Complete Guide to Car Insurance: Coverage Types + How To Get It

Getting car insurance is simpler than you might think. Insurers are always clamoring for customers, and there are plenty of ways to save on your policy. Figuring out what coverage you need, on the other hand, can be a little more complicated. But if you can pass a driver's test, you can do this.

Here's everything you need to know about car insurance from how it works and what it covers to how to compare coverage and companies.

Types of car insurance

Liability coverage

Liability insurance coverage includes bodily injury liability and property damage liability. Liability coverage isn't actually meant to protect you — it protects other drivers if you're liable for an accident. If you rear-ended someone at a stoplight because you were texting, your liability policy would help to cover their damages.

Auto liability coverage is required in most states, though the minimum you're legally obligated to purchase varies.

Bodily injury liability

Bodily injury liability, required by law in almost every state, pays damages if you're responsible for another person's injury or death in a car accident. Your insurer will pay for medical bills, lost wages, pain and suffering, and emotional distress.

It also pays for your legal defense if you're sued as a result of an accident. If the damages are high, all of your assets — your home, savings, and future wages — could be in jeopardy.

When you purchase bodily injury liability coverage, you select two limits. For example, $250,000/$500,000. The first number is the maximum for any one person, and the second is the total for one accident. When selecting bodily injury liability coverage, you should try to buy enough to fully protect your assets.

Property damage liability

If you're in a car accident and are liable for the damage to another person's property, property damage liability coverage will pay for the damage up to your coverage limit. It also covers your legal defense if you're sued. This is sometimes called "physical damage coverage," and it's also required in most states.

Property damage can include damage to another person's car, a building, a fence, etc. When choosing your coverage, select the most coverage you can afford. The minimum requirement varies by state but ranges anywhere from $10,000 to hundreds of thousands of dollars.

Personal injury protection (PIP)

Personal injury protection, or PIP, is no-fault insurance that can help pay your and your passengers' medical expenses if you're injured in a car accident. It pays regardless of who caused the accident. PIP coverage pays for your own injuries and usually for partial lost wages from more minor crashes. PIP is not available in all states, but it's required in some and optional in others.

In "no-fault" states, like Florida and Massachusetts, you must use PIP to pay for losses instead of relying on an at-fault driver's liability insurance when your injuries are minor.

The level of benefits can vary by state, but coverage typically includes medical, disability, and death benefits. When choosing PIP, you select the deductible you want to pay, which impacts your insurance premiums.

Medical payments coverage

Medical payments coverage can help pay for medical bills and lost wages if you or your passengers are injured in an accident or you're hurt as a pedestrian, regardless of who was at fault. It can also cover funeral costs.

Medical payments coverage can be applied to ambulance, surgery, X-rays, and physician costs, among many others.

Medical payments coverage is similar to PIP, though it's optional and not available in every state. It can supplement your health insurance coverage.

Uninsured and underinsured motorist coverage

If you're hit by a driver who doesn't have insurance or whose policy doesn't offer enough coverage to pay for your car repairs or medical costs, uninsured and underinsured motorist coverage will reimburse you for these costs up to your policy limits.

In other words, this type of coverage pays bills another driver should cover for you but can't. Some states require it or make it mandatory unless you decline in writing.

• Uninsured motorist coverage pays out if you or your passengers are injured in an accident caused by an uninsured motorist. It essentially takes the place of bodily injury liability coverage.
• Underinsured motorist coverage pays you for damages resulting in bodily injury from an accident caused by a motorist whose liability coverage limits are insufficient to cover your claim.

These policies may be combined, or you may have to purchase them separately.

Collision coverage

Collision coverage pays for damage to your own vehicle after a crash, even if you were at fault or if the crash was a single-car accident. Although liability insurance covers the other driver involved in an accident, collision coverage will help pay for repairing or replacing your car if it's totaled.

Collision coverage isn't required by law, but your lender may require it if your car is financed.

Comprehensive coverage

Comprehensive coverage kicks in to pay for losses that aren't crash-related. It pays for damage caused by nearly everything other than collisions. This includes theft, vandalism, fire, hail, flooding, and so on. If your car or items in it are stolen, or a tree falls on your car during a windy day, comprehensive can cover that.

Like collision coverage, comprehensive coverage is optional, but lenders and lease providers can require it.

When choosing this coverage, you'll select the deductible you'll pay if you file a claim.

GAP insurance

Cars are often worth less than you owe on them if you have an auto loan. GAP insurance will pay the difference between the fair market value your insurer is willing to pay if your vehicle is totaled and the remaining amount due on your loan. Some lenders and lease providers require you to get this coverage.

New car replacement

If your car is completely totaled in a covered event, having new car replacement coverage will replace your car with one of equal value. Covered events may include fire, theft, and flood.

Roadside assistance coverage

This optional coverage can help you get back on the road again if your car breaks down or won't start, you run out of gas, you get a flat tire, or you're locked out. It can also pay for towing.

Rental car reimbursement coverage

Rental reimbursement pays for a rental car if your vehicle is damaged as a result of a covered loss. You choose how much you want to pay for each day of having the rental car, and a total maximum.

Rideshare coverage

This is essential coverage if you drive with Uber, Lyft, or another rideshare company. Not all insurance companies offer this coverage.

How car insurance works

Deductibles + coverage limits

Your insurance deductible is the amount you'll pay out of pocket before your insurance kicks in. For example, if you have a $500 deductible and get in an accident, causing $5,000 in damages, you'll have to pay $500 toward the damages before your insurance company covers the next $4,500.

Liability coverage

Liability insurance coverage is required to some extent in almost all states, and coverage limits for this are often expressed in a three-number sequence. For example, 100/300/50.

These three numbers, also referred to as split limits, correspond to the following:

• First number: The maximum bodily injury liability payout per person injured in an accident.
• Second number: The maximum bodily injury liability payout per accident.
• Third number: The maximum property damage liability payout per accident.

So, in the 100/300/50 example, each person involved in an accident could potentially qualify for $100,000 in bodily injury damage coverage. However, the maximum payout in a single incident is capped at $300,000. The not-at-fault driver could get up to $50,000 in total to cover the damage done to their car.

How much car insurance do you need?

Almost every state requires drivers to have at least some form of auto insurance. If you live in New Hampshire, where car insurance isn't mandatory, you still need to demonstrate the ability to cover damages in case of an accident if you choose not to have it.

States set minimum requirements for how much bodily injury and property damage liability coverage you need, with some also requiring PIP, medical payments coverage, and/or uninsured motorist coverage.

But don't let state minimums be the only deciding factor in how much coverage you purchase. These minimums are often pretty low, with some requiring as little as $10,000 per person and $20,000 per accident in bodily injury liability. If you stick with the minimum, your insurance won't provide enough protection to cover anything but the most minor of accidents. After all, one hospital visit could easily cost more than $10,000.

If you have too little coverage, crash victims could pursue a claim against you personally, or you could have to cover your own losses out-of-pocket.

Consider how much coverage you need to protect your wealth. Some experts recommend a $500,000 minimum liability policy, but consider the value of your own assets. If you own substantial property or have a higher income, you're a bigger target for lawsuits, and so you may need more protection.

How much does auto insurance cost?

According to Insurify, the average customer pays $186 per month for full-coverage auto insurance. This is the average for the whole country, however. Your personal rate will vary vastly depending on a number of factors, and many of the best car insurance companies offer lower minimums for select drivers and coverages.

Here are factors that will affect your insurance premium.

Age

Statistically, young drivers get into more accidents and, therefore, file more insurance claims than older drivers with more driving experience. This means even if you're a teen driver with a clean driving record, you'll likely have higher auto insurance rates.

Driving history

Drivers with poor driving records typically pay more than those with squeaky-clean records. If you've gotten into an accident and the insurance company has had to pay out for a claim, they're likely going to charge you for that by raising your premiums.

Gender

Because insurance costs are largely determined by statistics, men, who are statistically more likely to get into accidents, often pay more for auto insurance than women.

Where you live

If you live in the city, especially if you park on the street, you're more likely to have your car stolen or vandalized than those living in rural areas. That means city drivers will likely pay more for insurance because they're more likely to make claims.

Credit score

Many auto insurance companies perform a soft credit pull when you apply for insurance. Your score won't be affected, but the company can still see your basic credit history. Drivers with better credit are often seen as more reliable, so they typically have lower car insurance costs.

Type of vehicle

There are definitely certain vehicles that insurance companies prefer. They typically charge higher rates for luxury and sports cars, for example. Newer cars often have higher insurance rates than older cars because they're worth more. This varies by vehicle, however, which is one more reason why we recommend shopping around for coverage.

Type of coverage you want

If you're just looking for the most basic, minimum coverage, you'll pay less than those who opt for comprehensive and collision coverage. You'll also potentially have to pay out of pocket for repairs to your vehicle if you're in an at-fault accident, however.

Your deductible

A higher deductible means lower monthly insurance costs. It also means you'll pay more out-of-pocket in the event of a car accident or another incident that requires you to file an insurance claim.

A lower deductible means you'll pay more each month for insurance, but you'll pay less out-of-pocket if you file a claim.

Tips to get lower rates

Auto insurance is expensive, no matter how you slice it, but you do have options to help save on car insurance. Some of the best ways to get affordable premiums include:

• Provide proof of good grades to qualify for good student discounts.
• Buy vehicles with good safety records and low rates of theft, as insurers consider the risk of the vehicle as well as the driver.
• Install telematics programs that monitor your driving and provide discounts for safe drivers.
• Maintain a clean driving record to avoid a higher premium for those with an accident history.
• Take advantage of discounts for memberships in certain groups or organizations.
• Complete driver's education or safe driving courses.

These steps can make a big difference in the price you ultimately pay for a policy.

Auto insurance discounts

The best car insurance companies offer many discounts you might qualify for that could lower your premiums.

Here are common car insurance discounts:

• Good student discounts: For teens, one of the easiest ways to lower their monthly insurance costs is to maintain a good GPA. Many major car insurance companies offer discounts to high school and college students who consistently get good grades.
• Multi-policy discount: Insurance companies want your business, so they'll reward you if you take on multiple policies. For example, if you have homeowners insurance or renters insurance, you can often bundle these policies and qualify for a discount.
• Safety features discount: If your vehicle has added safety features, such as adaptive headlights or anti-theft devices, you may qualify for a discount.
• Safe driver discount: The longer you keep your driving record clean, the more reliable you look to an insurance company.
• Defensive driving discount: If you take one of these courses to improve your driving skills, you may get a discount.
• Pay-in-full discount - If you pay your entire bill upfront, typically every six months, your insurance company may offer a discount.

What do you need to apply for auto insurance?

Personal information:

• Your full name and address
• Your date of birth
• Your driver's license number and state of issue
• Details about your driving record, including your accident and claims history, and any license suspensions you've had

Vehicle information:

• Make, model, year, and Vehicle Identification Number (VIN) of the vehicle, including any details about body style or special features
• Address where the vehicle is located
• Mileage on the vehicle
• Name of the current registered owner
• Date of purchase
• Information for the previous policy you had in place

How to buy car insurance

When you're ready to purchase car insurance, follow these steps.

Decide what type of coverage you need

Depending on the state you live in, some types of car insurance coverage are required.

If you have a loan or a lease, for instance, you'll most likely be required to purchase "full coverage" car insurance. This describes a policy that includes collision and comprehensive coverage in addition to the state minimum requirements.

Decide how much coverage you need

A general rule of thumb is to purchase as much coverage as you can afford.

You'll also need to decide whether to buy a brand-new policy or be added to an existing one. Getting covered by an existing policy may be possible if you live in someone else's home and/or are driving a car they own. This is often one of the cheapest ways to insure a teen.

You should also ask whether your insurance will cover the car or the driver.

Gather your information and paperwork

Typically, you'll need the following to get a policy:

• Names, dates of birth, driver's license numbers, and Social Security numbers of all drivers on the policy
• VINs for all vehicles you want covered
• Information on the amount of coverage you want
• Your driving history, including any tickets or accidents
• Details about grades for teen drivers who qualify for good student discounts
• Proof of driving instruction, as completing driver's education or defensive driving/accident prevention courses, can lower policy costs
• Whether you're a homeowner to see what discounts you qualify for.

Compare quotes from multiple companies

Car insurance rates are based on several factors, and each provider weighs those factors differently. Get quotes from at least three different insurers, ideally more, to make sure you're getting the best deal.

Be sure you're getting quotes for the same type and amount of coverage so you can compare apples to apples.

Most companies provide free quotes online or by phone. You can also use a marketplace like The Zebra to compare several potential quotes at once.

Choose a company and policy that fits your budget

As you compare rates, also consider:

• The insurer's reputation: Check the National Association of Insurance Commissioners complaint database and JD Power customer satisfaction ratings.
• Coverage types
• Discounts
• Access to local agents
• Financial strength: Check AM Best ratings to make sure the company can actually pay your claim.

Purchase your policy + make your first payment

Once you've found a company you're happy with, complete an application and accept a policy. Review your policy to make sure it covers what you expected. Depending on how you shop, you might be able to get coverage the same day.

You'll need to make your first payment for your policy to become active. Typically, this is one month's premium, but you might get a discount if you pay in full for six months or a year.

How long does it take to get car insurance?

There are a few ways to buy auto insurance, and the method you choose determines how long it takes to get coverage. You might be able to purchase a policy the day you apply.

If you have all the information you need to start, it often only takes a few minutes to get quotes from several car insurance companies to compare policies and prices. Working directly with an agent in person or over the phone can take longer than doing everything online.

• Get a quote and buy a policy online: To get car insurance faster, we recommend getting a quote and taking out a policy online, and being prepared with the right documents. This method allows you to get a policy with a start date as soon as the same day or the next day.
• Talk to an agent on the phone: The online quote process doesn't work for everyone. You might have more questions, prefer not to use a quote tool, or want more information about extended or nontraditional coverage. We suggest calling a local agent to get a quote in this case. It can be helpful to talk through the insurance-buying process with a real person when you're getting car insurance for the first time.
• Meet an agent in person: If you have extensive questions, need accommodations, or just want a more personalized experience, choose this method. Find local agents online, then set up an appointment. The agent will likely be able to give you a quote upfront and go over the details with you in person.

Tips to get car insurance faster

• Apply online: If you work with an agent over the phone or in person, it can take longer. If you're at the dealership shopping for a new car, you can get a quote online, purchase coverage, and have proof of insurance in minutes.
• Look for flexible cancellation policies: Most carriers allow you to cancel at any time, so you can buy a policy that starts today and then take your time shopping around afterward.
• Make sure your application is complete and accurate: Inaccurate information could cause delays. Double-check everything from the spelling of your name to your driver's license number and VIN.
• Get your payment ready: Keep in mind that some insurers require payment for multiple months upfront. Check with your insurer to find out when (and how much) you have to pay for your policy at one time.
• Don't wait for a physical insurance card: You can print proof of insurance yourself, and many insurance carriers now offer digital insurance cards that are available almost immediately.

How soon after buying a car do you need car insurance?

Typically, if you're buying a car with a loan, you'll need to obtain car insurance before you can drive off the lot. Lenders require this to protect their investments.

If buying from a private seller, you could have a bit of leeway. If you currently have auto insurance on an existing car you own, a grace period might cover the new car purchase for a bit. Before you buy, call your current insurer to verify this.

What companies offer same-day car insurance?

Many car insurance companies today offer same-day car insurance that kicks in instantly after you've been approved and paid. Top providers include:

• State Farm
• Progressive
• GEICO
• Liberty Mutual
• Nationwide
• Allstate
• USAA

Reasons you may not be able to get same-day auto insurance

Although most major insurers can serve most customers with a same-day policy, you may not be able to get a policy instantly if:

• Your driving record is poor. Not every car insurance company will insure every driver. For example, some providers don't offer insurance to drivers who need an SR-22, which is often required after a DUI. If you have many citations or car accidents on your record, look into car insurance companies for bad driving records.
• You have a rare or classic car. Not every car insurance company will insure every car, either. They may have limits in place for the value and age of the car, or may only cover cars in their database. If you need same-day coverage for your collectible vehicle, look for a company that specifically offers classic car coverage.
• You just moved or don't have a permanent address. Because your location is used to determine your rate, you may need to provide proof of address to car insurance companies. If you've recently moved, explain your situation and ask what types of proof of address might work.

FAQs

Bottom line

Even if car insurance isn't required in your state, it's a good investment. Car accidents can result in a tremendous financial burden for motorists without sufficient coverage. Consider purchasing as much coverage as you can afford. That way, you're not only adequately protected but also have peace of mind.

Take the time to determine how much protection you need and compare policies to find the right mix of coverage and value.