Car Insurance

What it protects against

The financial consequences of damage to a vehicle or property, theft, vandalism, injury to the insured or other people, personal liability, and/or accidents with uninsured or underinsured drivers.

How it works

Policies are carefully underwritten by insurers, who take into account your driving record, address, age and even your credit history. The kind of vehicle also matters; some vehicles are stolen more often than others, and some have better safety features. Among the coverages you can purchase are collision; comprehensive, which covers physical damage from fire, theft, vandalism or other non-collision damage; and liability, in case you are legally liable for bodily injury or property damage caused by an automobile.

Who needs it

Only New Hampshire, Tennessee and Wisconsin do not require some kind of liability protection, but they have financial-responsibility laws. These laws require drivers to have sufficient assets to pay claims if they cause an accident. All other states require a variety of coverages. Insureds have wide latitude in how much and what kind of coverage to buy. For example, high annual deductibles can greatly reduce premiums. Old vehicles may no longer warrant collision or comprehensive coverage. Affluent drivers may want to maximize their liability coverage. Lenders may require owners to insure for collision and comprehensive.

Who may not need it

Even if you live in the few places that do not require auto insurance, you owe it to others, if not yourself, to have it.

When to buy it

Before you start driving.

How you pay for it

Annual or monthly premiums. Policies are generally renewable annually or semi-annually. Insurers charge interest on premiums paid less frequently than annually.

Terms to Know

  • Coverage if an insured is legally liable for bodily injury or property damage caused by an automobile.
  • Covers physical damage to the insured's automobile (other than that covered under comprehensive insurance) resulting from contact with another inanimate object.
  • Auto insurance coverage providing protection in the event of physical damage (other than collision) or theft of the insured car. For example, fire damage or a cracked windshield would be covered under the comprehensive section.
  • Pays basic expenses for an insured and his or her family in states with no-fault auto insurance. No-fault laws generally require drivers to carry both liability insurance and personal injury protection coverage to pay for basic needs of the insured, such as medical expenses, in the event of an accident.
  • Coverage for losses above the limit of an underlying policy or policies, such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.
  • Endorsement to a personal automobile policy that covers an insured involved in a collision with a driver who does not have liability insurance.