Get the details on the basic auto insurance coverages and the best companies to buy from.
If you are looking to get a new auto insurance policy or are considering switching to a new provider, this article will answer your burning questions about auto insurance.
We’ll point out a couple of the best auto insurance companies to check out if you’re looking for a provider – based on our research into over two dozen popular insurance companies.
To see the best options in your area, call (855) 518-0148 or use this easy tool and get matched with the best value provider:
In this article:
- Do You Need Auto Insurance?
- Auto Insurance Requirements Vary By State
- How To Use Your Auto Insurance
- Standard Insurance Coverages
- How Much Should I Pay For Auto Insurance Per Month?
- What Does Auto Insurance Not Cover?
- 10 Best Auto Insurance Companies
Do You Need Auto Insurance?
Yes, you do. Only two states allow you to go without auto insurance, and even in those states, you have to prove that you can handle the financial consequences of causing an accident. Insurance coverage exists to protect you and other drivers on the road from financial hardship. Many people can purchase new cars and handle monthly payments, but not many people can cover the cost of medical bills or property damage after an accident.
A number of states allow you to post a surety bond instead of holding auto insurance, but a surety bond works in a different way. A surety bond will cover the costs of an accident up to a certain point, but you will be required to pay the whole amount back to the bond issuer over time. In contrast, if a auto insurance claim is within your policy’s limits, you’ll only ever have to pay your deductible for that claim.
Also, if you finance your car, your bank may require you to carry minimum insurance. That makes sense since you really don’t own your car until you have it paid off.
Auto Insurance Requirements Vary By State
Most states in the U.S. require you to carry proof of insurance or financial responsibility. Each state’s requirements can vary, but it’s usually not a good idea to carry the minimum coverage. That’s because most states only require liability auto insurance, which applies to other parties in accidents that you cause.
For example, Arizona requires $15,000 in bodily injury liability per person, $30,000 in bodily injury per accident, and $10,000 in property damage liability per accident. That might sound like a lot, but none of that is reserved for you. It all goes toward other people when you’re at fault. If you carry the minimum insurance in Arizona, you’ll have to repair your own car if you cause an accident. You also won’t be protected against uninsured motorists, natural disasters, or theft.
Arizona's car insurance minimums are some of the lowest in the nation, and only Florida requires less. Many states require you to carry $25,000 in bodily injury liability, while some require $30,000 or $50,000. Even $50,000 can get used up pretty quickly, and many insurance companies recommend carrying $100,000 in bodily injury liability.
How To Use Your Auto Insurance
If you’ve been in an accident, the first thing to do is assess whether it was major or minor. If there are any injuries, or if the vehicles involved have visible damage, you should file an insurance claim and a police report. While you are still at the scene, get the other drivers’ insurance information, and try to take some pictures. Don’t admit fault – that’s for the insurance companies to figure out later.
All insurance companies will have a phone number for reporting claims, and some – like Root auto insurance – also let you file a claim in a mobile app. You might be asked to upload pictures if you have them. If your car isn’t driveable, your insurance may cover a tow truck and a rental while your car is in the shop depending on your level of coverage.
After you initiate your claim, it can take days or weeks until the claim is fully resolved. That’s because insurance adjusters have to visit the scene of the accident, take a look at your car, and interview drivers and witnesses. You will be asked for a statement on the events that happened, which the insurance adjuster will record for reference.
An insurance adjuster is a person in the company’s claims department who works for you, and they will be in touch with you throughout the process. If you were not at fault, your own insurance company will contact the other driver’s insurance company to resolve compensation. If you were at fault, you’ll pay a deductible and your rates will go up.
Should You Pay Out Of Pocket Instead?
You might not want your rates to go up, but in most cases, that’s the reality of causing an accident. However, there are a couple of scenarios in which you might want to think twice about filing a claim.
If you bumped into another car but left barely any damage, you might consider settling outside of your insurance if the other driver agrees. Depending on your auto insurance company, you might pay $500 to $1,000 more per year for the next three years as a result of an at-fault claim. That’s $1,500 to $3,000 total. You have to weigh the cost of repairing a small bump or scratch out of pocket against that.
Also, if you damaged your own car by hitting a tree or cement pylon, you might want to just handle the repair yourself. This type of accident is still your fault, so it might cost more in the long run to report it to your insurance company.
What Is A Auto Insurance Deductible?
Your vehicle insurance plan most likely has a deductible. This may be around $250, $500, or $1,000, and it can vary between the different coverages on your policy. Typically, having a smaller deductible means you’ll pay more for your policy. You pay your deductible every time you file an at-fault collision claim or a comprehensive claim. You usually won’t pay a deductible when someone else files a claim against your bodily injury coverage.
If you’re looking for the cheapest coverage, you might notice that a high deductible will help lower your monthly payment. However, keep in mind that you may actually have to pay your deductible at some point. If you have a $1,000 deductible, it’s a good idea to set aside that amount as an emergency fund. You don’t want to turn to credit cards or payday loans just to cover a high deductible.
Standard Insurance Coverages
Next, we’ll go over the main types of automobile insurance coverage. Every major insurance company offers standard coverages and, in some cases, additional types of coverage.
Bodily Injury And Property Damage Liability (BI/PD)
Liability coverage is the basic type of auto insurance that most states require. It’s broken into two main types, which are bodily injury and property damage, and these don’t have deductibles. Bodily injury liability is broken down further into per-person and per-accident coverage. The main thing to remember is that BI/PD applies to other people who get hurt in accidents that you cause.
- Bodily injury per person: Covers medical costs up to a certain amount per person, as well as lost wages and funeral costs in some cases
- Bodily injury per accident: Covers medical costs and lost wages up to a total amount between all injured drivers and passengers
- Property damage per accident: Covers repair costs and totaled vehicles up to a certain point per accident
As an example, let’s say you live in Minnesota. The state requires $30,000 in bodily injury per person, $60,000 per accident, and $10,000 in property damage. When shopping around for insurance, you’ll see those requirements written as 30/60/10.
Now pretend you cause an accident with one other car which contained two people. Both people claim $10,000 in medical expenses, and the car needs $7,000 of repairs. Those claims will fit within your 30/60/10 liability coverage.
However, that coverage can go quickly, especially if you cause a multi-car accident or crash into an expensive car. Most state requirements are pretty low, so a good coverage level to shoot for is 100/300/100.
Collision coverage pays for your car to be fixed when you are at fault in an accident, and it carries a deductible. Insurance companies can also give you the option to go through your own collision coverage after another driver causes damage to your car. Your insurance company then seeks reimbursement from the other driver’s insurance company.
Do you know how many states require collision coverage? Zero. But you’ll definitely be paying more than that if you don’t have this coverage and you cause an accident.
Comprehensive auto insurance coverage pays for repairs that are not related to a car accident, and it requires a deductible. For example, it can cover damage from:
- Objects falling from trucks or cars
- Tree branches
- Hitting deer
Comprehensive coverage might add a few dollars to your automobile insurance, but it can pay off in the case of a natural disaster. As we mentioned before, you’ll want to weigh the cost of paying out of pocket with filing an insurance claim. Auto insurance companies don’t raise rates after a comprehensive claim as much as they do after an at-fault accident, but your rates may still go up.
Personal Injury Protection (PIP) And No-Fault States
Personal injury protection is required in 16 states, including the 12 no-fault states. In a no-fault state, drivers seek medical reimbursements from their own insurance company’s PIP coverage regardless of who caused the accident. However, property damage is still the responsibility of the at-fault driver.
PIP can cover medical expenses and lost wages no matter who is at fault, and it may or may not require a deductible. However, PIP in some states only covers a portion of your expenses. For example, PIP in Florida covers 80 percent of medical expenses and 60 percent of lost wages. Many states require drivers to seek coverage from their PIP policy before turning to their health insurance.
Medical Payments (MedPay)
Medical Payments, also called MedPay, is similar to PIP, but it is only required in two states. It exclusively covers medical expenses, not lost wages or death benefits. However, it allows you to get medical compensation right away without waiting to settle an insurance claim with another driver. It also doesn’t require a deductible.
Uninsured/Underinsured Motorist BI/PD
This is another important auto insurance to have. This option pays for bodily injury and property damages caused by an uninsured or underinsured motorist, and it covers hit-and-runs in many states. Twenty states require uninsured coverage, underinsured coverage, or both.
When looking at an auto insurance policy, you’ll see uninsured/underinsured coverages spelled out in the same way as standard BI/PD. For example, a 25/50/25 uninsured motorist policy would cover $25,000 in medical bills per person, $50,000 in total medical bills per accident, and $25,000 in property damage. These benefits would go to you, your car, and the passengers riding with you in your car.
You may not need this coverage if you have a sufficient amount of collision coverage along with MedPay or PIP, since those can also cover you in this scenario. Finally, uninsured/underinsured motorist coverage usually won’t require a deductible.
How Much Should I Pay For Auto Insurance Per Month?
Since many things can impact the price of auto insurance, different surveys of average costs can bring back different results. The State of Auto Insurance study by The Zebra reports that the average auto insurance premium is $1,470. That means you’d pay about $123 per month. Of course, auto insurance quotes can vary depending on your situation.
So, what is the cheapest auto insurance for full coverage? In our research into dozens of the best vehicle insurance companies, USAA came out on top. Unsurprisingly, USAA tends to offer the cheapest option for full coverage overall. If you can’t get USAA, Progressive is another great option for full coverage at low prices. Full coverage as mentioned here is a combination of liability, collision, and comprehensive coverage, not including PIP or uninsured/underinsured motorist.
What Affects The Cost Of Your Auto Insurance
While each company calculates the price of its policies differently, here are a few basic things that most take into consideration:
- Driving record: This is a huge factor in the price of your insurance. Speeding tickets, DUIs, and reckless driving all raise rates. Depending on the state, your rates can go up for the next three to seven years because of a conviction.
- Credit score: A higher score generally correlates to lower rates and vice versa.
- Years of experience driving: Newer drivers are charged higher rates, while drivers with lots of experience get a break in rates.
- Where you live: This also has a huge impact on your insurance costs. If you live in a densely populated area with many expensive claims, your insurance will cost more even if you’re a good driver with a perfect history.
- Age: Younger drivers pay more, especially teen drivers. Teens can pay two or three times what a person in their 40s would pay.
- Mileage: Lower annual mileage can mean lower premiums from many companies.
- Previous insurance coverage: Companies like to see that you’ve had continuous coverage throughout your driving career. Gaps in coverage can increase your rates.
- Claims history: Claims filed within the last few years can also increase your rates.
- Gender of young drivers: Younger men are more likely to receive higher rates, but costs even out after drivers age beyond their teens.
- Type of car: Insurance companies will charge you more if you have a luxury or sports car since those cost more to fix. Family-oriented SUVs are a safer choice.
To see how these factors will affect your insurance rate specifically, use the tool below or give our team a call at (855) 518-0148:
What Does Auto Insurance Not Cover?
Standard vehicle insurance does not usually cover:
- Mechanical failure (extended auto warranties generally cover this)
- Paying off your loan after a total loss (Guaranteed Asset Protection, or GAP, coverage does this)
- Aftermarket accessories
- Regular maintenance
- Wear and tear
- Others who drive your car
- Waiting periods while working for a rideshare app (this is an optional add-on from most companies)
10 Best Auto Insurance Companies
We’ve reviewed dozens of insurance options and ranked the best auto insurance providers for 2020. Our top 10 picks are:
- USAA Car Insurance
- Geico Auto Insurance
- State Farm Auto Insurance
- Progressive Car Insurance
- AAA Car Insurance
- Liberty Mutual Auto Insurance
- Allstate Auto Insurance
- The Hartford Auto Insurance
- Nationwide Car Insurance
- Farmers Auto Insurance
USAA: Our Choice For Best Auto Insurance Company
USAA car insurance is our first choice for auto insurance. If you can get it, you might not find better rates or customer service anywhere else. Here are a few things we like about the company:
- USAA performed very well on J.D. Power’s 2019 Auto Claims Satisfaction Study and 2019 Insurance Shopping Study, taking first and second places, respectively.
- The company has a financial strength rating of A++ from AM Best.
- USAA offers numerous coverage options across the U.S., plus perks like roadside assistance and accident forgiveness.
- Rates are about $850 to $1,200 on average.
To get cheap auto insurance from USAA, you either need to have served in the military or have a family member who has had a USAA home or auto policy. Once an eligible person signs up for a policy, they can pass eligibility on to their spouse, children, grandchildren, and so on.
Geico: Best Overall Auto Insurance For Everyone
We think Geico auto insurance is also a great choice for auto insurance. Average annual rates through Geico are only about $200 more than USAA, and anyone across the country is eligible. Geico also has an A++ rating from AM Best, and it came in fourth place on J.D. Power’s 2019 Auto Claims Satisfaction Study, which means many people are happy with the claims process.
Geico has an A+ rating on the Better Business Bureau and has closed about 1,000 complaints in the last year. That might sound like a lot, but compared to Geico’s 17 million auto policies, it’s not much. The company also has a Consumer Reports score of 78, which is better than average.
Geico offers an array of coverage options, whether you want to go with the state minimum or protect yourself for any unforeseen event. The only thing Geico doesn’t have is a nationwide usage-based option right now, which might be a surprise since the company is so big. However, that’s about to change.
Geico recently began testing an app called DriveEasy that will help people drive safely and get a personalized insurance rate. This shows that Geico cares about improving customer experience, and that’s another reason why we think the company is a great choice for auto insurance. You can get a quick quote online from Geico, which might help you save money over other insurance options.
To get free quotes from one of our top recommended providers, use the tool below or call (855) 518-0148.
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