicle gets old and has lost significant value in the resale or trade-in market, many drivers decide to drop collision coverage as a way to save money on their policy.
- Medical payments coverage pays for medical expenses if you or your passengers are injured in a car accident.
- Personal injury protection (PIP), also known as no-fault insurance, covers medical bills, loss of wages and funeral costs for you or your passengers if you're in an accident, regardless of who is at fault.
- Uninsured/underinsured motorist coverage covers medical bills and repairs if you’re in an accident caused by another driver with little or no insurance. It can also cover the cost of damages that result from a hit-and-run.
- Guaranteed asset protection (GAP) pays the difference between how much you owe on your vehicle and how much your insurance will pay out if your vehicle is totaled or stolen.
- In addition to these, optional insurance riders can give you additional coverage such as roadside assistance, glass replacement and rental reimbursement at an extra cost.
What information do I need to get car insurance?
To get auto insurance directly from a provider or through an independent agent or third-party service, you should be ready with the following information:
- Your driver's license number and driver's license info for anyone else on the policy
- The vehicle identification number (VIN) for each vehicle included on the policy
- The physical address where the vehicle will be kept in a garage or parked
- Your Social Security number (possibly, many companies ask for it)
You may also want to have the information below handy because it will help you make decisions quicker or possibly lower your insurance costs:
- Report card showing good grades for students included on the policy
- Proof of any safe-driving courses taken by drivers covered the policy
- Your current auto insurance coverage levels (if available) or some idea of what coverage you want
Choose your car insurance coverage
Car insurance includes several different types of coverage, some of which are optional and some of which you can adjust based on your needs. You also need to make a decision on the deductible amount that works best with your budget.
Here are the steps to help you choose how much insurance you should buy.
Know the minimum liability you’re required to carry
Regulators in your state stipulate the types and amounts of liability coverage you’re required by law to carry. Insurers will be aware of these requirements for your state.
Nearly all states require liability coverage, which includes bodily injury liability per person and per accident. Liability coverage also includes property damage liability per accident. (In no-fault states, bodily injury coverage isn’t required, but you may instead be required to carry personal injury protection to pay for your own injuries.) There is also usually a third requirement, for property damage liability coverage.
Liability insurance is typically summarized in a string of three figures; for example, 25/50/25 would signify coverage of $25,000 per person injured, to a maximum of $50,000 per accident, along with $25,000 in property damage coverage.
Buy more than the liability minimums, if you can afford it
State-mandated liability coverage limits can be as low as $15,000 for bodily injury per person. Medical payments if someone is hurt in an accident can be far more expensive than this, and the injured party could sue you to make up the difference if your liability coverage isn’t sufficient.
The same also holds true for property damage insurance requirements. In California, for instance, the minimum required is $5,000. This minimum might be enough if you get in a fender bender, but if you total someone’s luxury car, destroy property like a phone pole or fire hydrant, or do serious damage to a building, you could be staring down some jaw-dropping bills.
The upshot: While sticking to your state’s bare minimum of insurance coverage might seem like a smart way to save money, it can backfire by leaving yourself personally responsible for some of the cost of injuries and property damage if you cause an accident.
Experts typically recommend coverage of 100/300/100. That is, bodily injury liability of $100,000 per person and $300,000 per accident, along with property damage liability of $100,000 per accident.
Weigh your need for supplementary medical coverage
The personal injury protection (PIP) coverage that’s required in no-fault states (sometimes simply described as “no-fault insurance”) is usually available in other states as a policy add-on. It covers medical expenses for you and your passengers, along with reimbursing you for lost wages and other expenses related to your injuries, such as needing to hire someone to carry out household tasks as you recuperate.
In at-fault states, you may also or instead have an option to buy medical payments coverage (or MedPay), which covers medical expenses but not the ancillary expenses such as wage loss.
You likely don’t need MedPay provided you and others who ride with you have adequate health insurance. But even those who are well-insured might consider getting optional PIP coverage because it would cover loss of income due to an accident, at least to a monetary limit.
Lean towards getting uninsured/underinsured motorist coverage
This protects you if you get into an accident with someone who doesn’t have — or doesn’t have enough — insurance coverage of their own. Most states require this coverage. But even when it isn’t required (as in Florida, for example), you should consider adding this coverage.
That’s especially the case if the percentage of drivers on the road where you live is well above the national norm of about 12%. In Florida, for example, the proportion of uninsured drivers is usually about double the national figure.
Get collision/comprehensive coverage, unless your car is old
Collision and comprehensive coverage are usually lumped together in insurance policy descriptions, but they’re slightly different. Collision coverage refers to damage that happens to your car if it hits, or is hit, by another vehicle or some other obstacle when you’re behind the wheel. Comprehensive covers all of the bad things that can happen to your car when you’re not driving it: theft, vandalism, fire or storm damage and so on.
If your car is more than 10 years old, you might not need collision coverage anymore. According to the most recent data available from the National Association of Insurance Commissioners, the average insurance claim payout for collision damages is more than $4,000. Look up your car’s value on an independent site like Edmunds.com or KBB.com — if it’s worth around $5,000 or less, you’ll probably be better off dropping that coverage and just saving a little more so you can pay for any damage you might incur in an accident. This is especially the case if you have a high deductible.
Other coverage options include reimbursement for costs like roadside assistance or windshield replacement.
Buying a new car? Consider gap coverage
Vehicle depreciation means that your new car’s value plummets the moment you drive off the dealer’s lot, so if you hit a phone pole a week after signing the contract and total your car, the amount your insurance company will reimburse you could potentially be less than the amount you agreed to pay your lender.
Gap coverage covers you for that difference. Not everyone needs this, but it can protect you if you borrow money to buy or lease a new car, especially if you put little or no money down on a luxury vehicle or one loaded with options.
Decide on a deductible
A deductible is the amount you pay before insurance covers the rest of a covered claim. For example, if repairs related to an accident cost $3,500 and your policy has a $500 deductible, the insurance company would (hopefully) pay $3,000 towards the repairs and you'd be on the hook for the remaining amount.
Deductibles typically range between a few hundred dollars and a few thousand, and lower deductibles raise how much an auto insurance policy costs. There are some insurers that offer “no deductible” features or policies with similar verbiage, but the trade-off is usually much higher premiums. You’d probably be better off taking a policy with a deductible and putting money into a savings account in case you ever need to pay it.
Shopping around and getting the best car insurance
There are a number of reasons why the best car insurance for you isn’t necessarily the cheapest option. That said, there are some tried-and-true ways to make good decisions and lower your car insurance premium.
Shop around, including online
If you’re searching for car insurance online, most carriers have tools that let you adjust your coverage levels if you’re seeking a way to lower your premium. To get car insurance, you’ll need a few pieces of information, including your driver’s license number and the vehicle identification number.
You can buy car insurance in person or online, and you can go directly through the insurance company or through an independent agent or an online platform that sells policies from multiple insurance companies.
If it’s your first time buying car insurance, third-party sites or apps can be useful. Just be aware if you use one of these platforms to get auto insurance quotes that those prices might be generated using assumptions about your driving record and coverage preferences that might not reflect your actual needs.
Seek bundling discounts and pay in advance
Experts recommend contacting your insurance agent to see if you can get a better deal, and comparing that with quotes from other insurance carriers every few years or when you have a major life change. You also can often save on car insurance if you bundle multiple vehicles into a single policy, or bundle homeowners and car insurance policies from the same company.
Car owners usually also get a discount on insurance if they pay their premium upfront for a six-month period, rather than paying one month at a time.
Consider trying usage-based insurance
If you're a safe driver and are comfortable being monitored behind the wheel, it's possible you could save money on car insurance.
This emerging insurance option requires agreeing to have either how well or how far you drive monitored by app or on-board device, and having that data affect your premium. The programs are offered by both "insurtech" startups and big insurance companies, along with a few automakers. Pay-as-you-go programs track your mileage and pay-as-you-drive behaviors like speeding, swerving or slamming on your brakes, and reward safe drivers with lower rates.
Take a driving course
If you have a history of vehicular infraction — think multiple speeding tickets or a D.U.I. — taking a defensive driving course might help lower your car insurance rates. While an in-person class may be required to get an insurance discount, online courses may also qualify.
When should I start thinking about auto insurance?
You can begin your research into car insurance as soon as you’re in the market for a car. Car insurance can be a significant expense and needs to be factored into your total vehicle budget. Indeed, the premiums you’ll pay will vary a lot depending not only on the cost of the car you are buying, but on other factors about it, such as its incidence of claims and costs to repair compared with other vehicles.
If you’re purchasing a vehicle from a dealership, you’ll need to provide proof of insurance before you can drive away with it. This holds true whether you’re buying a new or used car.
If you’re getting a car loan or leasing your vehicle, the lease or loan contract with the seller may require that you carry collision insurance and comprehensive insurance, and potentially gap insurance, too.
If you haven’t checked out car insurance pricing in a few years, it’s a good idea to do so, particularly if you’ve recently gone through a major life change like getting married or moving to a new place — both factors that can change your premiums. If you’ve acquired an additional vehicle, you also should do some comparison-shopping of different car insurance companies' offerings.
How much does car insurance cost?
The average full-coverage car insurance policy costs about $1,800 a year, according to a 2023 AAA estimate. But how much car insurance costs a specific individual will vary based on a host of factors, from your driving record to the car you drive to where you live (see more on these various factors below).
What determines car insurance premiums?
There are many variables that affect the cost of auto insurance beyond your choices about deductibles and elected coverage levels.
The vehicle itself
In general, a newer vehicle means a higher insurance premium. New cars have a lot of bells and whistles intended to keep you safe, from airbags to collision-alert sensors, rear-view cameras or automatic braking. These features can help you avoid accidents and keep you from getting seriously injured if you are in an accident, but the flip side is that they make vehicles much costlier to repair.
And some car categories are pricier to insure than others. Generally speaking, electric cars, large pickup trucks, luxury vehicles and sports cars are more expensive to insure, especially compared to small sedans and small or mid-size SUVs.
Where you live
Where you live and work can make a big difference in how much you pay for car insurance. If your commute is bumper-to-bumper or you regularly park in an area where rates of theft are high, you can expect to pay more. State-level regulations about how much coverage you must carry can also influence your premium.
How much you drive
Broadly speaking, the more you drive, the greater your risk of an accident and the more you’ll pay for car insurance. Since so many Americans spent most of 2020 working from home because of the COVID-19 pandemic, big insurance carriers like Allstate, Geico, and State Farm issued refunds to drivers to reflect the decrease in miles driven. But those rebates are all in the past. In 2023, car insurance costs rose faster than nearly any other common expense, and experts predict more price hikes in 2024.
Your driving record
If you have traffic tickets or at-fault accidents on your record, or more serious infractions like a D.U.I., you can expect to pay more to insure your vehicle. Young drivers, who tend to get in more accidents, also pay higher car insurance rates — although teens can often benefit by being added onto a parent’s policy.
Your credit score
Poor credit is associated with a higher rate of claims, so people with good or better credit are more likely to be eligible for the best rates. That policy draws controversy from some consumer advocates, and some insurers have pledged to do away with credit scores as a pricing factor for car insurance.
How does car insurance work?
Provided you keep payments up-to-date, car insurance gives you continuous protection against both the consequences to you of various perils and of your liabilities while at the wheel. Here's what you need to know about insurance coverage and the process for filing claims and collecting on it.
Understanding car insurance deductibles
Expenses like medical costs or damage to the property of others, which are covered under the policy’s liability coverage, are usually fully reimbursed. But you may have to pay a deductible before you’re made whole financially for the cost of damage you cause to your own car. That expense is covered under the policy’s collision and comprehensive (C&C) coverage, provided you carry that.
You need to have enough money to pay your C&C deductible upfront. However, in most states, your insurer will reimburse your deductible later, if you're found not at fault for the crash, and then reclaim the sum from the insurance of the other (at-fault) driver.
If you live in a no-fault state, you’re required to pay your own deductible in the event of a claim, because no formal fault is assigned — and there is therefore no possibility of the other driver in an accident being held responsible for paying it.
Fault varies by state
The norm is that blame is assigned for accidents and other automotive mishaps, with that determination of fault affecting who pays the resulting costs. However, about a dozen states have what is known as no-fault insurance. This alternative system changes much about how car insurance works, including its deductibles. In no-fault states, blame for crashes is not assigned, and each driver involved in an accident has their own insurance handle their liabilities and other accident costs.
Making a car insurance claim
If you’re in an accident or your vehicle is damaged in other ways that your insurance covers, alert your insurance company as soon as possible. That begins the process of filing your claim, which you can often do now from your mobile phone. Through one of its insurance adjusters, the insurance company then gathers (or has you gather) other data as needed, which may include estimates of repair costs.
The insurance company then negotiates with the other driver’s insurance company to reach agreement on responsibility for the accident (assuming it happened in a state that assigns fault).
However that responsibility is divided, your insurance company handles your claim and its reimbursement, and settles up as needed with the other driver's insurer to recover some or all of your payout.
Who needs car insurance?
Car insurance is required almost everywhere in the United States. All but two states require drivers to carry auto insurance (Virginia and New Hampshire), and there are special provisions to be mindful of if you're skipping coverage in these states.
Virginia charges an Uninsured Motor Vehicle Fee of $500 that is supposed to be paid on top or normal vehicle registration. "Payment of the $500 fee does not provide the motorist with any insurance coverage," the Virginia Department of Motor Vehicles states. "If involved in an accident, the uninsured motorist remains personally liable. This fee is valid for twelve months but may be prorated for a shorter amount of time."
Meanwhile, New Hampshire's auto guide explains that state "laws do not require you to carry auto insurance, but you must be able to demonstrate that you are able to provide sufficient funds to meet New Hampshire motor vehicle financial responsibility requirements in the event of an 'at-fault' accident. If you are unable to meet these requirements your driving privileges in New Hampshire may be suspended."
The requirements and minimum coverage levels for car insurance vary in other states. You should check with your insurance provider or the state motor vehicle department to get specifics.
Final tips for buying car insurance
Shop, and shop again as needed
Where you live and how much you drive are two big determinants of your insurance premiums: Do some comparison-shopping or contact your insurance agent after a big life change like a move or a new job. It's also good to comparison-shop and see if you can get a better deal when your policy is coming up for renewal — and you're likely seeing a price hike.
Don’t be underinsured
It might cost a few bucks less, but not having enough coverage can cost you in the long run. Your state’s minimum coverage requirements aren’t necessarily a good proxy for your coverage needs.
Embrace new technologies
Consider giving at least a trial to some new ways to track how (or how far) you drive, since these new usage-based tracking tools can save you money if your mileage is low and you're a careful driver. Installing your auto insurance company app can also allow to to file claims more quickly, which in turn can allow you to be reimbursed more rapidly.
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