At some point almost everyone will purchase some form of insurance.
You have a house, you need insurance. You have a car, you need insurance if you want to start cruising down the highway.
Before you get a headache trying to wrap your head around insurance and the many terms that go along with it, just breathe.
Insurance can get expensive and complicated so it’s a good to have an idea of what you’re looking for before you buy a policy.
Here is a collection of some of the most frequently asked car insurance questions. It should help to demystify insurance a little bit.
1. Wait, do I actually need car insurance?
Every state in the U.S. has different rules and regulations when it comes to car insurance. But almost every state requires that you have a minimum amount of liability insurance.
Liability insurance pays for any damage or injuries that you cause the other drivers in an accident.
Getting caught driving without insurance has severe consequences. You could pay a hefty fine, have your license suspended or revoked, or you could go to jail.
So, yes. You actually do need car insurance.
2. Well, what if I only get the minimum amount of car insurance required by my state?
It’s tempting to go with the state minimum for car insurance.
You’ll pay cheaper premiums and it’ll seem like you’re saving a ton of cash in the long run. But that’s only if you never get into a car accident. And how can you predict something like that?
If you get into a severe car accident, having the minimum amount of car insurance probably will do very little to protect you. It most likely won’t cover all the costs. The other party could easily sue, and seize and sell off your assets.
While technically you’re only legally required to have the state minimum for car insurance, it’s not advised that you do so.
3. Do I still need car insurance if I don’t drive my car or I’ve sold it?
It might seem weird or a waste of money to pay for car insurance if you don’t drive your car, keep it in storage, or you’ve sold it off.
But there are a couple of options you should consider before you cancel your car insurance.
If you’re keeping your car in storage, you can consider changing your coverages. You could drop to having only comprehensive and liability insurance. This will drop what you’re paying for your premium.
If you rent a car, this coverage could come in handy when the rental car policy comes with lower limits for liability.
4. What’s stopping me from canceling my car insurance?
You should think twice before you cancel your car insurance.
Any lapse in coverage will cause your premiums to rise the next time you try to get insurance.
Sometimes, it’s an increase of 12 percent. Other times, insurance companies can choose not to insure you because you haven’t had continuous insurance.
5. How much can I expect to pay for car insurance?
The average driver in the U.S. can expect to pay $1,548 a year for car insurance. But don’t take too much stock in this number and compare what you pay to it.
Insurance is deeply personal, which means that it’s based on your profile as a driver. When calculating your rate, insurance companies look at everything from credit score, relationship status, age, where you live, your education and occupation, and more.
6. So why do car insurance companies need all this information about me?
Insurance companies ask a range of questions to best gauge what kind of risk you are if they take you on as a customer.
Most of these questions make sense and pertain to you as a driver, like how often you drive. It might not be immediately clear why insurance companies ask certain questions.
For example, where you live has an impact on what you pay. If you live in an urban area, you’ll see higher rates. Urban areas see more accidents, theft, and vandalism. So insurance companies raise rates to compensate for claims filed for these types of incidents.
And other questions, well, they seem completely random. Why do insurers ask for your marital status? The research isn’t extensive and the studies are outdated, but it’s been said that single people tend to file more claims than married couples. Therefore, insurers raise rates for singles.
For car insurance in California, they don’t use credit scores to determine rates. Insurance companies will claim that there’s a relationship between a low credit score and how likely someone is to make a claim. But what ends up happening is that good drivers on lower incomes tend to pay higher rates for insurance.
So unfortunately, you’ll need to keep an eye out for your credit score if you don’t live in California. It will impact your rates.
7. How much car insurance do I need?
Unfortunately, there’s no universal number that works for everyone.
But there’s one way you can figure out how much car insurance you need. Buy an amount of insurance that’s roughly proportional to the assets and income you want to protect.
Add up the value of your car, savings, and investments. For the best protection, you’ll want to get that number equal or close to your bodily injury liability limit. That’s the middle number you see on your policy liability coverage limit — 25/50/25.
8. My rate seems high. Is there anything I can do to get my rate lower?
There are always things you can do to get your rate down. Some things you can do in the short-term and some things take some time.
An easy fix is to increase your deductible. But before you increase your deductible to an insanely high number, remember that it’s what you pay when you make a claim. So make sure you keep some funds saved to pay off the deductible, just in case.
Thinking longer term, you can work on your driving habits. Any time you get a ticket or a citation, it goes on your driving record. That will cause your rates to go up.
Don’t worry — your driving record won’t be permanently marked. Tickets and violations drop off anywhere between three to five years. So after some time, you’ll have a clean driving record.
Filing claims will also increase your premium, so be careful and alert every time you get behind the wheel.
9. Do any discounts exist? And how do I find out if I’m eligible for them?
All insurance companies have several categories of discounts, such as customer loyalty, driving history, demographic, driving training, and car equipment.
You can get a discount for a range of things:
- Being part of an alumni or professional group
- You decide to pay for your policy in full, you’re on auto-pay, or you went paperless
- If you get insurance through your employer
- Your car comes with anti-lock brakes or you drive a hybrid vehicle, like the Toyota Prius.
- You’re a good driver or a good student
- You decided to renew your policy early
You should always ask your agent about these discounts because you never know which ones you qualify for.
10. I’ve heard it’s best to bundle my insurance. What does that mean?
Bundling your insurance policies means that you’ll have multiple policies under one insurance company. Insurers offer savings with the multi-policy discount.
The discount applies to various combinations of: auto, homeowners, renters, and life insurance.
11. Does my car affect my insurance?
Yes, the make and model of your car has a direct effect on your premium. Some cars are more expensive to insure because they cost more to repair.
If you’re interested, you can see the impact of your car on your insurance rates by using Cover’s car insurance calculator tool.
If you’ve been thinking about getting a red car, go for it!
12. Does my car insurance cover rental cars?
In general, the car insurance you have on your own vehicle will cover rental cars.
If you have low policy limits, you might want to consider buying the rental car insurance they offer at the counter for that extra protection.
If you get into an accident, the combination of the two could ensure that you’re properly covered.
13. What if I’ve run out of discounts to apply and my car insurance isn’t any lower?
Take this time to shop around.
It can seem time-consuming, but getting multiple quotes from different insurance companies can only benefit you.
Prices can vastly vary between insurance companies. Shopping around ensures that you are getting the best rate possible and that you aren’t overpaying.