How to Use Auto Insurance

You buy auto insurance as protection for when you're in an accident and need to file a claim. The average premium for full coverage in 2015 was $1,009.38.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Nov 17, 2021

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Things to remember...

  • When you buy auto insurance, you should use it as a protective barrier when you really need to file a claim
  • You can only use your auto insurance if you carry the right type of coverage and the appropriate limits
  • When you have a loss, you have to decide if it’s worth it to use your insurance or if you should pay on your own
  • If you’ll pay more in surcharges than the total amount of the claim filed, you should pay for your own repairs
  • When someone is filing a claim against you, you need to use your insurance for protection against lawsuits

You buy auto insurance with no intention of actually using it. It’s one of the few services that you pay for every month that you hope to never use.

Even so, it’s crucial that you purchase high levels of protection so that you have the protection that you need if and when you ever need it.

You can drive for decades without ever having an accident. The fewer accidents that you have, the less familiar you are with auto insurance and how you go about using it.

It’s better to learn how to use your auto insurance before you have a claim than having to learn by making mistakes after you file an auto claim.

Compare car insurance quotes and options by using our free rate comparison tool above.

How much protection do you need?

Whether or not you’re going to be able to use your auto insurance after a small fender bender or an act of vandalism depends entirely on how much protection you’re carrying at the time of the loss.

As you’re comparing premiums and shopping around for a comprehensive plan, you need to select the level of protection that’s appropriate.

When you’re buying insurance strictly to comply with the state’s mandatory insurance requirements, you will have protection against third-party liability claims but not much else.

It’s not until you add other optional coverage that you’ll protect your own financial health when you suffer covered losses. Here’s a list of coverage options that you can add for better protection:

  • Comprehensive – Pays for the repairs your car needs after a fire, theft, flood, vandalism or falling object
  • Collision – Pays for repairs to your car after you’re in a collision where you’re liable for damages to other property
  • Medical Payments – Pays for medical bills when you and your passengers are injured an any type of auto accident
  • Uninsured Motorist – Pays for your medical bills,rehabilitation, lost income, and lost future income when you’re injured in an accident involving an uninsured driver
  • Uninsured Motorist Property Damage – Pays for your deductible or up to $3,500 of property damage if you’re involved in an accident with an uninsured motorist
  • Rental Car – Will pay for a temporary replacement vehicle for a specific number of days when you file a claim
  • Towing & Labor – Will pay for towing and other forms of labor when your car breaks down

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Does it make financial sense to buy all the coverage options?

The average American pays $308 per year for collision coverage and another $143 per year for comprehensive. If you have a high-risk driving record, you could pay more than the average going rate for full coverage.

Some drivers with luxury cars in risky zip codes wind up paying thousands of dollars per year just for physical damage protection.

To truly assess whether or not buying full coverage is a wise investment into protecting yourself, you have to look up what your car is worth in the eyes of your insurer.

What you think the car is worth and what the insurance company values the car it may be on two different ends of the value spectrum.

How do insurance companies evaluate vehicles?

Insurance companies assign adjusters to claims so that details are reviewed and statements are used for investigating purposes. When there’s no denying that property has been damaged, all of the property that’s been damaged has to be assigned a value.

Insurance companies will always use fair market value reports to assign the value.

There are a few different ways that adjusters can pinpoint a car’s value. The first way is to pull up the year, make, and model in the NADA guides. Once there is a starting figure, the insurer may use features in and condition of the vehicle to drive the value up. I

f there is not an entry in the guide, the adjuster might also look up sales records or vehicle listings to see what the car is going for in the area.


When is it worth it to purchase full coverage?

If you’re currently under a financial contract with an auto lender, the contract says that you must maintain comprehensive and collision until the principal and interest is paid off.

You can’t choose whether or not it’s worth it to buy full coverage when you’re financing the car. You do, however, have the choice when your car is paid off.

There’s a common rule of thumb that states that anyone who owns a vehicle should drop full coverage from their vehicle when the premiums for full coverage are 10 percent or more of the car’s fair market value.

For example, if it costs $300 for full coverage and your car is worth $2,500, it’s more than likely a waste of money to buy a full coverage auto plan.

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Knowing When to Use Your Auto Insurance

Knowing when to use your auto insurance is key. If you do have full coverage and you bump into a pole, you don’t automatically have to file a claim.

You can decide to deal with the damage or you could even pay for the minor repairs on your own to avoid having to use your insurance. The smartest insurance consumers are the ones who use their coverage at the right times.

Your auto insurance premiums are influenced by your claims history. Not all claims will drive your rates up but some will. If you have an at-fault accident or you bump into an object, the claim will change your premiums once it has been settled.

The change in premiums is due to the surcharge that is added to your renewal rate.

Not only can you be surcharged for three years after you file an at-fault claim, you can also lose some very valuable discounts. Good driver and claims-free discounts really help you manage your premiums.

If you’ve had a minor loss, you’ll save more than the claim would be worth over the three years that you’re paying the price for filing a claim.

Why file a claim when you damage property owned by others?

When you’re in a multi-car accident, you don’t have much of a choice to handle the claim on your own. You could always try and speak with the other parties to see if they will let you pay for the damages out of pocket, but that isn’t the wisest thing to do.

If you pay for those damages and the party later tries to come after you for more, you don’t have the legal protection that you would have had if you filed a claim.

Your policy is designed to foot the bill when you damage someone else’s car or even a building. As long as you don’t own the property, your Property Damage Liability coverage will pay.

By putting the case in the hands of your insurer, you don’t have to handle it and you have your coverage to lean back on. It ensures you never say the wrong thing and you’re never backed into a corner without a professional by your side.

Do you have protection if you’re taken to court?

If you’ve had an accident and then the other party threatens to file a lawsuit against you, it’s good to know that you have insurance. You don’t have to add any type of legal defense coverage to your policy because it’s a supplemental form of protection that’s built in.

All of the defense costs that are accrued if the case has to be heard in court will not be deducted from your limits.

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How do you file a claim to use your insurance?

If you’re certain that it’s best that you use your insurance, you need to call your agent or the claims department as soon as you can. When you speak with a claims representative, you’ll have to give the professional information about the date and time of the claim.

Some of the information you’ll need to provide includes:

  • Name of drivers
  • Time of day
  • Location and landmarks where claim occurred
  • Vehicles involved
  • Damage sustained
  • Injuries
  • Witnesses
  • Insurance companies of each driver

It’s not fun to pay for auto insurance but it’s even less fun to have to use it. If you do need to file a claim, make sure you’re prepared for the process. Some claims are settled faster than others.

If you’re not happy with how your adjuster settled your claim, you may want to switch carriers. Use our online rate quote tool to compare premiums and then you’ll see if making the switch is best.



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