If you’ve ever wondered, “Do I really need car insurance?” the answer is yes, 100 percent yes. Car insurance is not only a legal requirement in all but two states (Virginia and New Hampshire), but it is also required in order to lease a car. Plus, it’s just smart to have, especially from a financial perspective. The right car insurance will protect you if you are involved in a car accident, no matter who is at fault. It will protect your vehicle from damage should you be at fault, natural disasters, fires and so much more.
Many people don’t realize the full benefits of car insurance, so we’ve narrowed down the top 20 car insurance FAQs.
We’ll start by talking about the different types of car insurance.
20. What Does Liability Coverage Cover?
When we say car insurance is a legal requirement in most U.S. states, we’re talking about liability insurance. Liability insurance is what protects the non-fault driver and their property (and medical costs) in an accident.
If you hit another car with your car, you are legally responsible to cover the costs of the other car, as well as any medical costs the driver and passengers may incur due to the accident. This is where liability insurance comes in. Imagine you hit a car, the car is totaled and the driver is hospitalized and has to undergo surgery (and doesn’t have health insurance). Something like that could bankrupt a person! Thankfully, liability insurance will cover the costs of the damage you inflict.
19. What Is Collision Insurance?
Collision insurance is what protects your car should you cause an accident. Collision insurance is not mandatory (as long as your car is paid off) but is recommended to protect you and your car.
18. What Is Comprehensive Insurance?
Comprehensive insurance is an optional form of coverage that protects your car if it’s damaged by an event besides a collision with another vehicle. Examples include vandalization, fire, hail damage and even theft. It will even cover your car should you hit a deer, or if you happen to be in, say, Colorado and a bear tries to break into your car.
17. What Is Uninsured Motorist Insurance?
Uninsured motorist insurance, also known as UMI, protects your car against uninsured drivers and hit-and-run accidents. Many pair this with underinsured motorist insurance.
16. So What Is Underinsured Motorist Insurance?
Underinsured motorist insurance is a way of covering yourself in the event someone with insurance hits you and damages your car and property, but the amount their insurance is willing to pay is too low to cover the necessary costs to repair or replace your vehicle. Many people with luxury cars choose to add uninsured and underinsured insurance to their policies.
15. What Is Medical Payments Coverage?
Medical costs resulting from an accident can be very expensive – especially if you don’t have health insurance. Medical payments coverage can help pay medical costs related to a covered accident, regardless of who is at fault.
While liability insurance will cover the other driver’s medical bills, it does not cover yours. Additionally, it has limits, or a maximum payment, and once that payment has been reached, you are still expected to cover the costs. This is where medical payments coverage comes in.
14. What Is Personal Injury Protection Insurance?
If you’re seriously injured in a car accident, chance are you’ll have to take some time off work. Personal injury protection insurance helps provide additional coverage for certain medical expenses, but it also provides coverage for loss of income resulting from a covered accident.
All policies are different, but depending on the limits of a policy, personal injury protection could cover as much as 80 percent of medical and other expenses resulting from an accident.
13. What Is Gap Insurance?
If you receive a loan for a car or are leasing a car, we’ve told you that collision insurance is mandatory (in addition to liability insurance). However, as cars depreciate the second you drive them off a lot, an auto insurance settlement might not be enough to cover the cost of a loan. Basically, the company financing your car will expect to be repaid for the original cost of the car, but the insurance company may value your car at less than what you paid for it, leaving you to make up the difference. This is where gap insurance comes in. Gap insurance helps cover the amount owed on a car loan after a car is stolen or totaled in an accident.
12. What Is Towing and Labor Insurance?
Towing and labor insurance is an add-on available for those who have already purchased comprehensive insurance. If your car breaks down or needs to be towed for any reason, towing and labor insurance will reimburse you for both the towing fees and any labor costs associated with repairing your vehicle.
11. What Is Rental Reimbursement Insurance?
What happens if you get in an accident and can no longer drive your car? You’ll likely need to either borrow a car from a friend, take an Uber or Lyft or rent a car. If you’d prefer the latter, you should invest in rental reimbursement insurance, which will help cover the costs of a rental car until you get your car back.
Here are some other car insurance FAQs:
10. How Long Does It Take to Get a Car Insurance Quote?
A car insurance quote is an estimated cost of what your car insurance rate would be with a potential insurance carrier. Quotes are not finiteanswers – they are merely a best guess from an insurance provider, based on how much information you give at the time of the quote.
The fastest way to get a car insurance quote is online. It can take less than 15 minutes! If you’d prefer talking to a person, you can call and request a quote, which should take approximately 20 minutes.
9. What Happens If You Lie about Your Driving History?
Your insurance premium (the amount you pay each month) is based on your driving record. If you have several accidents and/or speeding tickets in your past, your premium will be higher than it will be for someone with a flawless record.
If you lie about your driving history, you could get away with it… However, if you’re caught, the DMV will report you for committing a “soft fraud,” and your insurance company can drop you.
8. What Factors Play Into Determining Your Monthly Premium?
If you’ve ever discussed car insurance rates with your family and friends, you’ve likely realized that you all pay different rates. Car insurance monthly premiums vary depending on a variety of factors. Key factors include:
- Driving history: If you have a record of speeding tickets and accidents, you’re likely to pay more in monthly premiums than someone with a clean driving record.
- Your location: Insurance companies look at where you live to determine how much you should pay in monthly premiums. If your area has high rates of theft or insurance claims, this will, unfortunately, cause your premiums to be higher. Metropolitan areas are typically costlier for car insurance than rural areas, as higher congestion increases the chance for accidents.
- Gaps in insurance coverage: If you had car insurance and then for any reason chose not to have car insurance, insurance providers consider this a risk and will increase your monthly premiums.
- The make and model of your car: When giving you a quote, car insurance companies look at the type of car you drive to have an idea of how much it will cost to repair or replace your car. Vehicles that score well in crash tests typically have lower insurance rates than those that don’t.
- Your annual mileage: If you have high annual mileage, your car insurance premiums may be higher than those of someone who drives less. The reasoning is pretty straightforward: The more you drive, the higher your chances are of being involved in a car accident.
7. How Many Care Insurance Quotes Should You Get Before Selecting a Car Insurance Company?
You should never accept the first car insurance offer you look at. You’ll want to look around and price compare to make sure you truly are getting the best deal.
You should get three to five insurance quotes before selecting a company. There are several ways to do this: You can call the agencies, you can request online quotes or you can go through an independent agent (either human or website). Independent agents sell car insurance through a variety of insurance carriers and thus can easily compare rates and tell you which company will give you the best price. As mentioned, you can either speak to a live person or use a website that provides multiple quotes.
6. Can a Car Insurance Company Deny Me Service?
Car insurance companies aren’t required to cover you. If you have a DUI, bad credit or a history of accidents, you may be denied service.
5. If I Drive a Red Car, Will My Premium Be Higher?
No – though many people think this is true!
However, you may attract more attention from police, so best to keep an eye on your driving.
4. If I’m Driving My Roommate’s Car and Get Into an Accident, Whose Insurance Will Cover It?
This is tricky.
If your roommate has liability and collision insurance, their car insurance will kick in first and cover the costs to fix both the other car as well as their own. However, if they reach their car insurance’s limits, your car insurance will kick in and cover any remaining costs. In both cases, your premium and your roommate’s car insurance premiums are likely to go up.
3. Can I Pay My Care Insurance Bill Annually Rather Than Monthly?
In general, yes.
Most auto insurance companies give you the choice of paying either monthly or annually. Some actually prefer you to pay your premiums annually and incentivize you to do so by providing discounts.
2. Can I Deduct My Car Insurance Payments from My Taxes?
However, this all depends on your unique situation. If you own your own company and your car is primarily used for work-related purposes, you may be able to, but always talk to your accountant to be sure.
1. How Can I Lower My Car Insurance Costs?
It’s simple: Just ask!
Many car insurance payments actually provide discounts. Discounts can be allotted for being a good student, having a clean driving record, having a low credit score, paying your premium annually, having an anti-theft device and more. This can be one of the benefits of talking to a live customer service agent as opposed to signing up for car insurance online: You can just ask them what discounts they offer. Find out even more ways to save on your vehicle insurance.
Do you have any other questions about car insurance? Ask us in the comments!