Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager Chris Harrigan

UPDATED: Mar 22, 2022

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Key Takeaways

  • Car insurance is a mandatory requirement in most states
  • The average cost of car insurance depends on several risk factors like location, driving habits, and the car you drive
  • Taking the time to understand your policy can help you from being denied a claim

Understanding car insurance can be complicated. There are many terms and concepts to understand when you start driving, plus the laws vary from state to state. But it’s worth finding out as much as possible about insurance because it can help you save money on your policy. 

Another great way to save money on your insurance is to compare quotes from as many companies as possible. When you’re armed with all the information, you can make the best decisions.

Read on for ten things to know about car insurance, whether you are a new driver or have been on the road for decades.

The Top Ten Things You Should Know About Car Insurance

Why is it important to have car insurance? Car insurance is necessary for several reasons. We’ve put together a list of the top ten things you should know about car insurance.

#1 — Car Insurance Is a Legal Requirement in Almost All States

Most states require drivers to have some kind of car insurance policy. The only exception is New Hampshire, where you can drive without insurance if you prove that you have the financial means to pay for damages stemming from any at-fault accidents.

#2 — Insurance Protects You and Other Parties

Even the safest, most vigilant drivers can be at fault for an accident. While some collisions are minor, others can cause significant injuries or damage to personal property like cars, fences, and buildings.

If you are at fault for an accident, you may be liable to pay for these damages. Car insurance can protect you by covering the expenses arising from these accidents, depending on your policy.

Additionally, certain types of coverage, like comprehensive coverage, will protect your car against hazards like theft, fire, and floods.

Car insurance costs can vary considerably depending on which insurance company you choose. As a result, we always recommend shopping around as much as possible.

#3 — The Average Cost of Car Insurance in the United States

A car insurance policy in the U.S. can cost as little as $211/month. However, to access these low rates, you’ll need USAA car insurance. The catch? It is only available to military service members and their immediate families.

However, other companies provide cheap car insurance. The average GEICO car insurance costs about $3,214/year or $268/month. Likewise, State Farm car insurance costs an average of $3,260/year or $271/month.

#4 — Car Insurance Costs Depend on Several Factors

Insurance companies consider several factors when determining the risk associated with you as a driver. These factors include your age, driving record, the type of car you want to insure, location, and other demographic factors. Usually, drivers with higher risk face higher insurance premiums. 

Additionally, the type of coverages, limits, and deductibles you choose can have a considerable bearing on your insurance rates.

#5 — A Claim Can be Denied for Personal Negligence, Inadequate Coverage, or Late Filing

There are some situations where you may be denied a claim. However, there are things you can do to increase your chances of having a claim approved.

Before a claim is approved, you need to meet specific requirements that have been outlined in your insurance contract. Some scenarios that would see you in breach of your contract are:

  • Driving while intoxicated or other acts of personal negligence
  • Refusing to cooperate, not following up with your insurance representative, or filing your claim too late
  • Repairing damages without consulting the insurance company
  • Lying or exaggerating your claim
  • Using your personal car for business purposes without telling your insurance company

These are just a few of the most common breaches that can lead to a denied claim. Understanding these concepts is one of the most important things to know about car insurance.

#6 — You Need to Collect Information in Event of Accident 

If you get in an accident, you should collect as much information as possible to give to your insurance company — things like the name and contact details of the other driver, witnesses, and police respondents. 

Additionally, photos of your car, the other cars involved, and even the location can all help your case.

 #7 — Each State Has Minimum Required Liability Coverage Limits

Each state mandates minimum amounts of coverage that you need to have for liability insurance. While choosing the minimum limit can save you money on car insurance, it can also end up costing you a lot more if you have to pay the balance in the event of an accident.

How do I find out what my liability limits are? Liability limits are the maximum dollar value that an insurance company will pay on your behalf. If you cause an accident — and the damages exceed these limits — you’re liable to pay the balance. Check your policy to confirm your limits.

#8 — There Are Three Main Types of Liability Limits

The three main liability limits are: 

  • Bodily injury liability limit per person
  • Bodily injury liability limit per accident
  • Property damage liability limit per accident

For example, your policy may list limits, like “30/60/15,” which would mean:

  • $30,000 as the maximum your insurance company will pay to a person in the event of an accident
  • $60,000 as the maximum your insurance company will pay to everyone involved in the accident, excluding you
  • $15,000 as the maximum amount your insurance company will pay toward property damage you caused during an accident

#9 — You Need to Provide In-depth Information to Get an Accurate Quote

Car insurance companies need a lot of information to give you a precise quote. This includes your address, birth date, gender, and other drivers’ names on your policy. You also need to report any tickets or accidents.

If you don’t provide accurate information, your rates may change once you actually apply for the policy. That’s because the insurance company will check your driving record, insurance history, and other factos.

#10 — Comparing Quotes is the Best Way to Save

How can I get affordable car insurance rates? You can get cheap car insurance if you are prepared to put in a little work. There are many car insurance companies out there, and some offer better rates than others.

For the same amount of car insurance coverage, rates can vary dramatically between companies. So, shopping around is the best way to find cheap car insurance.

Compare quotes from the top car insurance companies and save

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Things To Know About Car Insurance: The Bottom Line

While it’s hard to cover everything you need to know about car insurance in one article, this should give you a good start. There are many important things to know about car insurance, and knowing how to get cheap car insurance is at the top of the list.