The Auto Insurance Guide for 2024

What is auto insurance?

Auto insurance is the insurance that protects you against financial loss in the event of an accident. The insurance company will pay your losses as outlined in your policy. Policyholders pay annual premiums to insurers, and the company pays all or most of the costs related to auto accidents. Auto insurance premiums are different depending on age, gender, driving record, and other factors, and the coverage minimum various by state, too.

Why do you need auto insurance?

Having auto insurance is required for drivers in almost every state. Auto insurance helps pay for covered losses, medical expenses, and legal fees resulting from accidents. Although some drivers have auto insurance because of the law, there are still many reasons to buy auto insurance.

• Protect yourself and others
  Protect yourself and others The proper auto insurance can protect you, your family, your passengers, other drivers, and your vehicle. It may cover the pay for damage to another driver's vehicle and your vehicle. It also may pay for your medical expenses if you and your passengers are injured in an accident. Get an auto insurance quote to learn how it can protect yourself and your family.
• Save time
  Dealing with a car accident can be time-consuming and tiring. Proper auto insurance helps you with repairs and replacements, vehicle towing and covering the costs of damages. You don't have to negotiate with other drivers when you are involved in an accident.
• Supplement your health insurance
  Auto insurance may pay for medical bills, such as dental work required due to an accident, that health insurance typically won't cover.

💡Takeaway: Auto insurance covers your liability and property damages from car accidents.

What are the types of coverage for auto insurance?

Below are the most standard types of coverage. The options may vary from state to state and company to company. You should always check your auto policy to review the limits of your coverage.

• Liability
  There are two types of liability coverage, bodily injury liability, and property damage liability. Liability means the responsibility you have to take in an accident. When you are at fault in a car accident, it covers the cost of property damage due to the accident and the medical expenses from resulting injuries. Most states require a minimum liability insurance coverage that drivers should have. If you can afford it, it will be better to have coverage above your state's minimum requirements because it will provide further protection. It reduces the risk of you paying a large amount of money because of exceeding your policy limit.
• Collision
  It is a type of coverage that pays for the repairs to your car. If your car is damaged in an accident involving a collision with objects such as another car, tree, mailbox, fence, pothole, or other objects, and single-car accidents that involve rolling or falling over, the policy helps pay the expenses of repairing or replacing your vehicle. Even though collision insurance is not required by any state law, drivers with paid-off cars should consider purchasing the insurance to protect their finances.
• Comprehensive
  The coverage pays for the damage to your vehicle that isn't caused by accident, such as weather damage, theft, animal damage, glass damage, vandalism, and other broad range of potential damage. This type of insurance may be costly but optional. With anti-theft or tracking devices on your car can make it more affordable.
• Property damage
  If your property is damaged by another driver, such as being hit by another car while parked, or if a vehicle slides off the road and damages your house, you can file a claim.
• Medical Payments or Personal injury protection (PIP)
  PIP is often regarded as "no-fault" insurance, required mostly in states with no-fault insurance laws. No matter if the accident is your fault, it covers your medical expenses, and those of your passengers can be paid. PIP includes medical expenses, funeral expenses, child care expenses, lost income, survivors' loss, and household services. It doesn't cover your car damage and property damage.
• Uninsured / Underinsured motorist (UM/UIM)
  The coverage protects you from accidents caused by a driver without insurance or without enough coverage to pay for you. It covers you when you do not cause the accident, and the at-fault driver doesn't have (enough) insurance to cover your expenses, or you are the victim of a hit and run.

What are the steps for purchasing an auto insurance policy?

So you’ve decided to purchase auto insurance. Now what?

• Know yourself and your car
  To set a rate for your auto insurance, you need to provide the following information about the driver and the vehicle.
  1. Driver name and date of birth
  2. Driver’s license number and issue date
  3. Vehicle information number (VIN)
  4. Driver’s driving record
  5. The type, age, and/or value of your vehicle
  6. Anti-theft devices
  7. The record of other drivers on your policy
  The information affects your premium.
• Determine what coverage you need
  You need to know how much of each type of auto insurance coverage you need. The coverages include liability coverage, collision coverage, comprehensive coverage, etc. It is essential to know the amount and type of coverage you require. In addition, to look for the coverage best for you, you will also need to look up the auto insurance requirements in your state. Your state minimums are the basics for determining coverage; they may be too low to cover you in the event of a major accident. Additional options include roadside assistance, new car replacement coverage, rental reimbursement coverage, etc.
• Get quotes and compare your car insurance quotes
  You should get multiple quotes and compare those quotes. You can go to one-stop online services and type in your information to have a list of companies for comparative quotes. Having high coverage limits for the necessary coverage types is always a good idea to be considered. Your quote may include some types of coverage you don't need, and you should carefully look at the options.
• Look for discounts
  Many types of auto insurance discounts are available. Most standard auto insurance discounts are multi-policy, multi-car, car safety, new car, anti-theft, good driver, defensive driver, good student, student away at school, pay in full, electronic funds transfer, paperless, online quote, occupational discounts, alum association and professional organizations, usage-based insurance program discount. Auto insurance discounts can be more complex. Ensure you understand how deals work and always confirm available discounts when shopping for an auto insurance policy.

💡Note: Read your policy carefully about the limit of your item. If your expensive items exceed the limit, you need to talk to your agent or call the customer service line to endorse those items.

How Do Insurance Companies Determine Auto Insurance Premiums?

The information about you and your car will be the factors to determine your premiums. Not all insurers use the same risk models; here is a list of some most common factors.

Age, gender, marital status, and driving experience are common factors used to determine your premium. In general, mature drivers encounter fewer accidents than young, novice drivers. Insurance companies tend to charge more if you are under 25. According to data, Women have fewer accidents than men. Therefore, if all things are equal, women usually pay less than men. Married couples are more likely to be safer than single drivers, resulting in fewer accidents. Therefore, married people typically get discounts and lower insurance rates on their auto insurance.

You can get a lower premium if you have a better record. You will pay more if you or other drivers insured by your policy had a history of traffic violations or were responsible for accidents. You may have to pay more if you are a new driver without an insurance track record.

Your premium will be impacted by where you live. By asking for your ZIP code, insurance companies can tell the cases of accidents and theft, vandalism rates, and claims amounts. For example, living and driving in urban areas usually have higher rates than in rural areas.

The insurance credit score is calculated from bankruptcies, length of credit history, number of credit accounts in use, and so on, in a credit report. The score helps insurers measure how well you manage your money. Statistically, people with low scores are more likely to file a claim. Conversely, if you have higher insurance credit scores, you may get discounts from some companies.

The purchase price, theft rate, cost of repairs, accident rate, and safety tests of your car model are common factors to determine your premium. If your car is a higher value car, a new car, or costs more to repair or replace, rates will be higher. Also, if your car is equipped with high-quality safety equipment such as collision warning systems or special features such as a hybrid engine, you may qualify for premium discounts.

Also, why, how, and when you use the car is a factor in calculating your premium. Some companies may offer small discounts if you drive fewer miles or during less dangerous hours of the day. Personal use of a car costs less than business use. Using cars for business purposes has higher chances of an accident because the driving time is increased.

Limits on your basic auto insurance, such as limits or liability, the amount of your deductible, and the types and amounts of policy options, such as collision coverage, will affect the price you pay for coverage. For example, rates are higher for higher limits on basic coverages and policies with lower deductibles. Conversely, you can increase your deductible to lower your premium.

Your rates will be lower if you qualify for the discounts mentioned above.

How much is auto insurance?

The national average for auto insurance is around $1600 per year. The premium is determined by factors such as your car, driving history, age, coverage, etc.; in some states, your credit report is also used to determine your premium. Below is a comparison of the average car insurance price in the US. You can click any state to learn more details.

💡Note: Click the state to view more details.

Ready to start shopping around for your auto insurance? Hit the big button below to get your free quotes.

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What companies offer car insurance?

Most well known insurance companies offer more than auto insurance, such as GEICO, Farmers, and Liberty Mutual. Additionally, some new companies like Root and Clearcover mainly sell auto insurance. Below is a comparison between those two options.

You can also shop around to see what is the best option for you. Click here to start a free quote comparing multiple auto insurance companies.

What is not covered by auto insurance?

Auto insurance may not cover your losses when your car is damaged because of "Acts of God" such as a hurricane, earthquake, or flood. Also, if your belongings, like a laptop, phone, sunglasses, or other valuables inside the vehicle, are damaged or stolen, they are not covered by auto insurance. However, you can claim with renters insurance or homeowners insurance. Also, most auto insurance follows the car instead of the driver. Therefore, you will not be insured when driving a different vehicle. If that car has insurance, you should be covered. However, you may not be fully insured if your family member or friend drives your vehicle.

It is essential to check if your policy only covers the person listed in the policy if it only covers the accident when you are in the car, if your policy covers your family members, or if it covers any licensed drivers who drive your vehicle. Auto insurance does not cover general maintenance and regular wear and tear. Some insurance companies may require you to exclude specific drivers, such as drivers you live with who have a DUI or extensive accident history; you may prohibit that person from using your car to avoid high insurance prices. If that person drives your car and accidents happen, the insurance company will refuse to pay a claim.

References

• FEMA
• NAIC
• U.S. Census Bureau

Disclaimer
Our articles are intended for informational purposes and should not be considered legal or financial advice. Our articles are not written or reviewed by insurance agents. Consult your policies with your agent or a professional for details regarding terms, conditions, coverage, exclusions, products, services, and programs.

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