Auto Insurance: Am I Covered?

Car insurance is a necessity for all car owners, and even some non-car owners, in most states. It is important to understand the different types of insurance coverage available and the specific requirements of your state. While liability insurance is the most common mandated coverage, other types of insurance, such as uninsured motorist coverage, personal injury protection, or medical payments coverage, may also be required depending on your state. When purchasing car insurance, it is essential to consider your budget and the level of protection you need.

Do I need auto insurance if I don't own a car?

If you don't own a car, you're not legally required to have an auto insurance policy. However, if you're a licensed driver who regularly borrows or rents vehicles, it's a good idea to have non-owner car insurance. This type of insurance provides liability coverage for bodily injury or property damage caused by the policyholder while driving a car they don't own. It's also useful if you want to maintain continuous coverage to prevent your future insurance rates from increasing due to a lapse in coverage.

Non-owner car insurance is a form of auto insurance that provides liability coverage for bodily injury or property damage caused by the policyholder while driving a car they don't own. It is typically secondary coverage, meaning it kicks in after any primary coverage, such as the car owner's insurance, has been exhausted. The coverage provided by non-owner car insurance is usually the minimum required by state laws, but additional coverage can be added. Some policies also include medical payments coverage and uninsured/underinsured motorist liability insurance.

Who Needs Non-Owner Car Insurance?

Non-owner car insurance is suitable for those who don't own a car but regularly drive borrowed or rented vehicles. It can also be useful for those who need to file an SR-22 or FR-44 form with their state, which may be required after serious driving violations. Additionally, it can help maintain continuous coverage during periods when you don't own a car, preventing future insurance rate spikes.

Who Doesn't Need Non-Owner Car Insurance?

Non-owner car insurance may not be necessary if you only borrow a car from someone you live with, as their insurance policy should cover you as long as you are listed on their policy. It's also unnecessary if you rarely drive or don't have a driver's license. If you only rent cars occasionally, it may be more cost-effective to rely on the rental company's insurance or your friend's insurance policy.

The cost of non-owner car insurance varies depending on factors such as age, driving history, location, and coverage limits. It is generally less expensive than standard car insurance policies, as the car itself is a significant factor in determining traditional insurance rates. However, if an SR-22 or FR-44 form is required, the cost of non-owner insurance may be higher.

What are the minimum auto insurance requirements in my state?

The minimum auto insurance requirements vary depending on the state in which you live. While nearly all states require drivers to carry some level of car insurance, the specific coverage and minimum amount of insurance required differs by state. It is important to familiarize yourself with the types of coverage that make up a car insurance policy and the requirements in your state to ensure you are properly insured. Here is an overview of the different types of coverage and the minimum requirements in different states:

Liability Insurance:

Nearly all states require a minimum amount of liability insurance, which covers any injuries or damages you cause in a car accident, including those to the other driver and their passengers. Liability coverage is typically broken down into bodily injury coverage per person, bodily injury coverage per accident, and property damage coverage per accident. For example, if you are required to have coverage of 15/30/10, your insurance will cover up to $15,000 per person for bodily injuries, with a total limit of $30,000 for all bodily injuries in the incident, and up to $10,000 for property damage.

Uninsured/Underinsured Motorist Coverage:

This type of coverage is required in about half of the states and helps pay for injuries to you and your passengers and damage to your car and other property if you are hit by a driver with little or no insurance.

Personal Injury Protection (PIP):

PIP is required in some states, especially those with no-fault laws, and covers medical expenses, lost wages, and other benefits for the insured driver and their passengers, regardless of who is at fault in the accident.

Medical Payments Coverage:

This coverage is required in only a few states and goes towards medical expenses due to injuries from a car accident for the driver, their family, or their passengers, but it does not cover lost wages or additional benefits.

While these are the main types of coverage that are typically required by states, it is important to note that some states may have additional or different requirements. For example, some states may require collision and comprehensive coverage, which pays for damages to your car due to fire, theft, vandalism, or collisions.

To find out the specific minimum auto insurance requirements in your state, it is recommended to check with your state's Department of Insurance website or contact your auto insurer.

How much auto insurance do I need?

The amount of auto insurance you need depends on several factors, including your state's requirements, your lender's requirements, and your net worth.

State Requirements

Every state has a minimum amount of car insurance you must buy to satisfy financial responsibility laws. Liability insurance is the main mandated coverage. It covers damage and injuries you cause to others in an accident. The most common minimum limits for liability are $25,000 per person and $50,000 per accident for bodily injury and $25,000 for property damage. However, your state's requirements may be higher or lower, so be sure to check the laws in your state.

Lender Requirements

If you lease or finance your vehicle, your lender may require you to carry liability coverage above your state's minimum limits, as well as comprehensive and collision coverage. Comprehensive coverage protects your vehicle from things outside your control, such as theft, vandalism, fire, collisions with animals, glass breakage, and damage from weather. Collision coverage pays to repair or replace your car if it's damaged in an accident with another vehicle or object.

Net Worth

In addition to state and lender requirements, you should also consider your net worth when determining how much auto insurance you need. You'll want to carry enough liability coverage to protect your assets in case you're liable in an accident. Calculate your net worth by adding up the value of your home, vehicles, savings, and investments, and subtracting any debts. Then, make sure your liability coverage limits are high enough to protect your assets. For example, if your net worth is $90,000, you may want a policy with $50,000/$100,000/$50,000 in liability coverage. This would give you $100,000 in total bodily injury coverage per accident, which is higher than your net worth.

In addition to liability coverage, you may also want to consider optional coverages such as uninsured/underinsured motorist coverage, personal injury protection, medical payments coverage, and rideshare insurance. These coverages can provide additional protection in the event of an accident.

When deciding how much auto insurance to purchase, it's important to balance affordability and quality coverage. Compare rates from multiple insurers and consider your premium payment, deductible, and coverage limits to ensure you have optimal protection.

How do I compare auto insurance quotes?

Comparing auto insurance quotes can be a straightforward process once you understand what parts of a quote you need to compare. Here are some steps to help you compare auto insurance quotes:

Decide on auto insurance coverages:

When comparing car insurance rates, make sure you select the same set of coverages for each quote. Coverage requirements vary, and some coverages are optional. Comprehensive coverage may pay for losses resulting from incidents other than collision, while collision coverage may pay for damage to your car when your car hits or is hit by another vehicle or object. Uninsured motorist coverage may help compensate you for injuries caused by a person driving without insurance, and underinsured motorist coverage may protect you from drivers who cause an accident and may not have enough insurance to pay for your injuries. Medical payments coverage may pay for medical expenses related to an auto accident, and personal injury protection may pay for your medical treatment, lost wages, or other accident-related expenses.

Choose deductibles:

A deductible is the amount of money you pay out of pocket towards a claim. If you choose a higher deductible, it may lower your premium. Make sure you choose the same deductible for each quote when comparing auto insurance rates with different insurers.

Review and compare liability limits:

Liability coverage is required in most states. Liability coverage may pay if you are in an accident and are responsible for another person's injury or damage to another person's property. The liability limit is commonly presented in a format such as 100/300/50, which translates to $100,000 per person in bodily injury liability coverage limit, $300,000 per occurrence in bodily injury liability coverage, and $50,000 per occurrence in property damage liability coverage.

Gather quotes from multiple insurers:

It is recommended to compare at least three auto insurance quotes, as per the Insurance Information Institute (III) guidelines. Ensure that the quotes are for the same coverages, policy limits, and deductibles. This will allow you to make an informed decision about which insurer offers the best value for your needs.

Consider price, coverage options, customer reviews, and the insurer's reputation:

When deciding between insurers, it is important to look beyond just the price. Consider the coverage options offered, read customer reviews, and research the insurer's reputation to ensure they are a reputable and reliable company.

Understand your state's insurance requirements:

Different states have different minimum car insurance requirements. Some states require personal injury protection (PIP) or medical payments coverage (MedPay), while others may require uninsured/underinsured motorist coverage. Make sure you are aware of your state's specific requirements when comparing quotes to ensure you are complying with the law.

Compare quotes from regional and national companies:

In addition to comparing quotes from national companies, consider getting quotes from regional insurers as well. This will give you a more comprehensive view of the market and may help you find a better deal.

Use a comparison tool or calculator:

Utilize online comparison tools or calculators, such as The Zebra or NerdWallet, to simplify the process of comparing quotes from multiple insurers. These tools allow you to input your information once and receive quotes from multiple companies, making it easier to compare rates and coverages.

What factors influence auto insurance premiums?

Several factors influence auto insurance premiums. Some of these factors are within the control of the insured, while others are not. Here are some of the most common factors:

Age, Gender, and Marital Status

Age is a significant factor in determining auto insurance premiums, with younger and less experienced drivers often paying higher rates than older drivers. Insurance companies consider teen drivers very risky and potentially expensive clients, as they are more likely to get into accidents. Premiums tend to decrease as drivers reach their mid-20s and then increase again for older drivers over 65.

Gender also plays a role in some states, with male drivers, especially teenagers, often paying more than female drivers due to higher accident rates and severity. However, the gender gap in premiums tends to decrease as drivers age.

Marital status can also impact premiums, with married drivers often receiving lower rates since they are statistically less risky and have fewer accidents than single drivers.

Driving Record and Experience

A person's driving record is a crucial factor in determining their insurance premiums. A history of accidents, traffic violations, or DUIs will result in higher premiums. Conversely, a clean driving record can lead to lower rates and safe driver discounts. The number of years of driving experience also matters, as more experienced drivers are generally considered lower-risk.

Location

The location of the insured can significantly impact their auto insurance premiums. Urban drivers often pay more than those in small towns or rural areas due to higher rates of vandalism, theft, and accidents. Insurance rates can vary by ZIP code, with higher rates in areas with higher population density, crime rates, or natural disaster risks.

Credit Score

In most states, credit score is a significant factor in determining auto insurance premiums. A good credit score can lead to lower premiums, while a poor credit score may result in higher rates or requirements to pay the full premium upfront. Insurance companies consider individuals with good credit scores more likely to pay premiums on time and less likely to file claims.

Vehicle Type and Usage

The type of vehicle being insured can also impact the premium. Brand-new, expensive, or high-performance vehicles often have higher premiums because of their potential replacement costs and the likelihood of inflicting more damage in an accident. Vehicles with extra safety features or advanced technology may be more expensive to insure due to higher repair costs.

Additionally, how often and how far a person drives their car can affect their premium. Those who drive longer distances or use their car for business purposes are considered higher-risk and may pay more. On the other hand, low-mileage drivers may qualify for discounts or pay-per-mile insurance options.

Insurance Coverage and Deductibles

The type and amount of insurance coverage selected will also influence the premium. Opting for higher coverage limits or adding extra coverage options will result in higher premiums. Conversely, choosing a higher deductible will usually lead to a lower monthly payment.

Frequently asked questions