What is auto insurance and how does it work?

Auto insurance assumes some financial responsibility for damage from car accidents. The average cost of full coverage is $79.58/mo. Raise your deductible to lower your rates.

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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 Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Oct 26, 2021

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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...

  • Car insurance helps you repair or replace your vehicle if you get into a car accident by assuming some of the financial responsibility
  • Drivers can choose between several different types of coverage, including liability and full coverage auto insurance policies
  • If you do not have a car insurance policy or you need a policy with lower rates, you can use an auto insurance comparison tool to find a new insurance policy for your car

Car insurance protects you against a financial loss following a car accident.

Depending on the type of policy you own, it either protects you from being sued by the other driver and/or pays for your car repairs and medical bills if you cause an auto accident.

If you don’t have car insurance or want to lower your rates, you can use a comparison tool to shop for a new policy. Just enter your zip code above to try our free tool today!

Auto Insurance When You Get into an Accident

When you get into a car accident either with another vehicle or an object, your car insurance picks up a hefty portion of the costs, which helps you either repair or replace your vehicle and pay for any incurred medical expenses.

This, however, depends on the types of coverage included in your car insurance policy.

  • Liability Coverage – Liability coverage is required by almost every state. The driver that caused the accident will pay the other person′s expenses
  • Collision Coverage – Collision coverage is typically required on new vehicles and vehicles that are financed through a lending agency. It covers damage to your vehicle that you caused by hitting another car or object
  • Comprehensive CoverageComprehensive auto insurance coverage covers damage to your truck or car that occurred at the result of something other than a car accident. Typical coverages include certain types of storm damage, vandalism, and theft
  • Full Coverage – Full coverage auto insurance is a term given to insurance policies that include liability, comprehensive, and collision coverages

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Auto Insurance Add-Ons

There are certain types of coverages and protections that you can add onto your auto insurance policy.

  • Rental Car Assistance – If you are in a car accident that requires extensive repairs to your car, rental car assistance will pay up to a certain dollar amount while your car is in the repair shop.
  • Emergency Roadside Assistance – If you get a flat tire, run out of gas, or your car malfunctions or stops running while you are driving, roadside assistance provides you with a phone number you can call to get a tow truck to your location. Your insurance company pays up to a certain dollar amount for each call.
  • GAP Insurance – If you have a new car or a car that is financed, you may do well to get GAP coverage added to your regular car insurance policy. GAP insurance pays the outstanding amount between what your car was worth just prior to the accident and the amount you owe to the financial institution.
  • Uninsured and Underinsured Coverage – These coverages protect you if you get into a car accident with a driver who does not have a car insurance policy, who does not have adequate amounts of car insurance or in the event of a hit and run. While some states mandate the inclusion of these coverages, not all states mandate their inclusion.

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Auto Insurance Deductibles

Some types of car insurance policies come with deductibles. The most common of these coverages is collision insurance. A deductible allows you to assume some of the financial responsibility of the accident thereby reducing your total premium.

Typical car insurance deductibles range from $100 to $1,000, but you may be able to find insurance companies with deductibles that are lower or higher.

When you get into a car accident that causes damage to your car and you are found to be the one that caused the damage, you pay the deductible while your car insurance company pays the rest of the bill.

If your car were to get totaled during the accident, your car insurance company would write you a check for the value of your car less the deductible amount.

Lowering Your Auto Insurance with Discounts

Many car insurance companies offer discounts for vehicles with certain built-in safety features and for reaching certain milestones in your life. You can also receive lower rates when you insure more than one car with the same insurance company.

  • ABS Brakes and Air Bags – Having ABS brakes, passenger′s side airbags, and other features make your car safer to drive, and those additional safety features can translate into lower car insurance premiums.
  • Being Over the Age of 25 and 65 – Drivers over the age of 25 and over the age of 65 will notice a drop in their car insurance rates. This is because insurance carriers believe that drivers with more experience get into fewer car accidents.
  • Good Student Discounts – Maintaining a 3.0 GPA during high school and college can help you lower your car insurance rates. All you have to do to get this discount is to bring your report cards or transcripts to your insurance agent at the end of each semester.
  • Multi-Car Discounts – If you own more than one vehicle, get them all insured with the same insurance company. Insuring more than one vehicle with the same company can lower your overall insurance rates.

To find a car insurance policy that meets your needs and your monthly budget requirements, you can use a comparison tool.

These automatic insurance policy finders take your information and compare it against many different types of policies from multiple insurance carriers.

It then returns all the results that match your search parameters so that you can buy a policy that is right for you.

Compare insurance companies today using our rate tool and find the insurance policy you need.

References:

  1. https://www.iii.org/article/what-auto-insurance
  2. https://moneyning.com/budgeting/7-types-of-car-insurance-which-ones-do-you-really-need/
  3. https://www.investopedia.com/financial-edge/0611/car-insurance-add-ons-that-may-be-worth-the-money.aspx
  4. https://www.iii.org/article/understanding-your-insurance-deductibles
  5. https://abcnews.go.com/blogs/business/2013/07/car-insurance-hidden-discounts-revealed/
  6. https://www.consumerreports.org/cro/car-insurance/buying-guide.htm

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