Car Insurance FAQs

You know you need car insurance before you can even drive a newly purchased car off the lot, but you may not understand all the details of your coverage or even why you really need it. It's helpful to understand how your policy protects you in case of a disaster like a collision or theft. Here are answers to some of the most common questions about auto insurance to assist you.

Q. What Is Auto Insurance?
Q. What Does Auto Insurance Cover?
Q. How Does Auto Insurance Work?
Q. Why Is Auto Insurance Important?
Q. How Do I Get Auto Insurance?
Q. Is Auto Insurance Required?
Q. How Much Does Auto Insurance Cost?
Q. Is Auto Insurance Tax-Deductible?
Q. Can Auto Insurance Companies Drop You?
Q. Can Auto Insurance Companies Deny Claims?
Q. Do Auto Insurance Companies Check Credit?
Q. Do Auto Insurance Quotes Affect Credit?
Q. Do Auto Insurance Companies Check Driving History?
Q. Do Auto Insurance Companies Share Information?
Q. Does Auto Insurance Cover Rental Cars?
Q. Does Auto Insurance Cover Theft?
Q. Can I Get Auto Insurance with a Suspended License?
Q. Can I Get Car Insurance without a License?

What Is Auto Insurance?

Auto insurance is a contract between you and an insurance company in which you agree to pay a car insurance premium in return for financial protection in the event of a covered vehicle-related accident, bodily injury, or property damage. Other disasters, such as theft, may also be covered depending on the specifics of your policy.

In most states, at least some level of auto insurance is mandatory by law. However, each state requires different types and amounts of auto insurance coverage. It's critical to be aware of your state's minimum car insurance requirements before you drive your vehicle on public roads. Additional coverages can also be added to your policy based on your needs.

What Does Auto Insurance Cover?

There are several categories of auto insurance, each of which covers a different aspect of your risk as a driver. Here is a brief overview of the most common coverages.

Liability insurance: This pays for the cost of repairs, property damage, and medical expenses for bodily injuries to others, plus other expenses related to an at-fault accident, such as legal fees.
Collision insurance: This pays for damage to your car from a collision with another object, regardless of fault.
Comprehensive insurance: This pays for damage to your car due to a non-collision event, such as a flood or theft.
Uninsured/underinsured motorist insurance: This pays for bodily injuries and property damage costs you suffer in an accident when the driver at fault is either uninsured or does not have enough insurance to cover your injuries and damage. It can also reimburse you for expenses if you're the victim of a hit-and-run accident.
Medical payments insurance: This pays for medical expenses after a car accident, including ER and ambulance fees.
Personal injury protection insurance: This pays for everything included in medical payments coverage, as well as lost wages and other related expenses after an accident.

Additional policies can be purchased to cover things like custom parts or equipment, rental vehicles, and roadside assistance.

How Does Auto Insurance Work?

Auto insurance helps you to financially recover from the cost of damage, injuries, and other expenses related to a collision or other incident. When you purchase a policy, you may have a deductible that must be paid before benefits kick in.

In the event of an accident, you would pay your deductible and then receive financial coverage or reimbursement up to your policy limits if a claim is approved by your insurer. Each type of coverage you purchase has its own limits, and almost every state has minimum limits that it requires of drivers.

Why Is Auto Insurance Important?

Whether you're on the road or your vehicle is parked outside your home, there's a risk of an accident that can result in damage to your vehicle. Auto insurance provides a safety net when drivers make mistakes or unexpected things happen.

As a driver, you're responsible for any injuries or damage you cause to others when driving your vehicle. If you're in an accident with an uninsured driver, you could be responsible for your own injuries and damages as well. These costs can add up, and the less auto insurance coverage you have, the more you could have to pay out of pocket in the event of a disaster.

How Do I Get Auto Insurance?

There are a number of ways to get auto insurance, but working with an independent insurance agent is the easiest route. These agents learn about you, your driving habits, and your vehicle, and can shop and compare multiple policies for you.

Many insurance companies offer same-day insurance coverage, so even if you’re in a rush to get a policy, you have options. Independent insurance agents can also find and apply any auto insurance discounts you qualify for and are there to assist you with filing a car insurance claim in the event of an accident.

Is Auto Insurance Required?

Most states require vehicles to have some level of insurance coverage before they can be legally driven on public roads. Failure to have insurance can mean a fine, jail time, or other penalties in these states, not to mention suspension or revocation of your driver’s license. In most of these states, the minimum required coverage is liability insurance to cover damage and injuries you may cause third parties, though a handful of states require additional coverage, such as collision and comprehensive.

How Much Does Auto Insurance Cost?

The current national average cost for auto insurance is $2,678 per year for full coverage and $799 per year for minimum coverage. While rates vary from state to state and take into account a variety of factors, car insurance can still be fairly affordable.

The factors that affect your car insurance costs vary by location and insurance company and can include whether your vehicle is new or used, the safety rating of the car, your driving record, the value of your vehicle, your age and gender, and even your ZIP code, as certain areas tend to have a higher occurrence of accidents and claims than others.

Some common auto insurance discounts you may qualify for include:

Good student discount: This may apply if a young driver in your family has good grades.
Good driver discount: This may apply if you’ve been accident and violation-free for a certain amount of time.
Multi-car discount: This may apply if you insure more than one of your vehicles with the same company.
Multi-policy discount: This may apply when you insure your home and vehicle with the same company.

Your independent insurance agent can also find and apply any car insurance discounts you're eligible to receive to reduce your premium rates as much as possible.

Is Auto Insurance Tax-Deductible?

If you are self-employed and use your personal vehicle for business, you can often take a tax deduction for your car insurance based on the actual mileage used for business travel. If you drive a vehicle 15,000 miles per year for business and 15,000 for personal use, your deduction may cover up to half of your overall use. Be sure to consult with a CPA to correctly determine your tax eligibility.

Can Auto Insurance Companies Drop You?

Auto insurance is a contract, and as with many contracts, it can be canceled or voided by either party. You, as the policyholder, can drop the contract by changing to another company. The following are circumstances in which an auto insurance company can drop you:

If you fail to pay your premiums
If you present fraudulent information on your application for coverage
If your license is suspended or revoked for any reason, such as too many accidents or driving under the influence

If you're concerned about getting dropped by your car insurance carrier, speak with your independent insurance agent. They can provide practical advice about how to ensure you stay covered. But in general, as long as you continue to make on-time premium payments, stay safe on the road, and don't present any incorrect information on your car insurance application, you should remain insured through the full policy term.

Can Auto Insurance Companies Deny Claims?

Yes, car insurance companies sometimes deny claims. There are a few reasons that your claim can be denied by your insurer, including:

Filing a fraudulent claim, exaggerating or fabricating an accident or loss
Filing a claim under coverage you don’t have
Filing a claim for a loss that is not included in your policy, such as suffering an injury while using your personal vehicle for business purposes
Making improvements to your vehicle without notifying your company
Missing a premium payment

Some states allow companies to deny claims for other reasons, so it's wise to understand the fine print in your policy. Your independent insurance agent can help.

Do Auto Insurance Companies Check Credit?

The answer to this depends on your location. In certain states, car insurance companies can consider your credit history and current credit score when determining your auto insurance premiums. A poor credit score can alert an insurer to financial instability. If there is a chance that you may miss premium payments, an insurer may decide that you are too risky to insure or choose to offer you a policy with a higher rate to account for the increased risk.

Do Auto Insurance Quotes Affect Credit?

Auto insurance is not an application for credit, so while insurance companies may check your credit to determine your responsibility and financial security, they are not extending credit. A credit check for an auto insurance quote is often a “soft pull” and should not affect your credit rating.

Do Auto Insurance Companies Check Driving History?

An insurance company may check your driving record when you are looking for a new policy, renewing your existing policy, or modifying the policy by adding a new driver or additional vehicle. If you have a record that includes tickets, accidents, or points on your license, these factors indicate to the insurance company that there is a higher risk of paying a claim. To compensate for that, the insurance company may charge you a higher premium than it would for someone with a clean driving record.

Do Auto Insurance Companies Share Information?

When you make an insurance claim or begin the process of switching insurance companies, information about your claims history is placed into a national loss-underwriting database. That information can be accessed by all car insurance companies that are considering insuring you.

However, insurance companies do not share your personal information directly with each other. So, the information included in the claims database is not shared, exactly, but it is available for all companies to find when needed.

Does Auto Insurance Cover Rental Cars?

Most policies provide the same coverage for a rental car as for your personal vehicle, unless the rental is being used for business purposes. If your policy does not cover rental cars, you can add it to your coverage for an affordable rate. This coverage is often called rental car reimbursement insurance.

Does Auto Insurance Cover Theft?

If your vehicle is stolen, it will only be covered if you've purchased comprehensive coverage. Provided you have documentation for the stolen vehicle, your insurance can compensate you for the value of the car up to its actual cash value. However, if you lack comprehensive insurance, your auto policy will not compensate you for theft of your vehicle.

Can I Get Auto Insurance with a Suspended License?

Most insurance companies will not issue or maintain insurance for someone who has a suspended or revoked driver’s license. But if you need to get from home to work while your license is suspended, you're not entirely out of luck.

You can work with your local DMV to get a hardship license. If you're allowed behind the wheel due to a hardship license, you should be able to get car insurance.

Can I Get Car Insurance Without a License?

Yes, you can get car insurance without a driver's license. You can purchase a policy and list someone else as the primary driver, or add yourself as an excluded driver on someone else's policy.

How Can an Independent Insurance Agent Help Me Find Car Insurance?

When you're ready to find the right car insurance policy, no one's better equipped to help than a local independent insurance agent. These agents can shop and compare policies and quotes from several car insurance companies in your area to find the best deal. And down the road, your agent can also help you update your coverage and even file claims when necessary.

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