If you drive a vehicle in the US, you need automobile insurance. Should you get in an auto accident, insurance coverage offers a crucial way to protect yourself from financial catastrophe. And besides - it’s legally required almost everywhere in the country. Driving without an insurance policy could land you in serious trouble with the law.

But what is auto insurance? How does it work? How many different kinds of insurance are there? And how do you find the most affordable policy for you? In this post, we’ll dig through car insurance basics so you can make a smart, informed decision.

What is car insurance?

After an auto accident, the costs of damage can be tremendous. That includes your vehicle, other cars, houses and other property involved in the collision. It also includes medical bills for yourself, your passengers, people in other vehicles, and bystanders who are injured. Naturally, someone needs to pay for all of this damage. That’s where your insurance agency comes in.

When you buy insurance coverage - called a “policy” - the insurer agrees to foot the bill for these costs, should an accident happen. In exchange for this coverage, you have to pay your insurance agency a monthly fee, called the “insurance premium.” Usually, you’ll have to contribute a certain portion to the bill before your coverage kicks in. This is called your insurance “deductible.”

What types of car insurance do you need?

There are many different types of auto insurance available. The decision about which kind of policy to buy (and how sizeable they should be) is complex and personal - but you can make an informed decision by learning what’s available. Here are some of the car insurance options on the market:

  • Liability coverage: Your liability policy covers damage you do to other people’s property or person. Bodily injury liability _covers their medical bills, while _property damage liability covers damage to their property. This kind of policy is legally required almost everywhere.
  • Collision coverage: This kind of auto insurance covers damage to _your _car if you hit an object like a tree or mailbox. Collision coverage may or may not be optional - it depends on your local laws and whether you fully own your vehicle.
  • Comprehensive coverage: Comprehensive insurance covers damage to your vehicle that occurs when you’re not driving it. That includes fire, theft, hail, vandalism, etc.
  • Uninsured / underinsured motorist insurance: Many drivers, unfortunately, do not have auto insurance - or the policy they do have just isn’t sufficient to cover your medical / vehicle costs after an accident. You can protect yourself from this kind of financial risk with underinsured motorist coverage, which covers whatever the other driver can’t.
  • Personal injury protection: After an accident, your medical bills may be exorbitant. Personal injury protection (PIP) is there to protect you from these costs by covering your healthcare expenses, and potentially lost wages if you need to stop working. Many drivers buy a PIP policy in addition to standard health insurance.

How much auto insurance do you need?

State laws will set a minimum size for your auto insurance policies. In New York State, for example, you’re required to have $25,000 in bodily injury liability, $10,000 in property damage liability, and $50,000 in personal injury protection. So does this mean the minimum coverage is good enough?

In fact, the minimum coverage requirements are often far beneath what you’ll realistically need after a collision. For instance, the other driver’s medical expenses alone can run to hundreds of thousands of dollars. If you only have $25,000 in bodily injury liability coverage, you could be on the hook for the rest. For many drivers, that can result in massive debt or bankruptcy.

How can you get the best insurance quotes?

In a sense, insurance is just like anything else you buy: If you want a good deal, you need to shop around. That means comparing rates from a number of insurers, seeing which policy best meets your needs, checking ratings and reviews, and applying for coverage if you have full confidence in the quality of the insurer.

The first step in this process is called getting a “quote.” Insurance agencies “quote” you a monthly premium rate at which they’ll provide insurance coverage. Smart shopping means getting quotes from as many insurers as possible. That’s where AutoInsurance.com can help.

With AutoInsurance.com, you can compare quotes from many insurers in just a few clicks. Just enter some basic information about your vehicle and driving history. We’ll show you competitive quotes from a number of agencies. You can figure out which is best for you and apply in minutes.

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References

Local Information and Laws by State

Click your state from the list to learn about local insurance laws and other important information.

Did You Know?

Importance of Price

The results of a 2011 survey from consulting company Deloitte showed that 8 out of 10 shoppers consider how cheap a policy is to be an extremely or very influential decision when changing auto insurance carriers.