Skip to main content

Auto Insurance 101

A young, latino woman sitting behind the wheel of a car she just purchased auto insurance for.

If it is your first time getting a driver’s license or owning a vehicle then you probably haven’t thought about car insurance before. You may not even know how to get car insurance or where to start. Advertisements from car insurance companies make it seem like getting an auto insurance policy is simple, but in the process you may encounter confusing choices or unknown terminology. In order to avoid frustration and to ensure you have the right coverage for your needs, learn the basics of “Auto Insurance 101.”

What is Car Insurance?

Car insurance is essentially a contract between a car owner and a car insurance company. The insured pays a premium to the car insurance company and in return the company guarantees financial protection for the insured. Individuals can select their coverages and the limits they want for each coverage option. Limits are the most the insurance company will pay out in the event of a covered incident.

Do I Need Car Insurance?

There are a number of reasons why you should invest in a car insurance policy, but the primary reason is you will likely be breaking the law without one. All states require some form of liability insurance or proof that you are able to pay for an accident you cause. Failure to provide proof of coverage can result in penalties as minimal as fines or as serious as license suspensions or jail time.

The second reason you will want to buy car insurance is because accidents happen and they happen frequently. In fact, according to the U.S. Department of Transportation National Highway Traffic Safety Administration, more than six million accidents happened in the United States in 2017. Accidents result in property damage and injuries that can be costly. In order to protect yourself and your assets it is wise to have an auto insurance policy.

What Does Car Insurance Cover?

Think about when you made the decision to buy your car. Did you pick a car with a basic package or did you opt for a customized vehicle with a larger engine and a sunroof? Car insurance policies work the same way. There are standard policies as well as optional coverages.

What are Standard Insurance Coverages?

When it comes to a standard auto insurance policy the primary coverage to be aware of is liability insurance because it is the coverage that would protect you if you caused an accident that hurt someone else or damaged their property. It is important to note that liability coverage would not pay for any of YOUR injuries or damage to YOUR vehicle.

The following standard coverage would help cover YOU and YOUR property in the event of an accident:

  • Physical damage coverage is the coverage that will help pay for any damage to your vehicle. Physical damage coverage is often optional unless your vehicle is leased or financed in which case it may be required. It is divided into collision and comprehensive insurance. Collision will help pay for damage to your car if you hit another vehicle or piece of property. Comprehensive insurance will help pay for any damage to your car not caused in a collision. This type of insurance would be used if a tree fell on your car or if it was stolen or vandalized.
  • Uninsured/underinsured motorist property damage and bodily injury coverage is the coverage that would protect you if another driver hit you or caused an accident while they were uninsured or underinsured. The term underinsured means they do not have enough insurance to pay for your injuries or property damage.

While you may think most drivers on the road are following the laws and have the proper coverage, the truth is according to the Insurance Research Council one in every eight drivers was uninsured in 2017. That is why this coverage is so critical. Uninsured and/or underinsured motorist insurance is required in some states.

  • Personal injury protection would help pay for your injuries or injuries of your passengers if you are involved in an accident regardless of who was at fault. This coverage is also frequently referred to as medical payments coverage.

What are Optional Insurance Coverages?

While the standard coverages are often required by law or a lienholder, many insurance companies offer optional coverages that you may want to consider. Some examples of optional coverages include:

  • Towing and labor, which is the coverage that will help pay for the cost of towing your vehicle or other services such as tire changes, jump starts or gas or oil delivery.
  • GAP insurance is often a worthy consideration for drivers who lease or finance their vehicles. Since new vehicles rapidly depreciate, if you have a relatively new car that is totaled or stolen, the car may be worth less than what you owe on it. This is where GAP insurance comes into play to help cover the difference.
  • Car rental insurance will help to pay for a rental car if your vehicle is damaged in an accident and needs to be repaired over an extended period of time.

How Much Will Auto Insurance Cost Me?

Now that you know all of the coverage options that are available to you, you probably want to know how car insurance is priced and if you can afford to have all of the coverage options you want. Car insurance premiums are based on a number of factors such as:

  • Your driving record
  • Your age
  • The make and model of your vehicle
  • How you use your vehicle (for example how frequently or how far you drive)
  • Where you live
  • Your credit score

Every insurance company uses a different system so in order to find the best car insurance for you it is wise to get car insurance quotes from more than one company to compare the difference.

How Do I Start the Search?

Today’s technology makes it fast and easy to get covered. Begin by making a list of a few companies from which you want car insurance quotes. Most companies offer an option for you to get a quote online, over the phone or by stopping in a local office. As you compare car insurance quotes be sure that all of the coverages are included with the same limits so that you are making equal comparisons.

If you’re a new driver or this is your first time purchasing car insurance, you’ve come to the right place. Freeway Insurance specializes in insuring new drivers and we can help you find low-cost auto insurance that fits your needs and budget. Request a free car insurance quote online or over the phone by calling (800) 777-5620.

Ready to Get a Quick Quote?