Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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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

UPDATED: Jun 24, 2021

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Key takeaways...

  • Price is the determining factor for 64% of car insurance consumers
  • Understanding your auto coverage can save you over $150 a year
  • Nearly a third of the consumers we tested on basic terms, failed

Even if you have a flawless driving record, car insurance premiums have a nasty habit of going up. 

Shop around, and you’ll quickly find that rates can vary by hundreds of dollars depending on a myriad of factors such as where you live and how you drive. 

Determining which quote offers the best value for your money can be challenging – especially if you’re not up to speed with car insurance jargon. It can get even more complicated when comparing individual car insurance companies for the best coverages.

This article dives deep into the car insurance knowledge gap that many policyholders may have.

It was for this reason that we created a car insurance 101 page that goes over the basics of industry terminology and different types of coverages.

Fortunately, there are numerous ways to save on car insurance, even if you know your car insurance policy back and front.

Once you’ve brushed up on your car insurance knowledge, to get the best rates in your area, enter your ZIP code into our free online quote comparison tool. It’ll give you the best rates based on your location and demographic information.

Car Insurance Knowledge Gap: Could it Pay to Know More About Your Car Insurance?

Now, to discover how knowledgeable consumers are when it comes to car insurance, we quizzed 1,007 insured drivers — otherwise known as car insurance policyholders — on relevant terms, practices, and factors that can potentially affect premiums.

In this article, we’ll also cover or add links to the five types of car insurance, car insurance explained, what is recommended for car insurance coverage, and car insurance terms and definitions.

Read on, and you’ll discover that the more you know about car insurance, the less you could pay for it!

The Secret to Driving Down Car Insurance Costs  

According to a study by J.D. Power, 64% of consumers cited price as the determining factor when shopping for car insurance. 

But is getting a good deal a case of luck or careful research? According to the results of our survey, it pays to be a smart cookie. The more you understand about your car insurance policy is one of the many ways to lower your car insurance rate.


Perceived Knowledge of Car Insurance Average Monthly Premium
Not at all or slightly knowledgeable 15.4% $194
Somewhat knowledgeable 41.3% $171
Extremely or very knowledgeable 43.4% $181
30.1% of drivers didn’t know their deductible amount. 12.9% didn’t know their monthly premium amount.

Source: Survey of 1,007 Insured Drivers


For example, over 43% of drivers in our survey felt they were highly knowledgeable when it comes to car insurance. This confident band of motorists paid an average monthly premium of $181.

Conversely, drivers who confessed to having little or no knowledge of car insurance paid an average monthly premium of $194—that’s $156 more a year!

Furthermore, just over 15% of drivers said they had little or no knowledge of car insurance, and almost 13% of respondents didn’t know how much they paid for their monthly premium amount.

Clearly, it pays to learn more about car insurance coverage before you grab your wallet.

More Knowledge Equals Lower Car Insurance Rates

To test our participants’ knowledge of major car insurance terms, we asked them to take a short quiz. 

Surprisingly, the majority of respondents barely passed. Over 30%, in fact, completely failed! The average grade across the board? A disappointing D+.

Testing Car Insurance IQ: On average, drivers surveyed scored a D+ on a brief car insurance quiz.

Once again, the most clued-up participants knew how to find the lowest car insurance rates. At the top of the class, straight-A drivers paid an average of just $139 a month. The worst-performing students, however, paid $216 a month.

Do the math, and you’ll find that the least-knowledgeable drivers could fork out an extra $924 a year.

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Surprising Factors that Impact Your Car Insurance Rate

Insurers typically start by asking for your ZIP code; understandable, given that where you live is one of the main factors that determine your car insurance rates.

The reason for this is multifold and involves circumstantial factors like car theft and weather. Someone may have higher car insurance rates if they live in an area where there are more tornados for instance. Weather can raise car insurance rates by the hundreds.

Factors that Affect Your Rates: the percentage of drivers who correctly and incorrectly identified the factors that impact your car insurance rates.

A reassuring fraction of our respondents identified age and at-fault accident history as prime factors when pricing car insurance. But fewer were aware that occupation, education, and even local crime rate could affect premiums.

Around 10% incorrectly indicated that either disability status or a failure to pay tolls could contribute to their monthly expense.

Over half of respondents were surprised to learn that gender is taken into account. To address this, California recently joined six other states in banning the use of gender when pricing car insurance.

Insurers often offer discounts to groups of people defined by criteria such as education and income. While critics say this systematically discriminates against minorities and low-income neighborhoods, industry insiders assert that any price disparity between ZIP codes is due to mileage and accident rates.

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Understanding Car Insurance Jargon and State Laws

Almost all drivers – 98% of respondents – knew that the purpose of insurance was to provide financial liability coverage in the event of an accident or injury. But even the most common terms can be confusing.

Nearly 7% of respondents thought a “premium” was the amount paid to another driver in the case of a crash, while over 8% of drivers confused the term “deductible” with “premium” . . . these are essential insurance terms to understand.

For more information, check out our two pages:

Identifying Car Insurance Terms: Perceived Insurance Terms and Rules

Different states treat car insurance differently and have state-specific car insurance laws, adding a whole new layer of complexity. Reassuringly, over 96% of respondents living in states where car insurance is required knew of the requirement.

There are only two states where car insurance (or an alternative) is not required by law. 

Vehicle owners in New Hampshire can skip car insurance but they are still responsible to cover up to $50,000 for liability in the event of an accident. 

Virginian drivers can opt to pay an uninsured motorist fee of only $500 a year to the state. That may sound like a good deal, but the driver who caused the accident will still be liable for the cost of repairs, legal bills, and medical expenses.

Understand Your Car Insurance Coverage Before It’s Too Late

Crashing a vehicle is stressful – but finding out that you don’t have the coverage you thought you had could make matters considerably worse.

Few consumers read the fine print, so it’s no surprise that drivers had a tough time identifying the purpose of different types of car insurance coverages.

Defining Coverage Types: Percentage of drivers who correctly and incorrectly identified collision, property damage liability, and comprehensive coverage. ance coverage types.

Only half of the respondents knew that comprehensive coverage usually covers all risks not caused by a collision with another car.

Let’s imagine that you’ve had an accident. What type of insurance would cover the damage to the other party’s vehicle? 

The majority of drivers wrongly believed that collision insurance would cover the costs. Only 33.5% of drivers gave the correct answer: property damage liability.

This worrying disconnect between the coverage you think you have and the coverage you actually have could prove costly and frustrating.

Confidence in Adequate Car Insurance Coverage

Our study revealed that over 91% of drivers were confident they had adequate coverage. But when it comes to car insurance, there’s no one-size-fits-all coverage. 

Coverage Knowledge: Drivers attempt to identify the types of car insurance coverage they currently have.

Regulations vary from state to state, and it’s your responsibility to know the rules. Failure to maintain the correct level of coverage could leave you in violation of the law.

For example, half of the drivers surveyed didn’t think they had personal injury protection – which is required by law in many states.

Don’t assume your existing insurer is meeting the state’s minimum car insurance requirements. Every couple of months, take a few moments to review your policies and make sure you have what you need to protect yourself and your vehicle.

11.7% of drivers didn't know how to file a claim. 15.6% of millennial drivers said they didn't know how to file a claim.

If the worst-case scenario does happen, though, it is essential to know how to file a car insurance claim with your car insurance company.

Although nearly 12% of drivers didn’t know how to file a claim, many insurance companies make the process incredibly simple by allowing you to file a claim via a mobile app.

Never try to handle a car accident out of pocket involving other drivers on your own, although it may be tempting to avoid your insurance company. In the long run, you may be at risk for costly lawsuits and scams.

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Safest Drivers Know the Most About Car Insurance

There were more than 40,000 fatalities resulting from U.S. car crashes in 2018, and driver-related factors like distracted driving were present in almost 90% of them. 

Our quiz revealed that the safest drivers – those not involved in an accident in the past year – knew the most about car insurance. On average, these drivers nailed the correct answer to 70% of our questions.

Average Car Insurance Quiz Scores By Number of Accidents and Claims Filed in the Last Year, and Generation

Conversely, drivers involved in two or more accidents in the past year proved to be the least knowledgeable. They posted an average score of just over 50%.

The takeaway? Conscientious drivers on the road are equally conscientious when it comes to their car insurance coverage.

As far as generational divides, baby boomers posted a score of 74%. This is hardly surprising, as the Insurance Institute for Highway Safety says middle-aged drivers have the best record when it comes to accidents compared to the youngest and oldest drivers. 

Millennials fared the worst in our quiz, scoring just over 64%, and drivers in this age group are more likely to be involved in an accident, too. According to research by AAA, drivers aged 19 to 24 tend to exceed speed limits and send text messages while behind the wheel.

How Knowing Your Policy Saves You Money

No matter your age, driving record, or home state, our study indicates that drivers may be able to dial down their premiums by dialing up their car insurance know-how

Sure, drivers who felt they knew the most paid the lowest monthly premiums on average, but given the average grade in our quiz (D+), we could all be savvier when it comes to car insurance. Fill in those knowledge gaps and you can quickly fill up with savings.

CarInsuranceCompanies.com makes it fast and easy to compare quotes and find coverage that meets your needs. Ready to get started? Click here to use our free online tool to compare quotes from dozens of top car insurance companies – and start saving today!

Frequently Asked Questions: Car Insurance

Now that we’ve covered the car insurance knowledge gap of our survey respondents, let’s get to your frequently asked questions. They include:

  • What are the four types of car insurance?
  • How do I know my car insurance type?
  • What is a fair price for car insurance?

These are topics that cover car insurance things to know as well as the car insurance most know information. Scroll down for the answers to those questions and many more.

#1 – What are the three types of car insurance?

The three most common types of car insurance are liability, collision, and comprehensive. Liability covers the damages to another driver’s vehicle if you hit them and are found at fault. Collision covers the damage to your vehicle. Comprehensive covers everything but collisions such as weather damage and car theft.

#2 – What are the four types of car insurance?

In addition to liability, collision, and comprehensive car insurance (the most well-known), some drivers opt to get underinsured/uninsured motorist coverage. This covers the cost of damages to your vehicle if someone who does not have insurance hits it.

#3 – What are the five types of car insurance coverage?

Going even further than liability, collision, comprehensive, and underinsured/uninsured motorist coverage, some drivers also choose to buy Med Pay or Personal Injury Protection coverage. These coverages protect you financially if you’re involved in an accident and need some type of medical treatment. These include hospital bills, among other types.

#4 – How do you explain car insurance?

Car insurance can be tough to explain, given that the industry uses a lot of jargon, which may be an attempt to confuse the policyholders. The best way to explain car insurance to a family member, friend, or child is to use examples and anecdotes that summarize the type of car insurance you’re talking about. You can also go through sites like ours — CarInsuranceCompanies.com — for more detailed explanations.

#5 – How do I know my car insurance type?

Reading your car insurance policy is the quickest way to know your car insurance type. There is typically a paper copy of your policy that you can request (or might have received when purchasing that policy) and you can often download a copy from your online account.

#6 – Does insurance cover if you damage your own car?

The type of car insurance coverage that covers damage to your own car is called collision insurance coverage. This is assuming you were found at-fault in an accident. If not, the other driver’s liability covers the damages to your car.

#7 – What is a fair price for car insurance?

A fair price for car insurance depends on numerous factors: your age, sex, driving history, credit score, location, and many more. Some states intrinsically have higher car insurance rates than others due to the infrastructure of that state (being at-fault or a no-fault state for example).

#8 – What is the most common car insurance coverage?

The most common car insurance coverage is liability coverage. It is required in all but two states — Virginia and New Hampshire. Different states have different minimum car insurance coverages so checking with your insurance agent or doing personal research is important to determine what exactly you need to be legally driving on the road.

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Methodology: Determining Car Insurance Knowledge Gaps

We surveyed 1,007 drivers who had current and valid automobile insurance using Amazon’s Mechanical Turk service. We asked them to report information about their car insurance and take a nine-question quiz to test their knowledge of how car insurance works.

Participants ranged in age from 18 to 83 with a mean age of 37.8 and a standard deviation of 11.8. In regards to gender, 51.8% of participants were men, 48.0% were women, and fewer than 1% were non-binary or preferred not to specify their gender. 

Outliers in the monthly premium payment were excluded from the analysis. 

Limitations

Many aspects go into having an understanding of car insurance, which cannot be fully assessed with a short quiz. As such, our findings are based on means alone and are purely exploratory. 

Fair Use Statement

If you found this article beneficial, feel free to share our findings with friends and family for non-commercial use. In return, we ask that you link back to this page and credit CarInsuranceCompanies.com. That way, everyone can save money when buying car insurance coverage.

To find the best car insurance quote for you and your situation, plug in your ZIP code into our free online quote generator. It compares quotes from different companies with just one application, saving you precious time and money.