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Auto insurance basics

Nearly every state requires liability insurance, which pays for damage and injuries you cause to others. It doesn't fix your own car. Collision and comprehensive do that, and lenders usually require them if you finance.

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You'll need

  • Your car's year, make and model, or VIN
  • Your driver's license

What to know

  1. Start with liability. Nearly every state requires bodily injury and property damage liability, which covers injuries and damage you or another driver of your car cause (Insurance Information Institute).
  2. Look at the frequently required extras: medical payments or personal injury protection, and uninsured motorist coverage for hit-and-runs or drivers with no insurance (Insurance Information Institute).
  3. Decide on coverage for your own car. Collision covers crash damage when you're at fault. Comprehensive covers theft, fire, flood, hail and falling trees (Insurance Information Institute).
  4. Consider more than the minimum. State minimums may not cover the costs of a serious accident (Insurance Information Institute).
  5. Get quotes from several companies for the same coverage, and compare the price and the deductible together.
Watch out. Collision and comprehensive pay the car's market value, not what you paid or still owe. If you finance a new car, ask about gap insurance (Insurance Information Institute).

If it doesn't work

  • If a company charges more than an agent quoted, ask why in writing. The NAIC explains how misquotes are usually handled (NAIC).
  • If your rate jumps at renewal, get new quotes. Loyalty isn't always rewarded.
  • If you have a complaint you can't resolve with the company, contact your state insurance department.

Good to know

Who's covered

Your policy generally covers you and family members on it, and someone driving your car with your permission (Insurance Information Institute).

Renting a car

Some credit cards include rental car collision coverage. The NAIC suggests calling your card company to find out exactly what it covers (NAIC).

After a crash

Know what to do at the scene before you need it. See Car accident: right now.

Sources

  1. Insurance Information Institute Auto insurance basics: understanding your coverage
  2. National Association of Insurance Commissioners Auto insurance consumer guide
  3. Federal Trade Commission Buying a used car from a dealer

Lesson M8.3 · Last checked October 2, 2026 against the sources listed. See a mistake?