Few people will claim that buying car insurance is enjoyable, but car owners who take some time to learn about the different types of coverage, understand coverage limits and deductibles, and shop around for the best rates can save significant money.
Before you purchase car insurance, learn the basics so you get what you need at the best price.
The five main types of car insurance coverage are liability, uninsured/underinsured motorist coverage, personal injury protection, collision, and comprehensive. Choosing coverage beyond what is mandatory will provide greater protection—and higher premiums. (An insurance “premium” is the amount you have to pay for an insurance policy.)
Liability coverage. Liability coverage is mandatory in every state, with a few exceptions. Liability coverage pays for damages to another vehicle, its driver, and passengers when you cause an accident, or to you when another driver causes an accident, assuming that driver has liability insurance. Liability insurance does not pay for damage to the insured's car.
Uninsured/underinsured motorist (UM) coverage. A small number of states have made UM coverage mandatory. Uninsured motorist coverage means that a driver's insurance company will cover damages and injuries caused by another driver who doesn't have insurance. Underinsured motorist coverage means that a driver's insurance company will cover damages and injuries beyond the limits of the other driver's coverage.
Personal injury protection (PIP). Several states have made PIP coverage mandatory in an effort to reduce the number of lawsuits following car accidents. PIP covers medical expenses and potentially other costs for the insured driver and his or her passengers, regardless of who caused an accident.
Collision. Collision coverage is optional coverage under which a driver's own insurance company will pay for damage to the driver's vehicle in the event of a collision, regardless of fault. This includes typical car-to-car collisions, but also single-vehicle accidents.
Comprehensive. Comprehensive coverage is optional coverage designed to cover theft or damage caused by something other than a collision, like weather, fires, floods, and vandalism. Comprehensive coverage also covers damage caused by hitting an animal while driving, which can be very important in some states and locations.
For more information on different types of insurance coverage, see What Kind of Car Insurance Do I Need?
The amount of liability coverage an insured chooses impacts the monthly premium, and each type of coverage includes a deductible that the insured has to pay.
Coverage Limits. Drivers must purchase liability coverage that meets their state's minimum requirements. Drivers can choose higher coverage limits, with accompanying higher premiums, to avoid personal liability and protect assets.
Deductibles. The deductible is the amount of the claim that the insured is personally responsible for paying. Choosing higher deductibles means lower monthly premiums.
The Internet makes it easy for drivers to get and compare quotes from several companies. Be sure to provide complete and truthful information to each insurance company to ensure you get accurate quotes. You should also include any information that might entitle you to a discount from the insurance company, like if you're a military servicemember or a senior citizen. Give the same information to each company so you can fairly compare the quotes.
Although premiums are likely the primary factor in choosing insurance, you should also look into each company's customer service reputation. If a company tends to be difficult when claims are filed, or if service is slow, it might not be worth saving a few dollars in premiums. Similarly, if a company is responsive and provides hassle-free payment of claims, it might be worth paying a few more dollars in premiums.
To learn more about insuring your car, get Nolo's Encyclopedia of Everyday Law, by the Editors of Nolo. This handy guide contains information about cars and driving, as well other legal topics affecting the average American.