Auto Insurance FAQ
Get your questions answered by the pros.
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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 Expensive Is Auto Insurance?
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 where you pay a monthly car insurance premium in return for financial protection in the event of a vehicle-related accident or property damage.
Each state requires certain types of auto insurance coverage, but additional policies can be added 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: Liability coverage will pay for repairs, property damage, and medical costs for injuries suffered by others in the vehicle, plus other expenses related to an at-fault accident such as legal fees.
- Collision: If you hit another vehicle or an object, your collision coverage will pay for to repair the damage to your vehicle after you pay a deductible.
- Comprehensive: Also known as "other than collision," this pays for losses to your vehicle if it suffers damage from something other than an accident, such as a tree falling on your vehicle.
- Uninsured/underinsured motorist: Pays for injuries and property damage you suffer in an accident when the driver at fault either is uninsured or does not have enough insurance to cover your injuries and damage.
Additional policies can be purchased to cover things like medical expenses, rental vehicles, and roadside assistance.
How Does Auto Insurance Work?
Auto insurance helps you to recover from damage, injuries, and expenses related to a collision or other incident. When you purchase a policy, you'll 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. Each type of coverage you purchase will have its own limits, and every state has minimum limits that they require 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 for you and 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'll be responsible for your own injury and damages as well. These costs can add up, and the lower the amount of auto insurance coverage you have, the more you have to pay out of pocket.
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 will get to know everything about you and your vehicle and shop multiple policies for you. A lot of insurance companies offer same-day insurance coverage, so even if you’re in a rush to get a policy, you have options.
Agents can also recommend auto insurance discounts and are there to assist you in the event of an accident.
Is Auto Insurance Required?
Forty-seven states require vehicles to have some level of insurance coverage before they can be on the road. Failure to have insurance can mean a fine and/or jail time 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, though a handful of states require additional coverage, such as collision and comprehensive.
How Expensive Is Auto Insurance?
The national average cost for auto insurance is $1,311. While rates vary from state to state and take into account a variety of factors, car insurance is usually fairly affordable.
The factors that affect your costs include whether your vehicle is new or used, the overall safety rating of the car, your driving record, your age and gender, and even your ZIP code, as certain areas tend to have a higher occurrence of accidents and claims than others.
The 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-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 both your home and vehicle with the same company.
Your local agent can also talk with you about these discounts and determine the ones that would benefit you and save you the most money on your policy.
Is Auto Insurance Tax Deductible?
If you are self-employed and use your personal vehicle for business, you can take a tax deduction for your car insurance on the actual mileage used for business travel.
If you drive a vehicle 15,000 miles for business and 15,000 for personal use, your deduction will cover half of your overall use.
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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 can drop the contract by changing to another company. The following are circumstances in which an 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
Can Auto Insurance Companies Deny Claims?
There are a few reasons that your claim can be denied, 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 vehicle for business
- Making improvements to your vehicle without notifying your company.
- If you miss a premium payment
Some states allow companies to deny claims for other reasons, so it is a good idea to understand the fine print in your policy.
Do Auto Insurance Companies Check Credit?
Yes, insurance companies will take your credit history and current credit score into consideration when determining your auto insurance premiums.
A poor credit score can alert an insurer of financial trouble. If there is a chance that you may miss premium payments, an insurer may decide that you are too risky to insure.
Do Auto Insurance Quotes Affect Credit?
Auto insurance is not an application for credit, so while insurance companies check your credit to determine your responsibility and financial security, they are not extending credit. A credit check for an auto insurance quote is called a “soft pull,” and it does 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. In order to compensate for that, the company may charge you a higher premium than someone with a clean driving record.
Do Auto Insurance Companies Share Information?
When you make an insurance claim or begin the process to switch insurance companies, information about your claims history is placed into a national loss-underwriting database. That information can be accessed by all insurance companies that are considering insuring you.
However, insurance companies do not share your personal information directly with each other. The information included in the claims database is not shared, per se, but it is available for all companies to find.
Does Auto Insurance Cover Rental Cars?
Most policies provide the same coverage for a rental car that you have 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.
Does Auto Insurance Cover Theft?
If your vehicle is stolen, it will only be covered if you've purchased comprehensive coverage.
Providing you have documentation for the stolen vehicle, your insurance will compensate you for the value of the vehicle up to the limit of your comprehensive coverage.
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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 are not entirely out of luck.
You can work with your local DMV to get a hardship license, or you can file an SR-22 form through your insurance agent, who can file that with the DMV. If you are allowed behind the wheel due to a hardship license or an SR-22 form (which guarantees insurance coverage for a period of time), then you will 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.