What is Car Insurance?
Car insurance is a contract between you and your insurance company where you pay in exchange for protection if something happens to you or your vehicle.
Most states require all drivers to carry some form of auto insurance. Additionally, all states, except New Hampshire, require at least liability coverage.
Car Insurance Types
Who Is Covered?
Car insurance covers you and any other licensed drivers in your household that you put on the policy as regular drivers. However, if you loan your car to a friend for the day, he/she is usually still covered under a provision called “Permissive Use.”
Car insurance typically “travels with the car,” meaning that, in general, it doesn’t matter who is driving as long as they are either listed on the policy or rarely use the vehicle. Liability coverage, however, “travels with the driver”, so even if you’re driving someone else’s car, your liability policy covers you if you are at fault for an accident.
To be on the safe side, be sure to add any regular drivers to your policy in a timely manner.
- Premium—The amount you pay each month to keep your policy in force.
- Deductible—The amount you must pay out-of-pocket before your policy kicks in to cover your costs. Most policies carry a per-claim deductible, meaning you must cover the first small portion of your accident-related expenses yourself.
- Coverage Limit—The most your policy will pay for a given cost. You will have separate limits for liability, property damage, medical, and uninsured motorist coverage. Many states have specific requirements about the minimum allowable insurance limits, so be sure to check on your state’s requirements.
- The type of car you drive, your driving record, and your credit score can all affect your premium.
- Vehicles with only two doors typically have the most collision claims.
- Insurance companies assess your risk of filing a claim using numerous factors, including your occupation and marital status. If you’re married, for example, you may qualify for a discount because married drivers tend to get into fewer accidents.