Auto Insurance Explained

It's illegal in 49 states to drive without auto insurance. It’s also illegal to drive while intoxicated or without a driver’s license.

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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: Oct 21, 2021

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It’s all about you. We want to help you make the right coverage choices.

Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.

Things to Remember...

  • Knowing the various definitions of car insurance coverage can help you be adequately prepared
  • Auto insurance can protect you from a variety of things including medical payments and loss of assets in a lawsuit
  • Insurance is required in all fifty states, so make sure you have the legally minimum required insurance

Just as you are about to confidently hit the “approve and pay bill” button, you cannot help but see it.

Your insurer situated a picture of a car with text that reads: “Are you covered in case of fire, theft, mother nature’s wrath and vandalism?”

Your anxiety spikes right then, because you wonder, “Well, am I covered?” It’s only one example of how scared you feel when confronted with the purpose of your insurance.

You suddenly question whether your 15-year-old vehicle needs collision and comprehensive coverage reinstated.

Check out all of your coverage options with our FREE search tool above.

Knowledge is Power When Buying Auto Insurance

The antidote to all the panic and fear is a healthy combination of knowledge and reason.

It’s impossible to predict all of the damage and injuries that might occur, so accept hurtling at 60 miles per hour down a highway in a 2-ton vehicle carries inherent risk.

The rest of the fear is related to an unclear understanding of insurance and its many facets.

Where most consumers get lost and need direction is with the basic meanings of auto insurance terms.

An added boost to general knowledge is to thoroughly read your insurance policy. All of this helps in comprehending the reality of what insurance covers and what it excludes.

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What does auto insurance coverage do?

Auto insurance does the following:

  • Protects you from liability when you cause property damage and injuries
  • Pays you or your family for injuries and death caused by another driver
  • Pays to fix your vehicle or other property damage caused by a collision
  • Replaces or repairs your vehicle or possessions within your car if stolen

When Guilt Is Good

Bodily Injury liability coverage is separate coverage, and it’s listed with two figures.

First off, bodily injury liability is the coverage you buy to protect all of your assets. If you are at fault for an accident, you would file a claim on this line of coverage.

Your policy will pay out benefits per person at a maximum value if you cause the accident that causes the other party injuries or death.

The deductible is an amount that the insurer requires before it will pay out benefits on a claim.

For auto insurance, the deductible must be paid per incident. Bodily injury liability coverage comes with a heaping side of guilt.

If you run a red light that causes the main breadwinner of a family to become disabled and brain damaged, you would want to know you paid the family appropriately for their suffering and injuries.

In addition, the kids in the car may need therapy to rehabilitate them to some semblance of psychological health. Maybe the mother and grandmother both require extensive therapy and home health care following the accident.

One day in a hospital costs tens of thousands of dollars per person.

Insurance carriers generally recommend policyholders carry $100,000 per person, $300,000 per accident with $100,000 property damage liability as the most realistic coverage.


Uninsured and Underinsured Motorists

Having coverage is required by law in all 50 states, but that does not mean everyone buys insurance.

An additional portion of drivers carries their minimum state coverage, which puts them at risk for being underinsured.

Many states require drivers to carry what is known as Uninsured Motorist Injury and also Uninsured Motorist Property Damage coverage.

Both of these would pay out benefits to you or your passengers if you are injured by a hit and run, uninsured or underinsured driver.

So, make sure you protect your family, vehicles, and house or other property that can be hit and damaged.

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No-Fault Coverage

In many states, coverage pays out without regard for who is at fault;  this is known both as No-Fault Coverage or Personal Injury Protection (PIP).

PIP covers reasonable medical and hospital expenses, a percentage of lost wages, childcare and even funeral expenses for a covered loss.

This is where it pays to mention that reading and understanding your policy details is a great idea.

PIP pays out in addition to health insurance coverage, and insurance carriers recommend buying as much as you can afford.

Consider the deductible and the cost of coverage when evaluating this line of coverage.

Why buy automobile insurance?

A driver’s license is a privilege and not a right. Irresponsible drivers often lose or end up with a suspended license when they break the law.

Unlawful driving can include:

  • Driving resulting in moving or traffic violations
  • Driving while intoxicated on alcohol or drugs
  • Driving without a license
  • Driving without insurance

That’s right, in all 50 states it is unlawful to drive without car insurance. It’s also illegal to drive while intoxicated or without a driver’s license.

States use increasingly stringent laws to revoke, suspend and hold off on returning the privilege to drive. If you are thinking about foregoing insurance, think again.

Backed by renewed confidence and accurate information, get an insurance quote today.

The easiest way to get multiple auto insurance quotes is through our FREE tool at the bottom of the page.



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Enter your ZIP code below to view companies that have cheap auto insurance rates.

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