If you’re ever in an auto accident, you need the financial protection and peace of mind of auto insurance. Regardless of who’s at fault, your auto insurance policy helps cover damages to the vehicles as well as potential liability from anyone involved in the crash.
But where do you start when choosing the right auto insurance policy? Like most things, basic auto insurance begins with understanding how it works.
How does auto insurance work?
Much like homeowners’ insurance, the general premise of auto insurance is pretty straightforward: to financially protect you and your passengers against the costs of damages from a driving-related accident.
Similarly, an insurance company agrees to cover your losses as described in your insurance policy, as long as you continue to pay a premium to keep the policy active and meet other requirements. If you’re in an accident, you can then file a claim with your insurance company to have them pay for damages or liability up to the limits set in your policy, less any deductibles.
Why do I need auto insurance?
The short answer: Accidents happen. And according to the National Highway Traffic Safety Administration, they happen a lot—at a rate of 6 million a year in the United States.
Auto insurance protects your finances from these unexpected and potentially expensive accidents. In addition to helping cover the costs from vehicle and property damage, it can protect you and your assets from lawsuits brought on by other drivers and passengers (and sometimes, by your own passengers).
Here are few more reasons why you need auto insurance:
- It’s probably required by your state. Nearly every state in the U.S. requires auto insurance. If you drive without insurance in states where it’s required, you could be fined, have your license suspended, have your vehicle impounded, or even get jail time.
- It offers financial protection. If you’re driving and cause an accident, you could be accountable for the costs that come with it: vehicle damage, medical expenses or lost income of those injured, legal fees and more. Without auto insurance, these costs would come out of your pocket.
- It helps protect your passengers. By having medical payments coverage and personal injury protection in your auto insurance policy, it may help pay for your and your passengers’ medical bills if you're injured in an accident.
- It can help protect against repair costs. Even if you own your vehicle, you may want to add collision coverage and comprehensive coverage to your auto insurance policy in case you hit another car or object, if your vehicle is stolen or if it’s damaged by something besides a crash.
- It can help protect the most important item: you. If you’re ever in an accident with an uninsured or underinsured driver, having uninsured or underinsured motorist coverage in your auto insurance policy can help pay for your medical bills. Some states require uninsured/underinsured motorist coverage; in other states, it’s optional.
What is the basic coverage for auto insurance?
Basic auto insurance provides coverage for property (damages to or theft of your car), liability (if you’re legally responsible for bodily injury or property damage) and medical costs (injuries, lost wages, funeral expenses). Most states also require bodily injury liability (covers costs related to injuries or death from you or someone else driving your car) and property damage liability (reimburses others for damage that you or someone else driving your car causes to property or another vehicle).
While most basic auto insurance covers damage caused by your car, it doesn’t cover damage to your car. For that, consider adding collision (reimburses you for damage to your car due to a collision with another vehicle or other object when you’re at fault), comprehensive (coverage against theft and damage caused by something other than a collision: vandalism, flood, fire, falling rocks, etc.) and glass coverage (protection from windshield damage).
No matter which state you live in, there are requirements for the types of insurance you must carry and the minimum amount for each. Here are the requirements and minimum amounts for Alabama, Georgia and Mississippi:*
- Bodily injury liability per person: $25,000
- Bodily injury liability per accident: $50,000
- Property damage liability: $25,000
- Personal injury protection: Optional
- Uninsured/underinsured motorist coverage: Optional
What can affect the cost of auto insurance premiums?
When you buy insurance, your agent will ask some basic questions about you and your car, and then you'll have some options when picking coverage. More coverage often means a higher premium for you to pay.
Many factors can play into the coverage you need and the cost of your auto insurance. These factors could also earn you discounts on the premiums you pay!
- The car you drive. Some cars are more expensive, and in turn are more costly to repair.
- The miles you put on your car. Driving more = increased chance of an accident = a higher premium.
- Your driving record. A clean driving record will earn you a lower premium.
- Where you (and your car) live. Various areas usually have a greater risk of accidents, vandalism or theft. Plus, legal and medical costs can vary by state.
- Your age. The cost of auto insurance is higher for drivers under 25 and over 65. Nothing personal, but those two age groups are statistically the biggest risks on the road.
- Your gender. Often it’s men who literally pay the price here. They’re considered a higher risk because they’re involved in more accidents, they typically drive more, and they often own cars that are more expensive to insure.
- Coverage and deductibles. Higher coverage + lower deductible = a higher premium.
- Previous insurance claims. Any past auto insurance claims, especially if you were at fault, can affect your premium.
- A lapse in coverage. Insurance companies smile more on those with continuous insurance. A lapse will most likely increase your premium.
- Marital status. If you’re married, you may have a lower premium. That’s because married folks statistically get into fewer accidents.
- Credit score. A good credit score is a factor in your overall insurance score and may help you qualify for a lower premium.
- Use of your car. You’ll need additional coverage if you use your car for business. If you’re a rideshare driver, you’ll need a separate rideshare policy.
Knowing how much auto insurance you need can help better protect your vehicle, your assets and a large part of your sanity. Contact your local Alfa® agent for help choosing the coverage that's right for your specific needs.
*All coverages are subject to policy limits. This is not an insurance policy. It is intended only to provide a general description of Alfa Insurance® and/or its product lines and services. An actual policy contains the specific details of the coverages, conditions and exclusions.