Here are 10 essential things to know about car insurance in the USA:
1. It’s Mandatory in Most States
Nearly every state requires drivers to carry car insurance, though specific coverage requirements vary by state. Some states allow alternatives like bonds or deposits, but insurance is the most common option.
2. Minimum Liability Coverage Varies by State
States set minimum coverage limits for liability insurance, which covers damage or injury you cause to others. For example, you might see limits like 25/50/25, meaning:
- $25,000 for bodily injury per person
- $50,000 total per accident
- $25,000 for property damage
3. Full Coverage Isn’t Required, But It’s Recommended
“Full coverage” includes liability, collision, and comprehensive coverage. While it’s not mandatory, lenders often require it if you’re financing or leasing your car.
4. Uninsured/Underinsured Motorist Coverage Is Critical
Many states require this coverage, which protects you if you’re in an accident caused by someone who doesn’t have enough insurance—or no insurance at all.
5. Your Credit Score Affects Your Rates
In most states, insurers use your credit score to determine premiums. A better credit score typically leads to lower rates. However, this practice is banned in some states like California, Hawaii, and Massachusetts.
6. Driving History Impacts Premiums
Tickets, accidents, and DUIs can significantly increase your premiums. Safe drivers often qualify for discounts and better rates.
7. Discounts Can Lower Your Premium
Many insurers offer discounts for:
- Bundling home and auto policies
- Maintaining a clean driving record
- Taking defensive driving courses
- Driving low mileage or using telematics devices
8. Not All Damages Are Covered
Comprehensive and collision coverage only cover specific types of damage:
- Collision: Covers damage to your car from a crash.
- Comprehensive: Covers non-collision incidents like theft, vandalism, or natural disasters. Wear and tear or mechanical breakdowns are generally excluded.
9. Deductibles Matter
A deductible is the amount you pay out of pocket before your insurer pays for a claim. Higher deductibles often lower premiums but mean higher costs if you file a claim.
10. Shop Around Regularly
Rates can vary widely between insurers, so it’s smart to compare quotes annually or when your policy is up for renewal. Loyalty discounts are available but don’t always guarantee the best rate.