Auto insurance is required in most states and protects you financially from accidents, theft, and liability. Understanding coverage types and shopping strategies can save hundreds annually while ensuring proper protection.

Required Auto Insurance Coverage

Liability Insurance

Covers damage you cause to others:

Bodily Injury Liability

  • Pays for injuries to others when you're at fault
  • Covers medical bills, lost wages, legal costs
  • Expressed as limits: $50,000 per person/$100,000 per accident
  • Required in almost all states

Property Damage Liability

  • Pays for damage to others' property
  • Covers vehicles, buildings, structures
  • Typical minimums: $25,000-50,000

Most experts recommend higher limits than state minimums—100/300/100 is common advice.

Advertisement

Collision Coverage

  • Pays to repair your car after an accident (regardless of fault)
  • Subject to deductible ($500-1,000 typical)
  • Required if you have a car loan
  • May drop on older vehicles

Comprehensive Coverage

  • Covers non-collision damage: theft, vandalism, weather, animals
  • Subject to deductible
  • Required for financed vehicles
  • Protects against unpredictable events

Uninsured/Underinsured Motorist

  • Covers you if hit by driver without adequate insurance
  • About 1 in 8 drivers are uninsured
  • Highly recommended even if optional in your state

Medical Payments/Personal Injury Protection

  • Covers medical expenses for you and passengers
  • PIP required in no-fault states
  • Pays regardless of who caused accident

Factors Affecting Your Premium

  • Driving record: Accidents and tickets increase rates
  • Age: Young and elderly drivers pay more
  • Location: Urban areas cost more than rural
  • Vehicle: Sports cars and luxury vehicles cost more
  • Credit score: Lower scores mean higher rates (most states)
  • Annual mileage: More driving = higher risk = higher rates
  • Coverage levels: More coverage costs more
  • Deductible: Higher deductibles lower premiums

How to Save on Auto Insurance

Shop and Compare

  • Get quotes from 3-5 companies
  • Compare same coverage levels
  • Check both major carriers and regional companies
  • Re-shop every 1-2 years

Discounts to Ask About

  • Multi-policy: Bundle with home or renters insurance
  • Good driver: Clean record discounts
  • Good student: For young drivers with good grades
  • Safety features: Anti-theft, airbags, etc.
  • Low mileage: Drive less, pay less
  • Telematics: Usage-based insurance programs
  • Pay in full: Avoid installment fees
  • Paperless: Electronic billing discounts

Other Ways to Lower Costs

  • Raise deductibles ($500 to $1,000 can save 15-30%)
  • Drop collision/comprehensive on older cars
  • Improve credit score
  • Take defensive driving course
  • Drive a car that's cheaper to insure

How Much Coverage Do You Need?

Liability

Consider your assets—liability claims can exceed coverage and come after your savings. Recommended minimums:

  • 100/300/100 for most drivers
  • Higher if significant assets to protect
  • Add umbrella insurance for extra protection

Collision and Comprehensive

Drop if car value minus deductible isn't worth protecting. General rule: If coverage costs more than 10% of car's value annually, consider dropping.

Filing a Claim

  1. Document everything (photos, police report, witness info)
  2. Contact insurance promptly
  3. Get repair estimates
  4. Understand your deductible responsibility
  5. Know your rental car coverage

Best Auto Insurance Companies

See our complete guide to the best auto insurance companies for detailed comparisons and recommendations.