Car Insurance Basics

To get the best policy for your needs and the best price, it’s crucial to understand how car insurance works and what to watch out for.

Frequently Asked Questions

  • Which states have the cheapest car insurance?

    The states with the lowest annual average car insurance rates are North Dakota ($703), Maine ($696), and Iowa ($714). The U.S. average is $1,070. Your car insurance premiums may be higher or lower depending on your vehicle, driving habits, demographics, policy selections, and more. Shopping for and comparing quotes is one of the best ways to get the greatest coverage for the most affordable price

  • How long does a car accident stay on your record?

    An accident generally stays on your record for three to five years, depending on your insurance company and the state you live in. But even if you’re not at fault, it can still increase your premium. If you cause a severe accident or have multiple accidents in a short period, you could see your premium rise significantly and stay higher longer than it would if you’d only caused a minor accident. 

  • What is comprehensive car insurance?

    Comprehensive is a type of coverage that pays for losses that don’t happen as the result of a collision with another vehicle. For example, if your car is stolen or damaged by a storm or other natural disaster, comprehensive coverage can help pay to repair or replace it. It’s often required if you lease or make payments on your vehicle.

  • How does car insurance work?

    Car insurance, like any form of insurance, provides protection in case of covered losses. In fact, most states require at least liability coverage which kicks in up to your coverage limits if you hurt another person or their property while driving. Auto insurance can also protect your own property in the case of damage or loss, and pay for medical costs for you and your passengers if you need it.

  • How do you shop for car insurance?

    Before comparing quotes, know what type of coverage you need and how much. Consider your state’s and your lender’s minimum requirements, but don’t necessarily stop there. You may want to increase the minimum coverage limits based on your situation. Next, compare quotes and insurance companies to find one with a reasonable rate, good customer service, and a strong financial footing.

  • What does liability car insurance cover?

    Liability auto insurance protects you financially when you damage another person or their property with your vehicle, and is often a state-mandated requirement. There are two types of liability coverage: bodily injury and property damage. The first might pay for another person’s medical treatment and lost wages. The second might for damage you cause to their vehicle or belongings. 

Key Terms

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Page Sources

  1. National Association of Insurance Commissioners. "2018/2019 Auto Insurance Database Report," Pages 7, 26.

  2. American Family Insurance. "Insurance After an Accident."

  3. Allstate. "What Is Comprehensive Insurance?"

  4. Insurance Information Institute. "What Is Covered by Collision and Comprehensive Auto Insurance?"