Auto Insurance
Auto insurance protects you financially in the event of a car accident, theft, or damage. Understanding the types of coverage and how to save money on your premium is essential for every driver.
Types of Coverage
Pays for injuries and property damage you cause to others. Required in almost every state. Typically shown as three numbers (e.g. 100/300/100).
Covers damage to your own vehicle from a collision, regardless of fault. Usually required if your car is financed or leased.
Protects against non-collision events like theft, vandalism, hail, flooding, and animal strikes.
Covers your expenses if hit by a driver with no insurance or insufficient coverage. Highly recommended in all states.
Pays medical bills for you and passengers regardless of fault. Personal Injury Protection (PIP) is required in no-fault states.
Covers towing, flat tires, lockouts, and fuel delivery. An affordable add-on that provides peace of mind.
How Auto Insurance Premiums Are Calculated
Insurers consider your age, driving history, credit score (in most states), vehicle type, annual mileage, zip code, and coverage selections. Young drivers and those with accidents or violations pay significantly more. Factors like your credit-based insurance score can impact your rate by 30-50% or more.
Money-Saving Tips
- Bundle auto and home insurance with the same carrier for a multi-policy discount of 5-25%.
- Increase your deductible from $500 to $1,000 to lower your premium by 15-30%.
- Ask about discounts: good driver, good student, low mileage, anti-theft devices, and defensive driving courses.
- Shop around and compare at least 3-5 quotes every renewal period. Loyalty rarely pays off in insurance.
- Maintain a clean driving record. A single at-fault accident can raise rates 20-40% for 3-5 years.
- Drop collision/comprehensive on older cars where the premium exceeds 10% of the car's value.
Common Mistakes to Avoid
- Carrying only the state minimum liability limits, which can leave you personally liable in a serious accident.
- Skipping uninsured motorist coverage. About 1 in 8 drivers on the road is uninsured.
- Auto-renewing without comparing quotes. Rates vary dramatically between insurers for the same coverage.
- Not reporting all household members to your insurer, which can void your policy.
Key Terms to Know
The amount you pay (monthly or semi-annually) for your insurance policy.
The amount you pay out of pocket before insurance kicks in on a claim.
The maximum your insurer will pay per person, per accident, and for property damage.
Determines who pays after an accident. No-fault states require your own insurer to pay your medical costs regardless of who caused the crash.