Car Insurance 101: Your Complete Guide to Insuring Your Vehicle


Did you hear about Tiger Woods car accident?

Driving down a notoriously windy road, Tiger Woods’ SUV veered off course. After crossing a median, and 2 road lanes, the SUV hit a curb, tree, and eventually landed on its side in a brush pile. Arriving at the hospital, Woods had to undergo emergency surgery, and doctors nearly had to amputate his leg.

Car accidents can happen at any time and to anyone. To help you prepare for the worst, we’ve created this car insurance 101 guide. In this article, we’ll explain everything you need to know to protect yourself and your loved ones on the road.

Why insure your vehicle? Read on to find out!

Commercial vs. Personal Car Insurance

Let’s start by looking at whether you need a personal or commercial auto policy. And if you’re not sure, why not text insurance rates and get more info.

There’s a ton of small businesses in the United States, accounting for almost 50% of the workforce. If you’re a small business owner, you may need a commercial policy for your vehicle.

For instance, if you transport products or clients in your car, you probably need a commercial policy.

Commercial policies also help when you use your vehicle to perform a service, such as a house cleaning or lawn care. Do you have employees who drive your vehicle, or is the vehicle owned by your company? If yes, you’ll need commercial coverage.

Always Tell The Truth

While commercial policies typically have higher insurance costs than personal ones, having the wrong coverage will wind up costing you more. If you’re dishonest with insurance providers about what you use your vehicle for, you’ll wind up causing a ton of problems for yourself. If you’re caught lying all of your coverages could become null and void.

In other words, you’ll have to cover all of the expenses from the crash out of pocket.

To avoid problems, always be honest about what you use your vehicle for when you’re securing a new policy. If you’re not sure whether or not your need commercial coverages, ask.

When Should You Update Your Policy?

As your life changes, your auto policy needs to be updated to reflect those life changes. Here’s a shortlist of instances that should prompt a policy review:

  • You get married or divorced
  • Kid gets a driver’s license
  • Adult licensed driver moves into the home
  • You get a new car
  • You move
  • You switch jobs
  • Purpose of vehicle changes

You should also review your auto policy coverages before each renewal.

When you’re reviewing your policy, get price quotes for increasing your coverages. You can also explore add-on coverages that you don’t currently carry, such as gap coverage or new car insurance.

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What To Look for in an Insurance Company

On your journey to find the best affordable car insurance, it helps if you know what to look for in an insurance company. For starters, the best insurance companies will be on board with the latest digital trends. For instance, you should be able to access your policy on a website and app.

It’s also a good sign when insurance companies have active social media accounts. Having a good online presence shows you that the company cares about communicating with customers.

Next, look for a company that offers discount opportunities. Finally, when you’re calling to get a quote, the insurance agent you’re speaking to needs to be licensed.

Take advantage of talking to a licensed agent by asking all of your insurance-related questions. If at any time the insurance agent seems impatient, or unhappy to answer your questions, take your business elsewhere! Insurance is tricky to understand and well-versed agents understand that you’re going to have a lot of questions.

Cost Affecting Factors

There’s a variety of things that influence the cost of your auto insurance policy. While some cost factors under your control, like choosing coverage limits, others aren’t. For instance, your age, career, and homeownership status all play a role in your monthly rates. The state you live in also plays a role in premium prices.

Insurance companies take into account things like crime rates and the likelihood of natural disasters. That’s why hurricane-prone Florida has some of the highest coverage rates for car insurance. In Florida, it’s normal to pay over $2,500 for coverages, and that’s not even for a full year!

How to get auto insurance Discounts

Good news! You can seek out vehicle insurance discounts if you know where to look. Here’s a shortlist of discount opportunities you should explore:

  • College degree
  • Homeowner
  • Safe driver
  • Policy bundling
  • Belonging to specific organizations
  • Taking a defensive driving course
  • Low mileage
  • Recreation only

If you’re only going to be driving your car now and then, you may qualify for a discount. For example, perhaps since the pandemic struck, now you’re working from home.

Since you’re not using the vehicle to commute to work every day the likelihood of you getting in a crash goes down. Since insurance companies are all about risk calculation, driving your car less is looked upon favorably. As a result, you may qualify for a break on your monthly rates.

How To Insure Your Car With the Right Coverage

Next, in car insurance 101 we’re going to review all of the different coverages your policy can have. Here’s a shortlist of all the different car insurance coverages:

  • Bodily Injury
  • Property Damage
  • Uninsured Motorist
  • Underinsured Motorist
  • Medical Payments
  • Personal Injury Protection
  • Roadside Services
  • Rental Reimbursement
  • Comprehensive
  • Collision

Keep in mind that there’s no 1 size fits all when it comes to choosing coverages. Instead, you should carefully select the coverages, and coverage limits you need based on your life situation.

Liability Coverages

Bodily injury and property damage are 2 types of liability coverages. If you’re found at fault, or liable, for an accident, bodily injury and property damage will help cover the other driver’s expenses. For instance, the bodily injury will cover things like doctor visits, and other medical-related expenses.

When you’re getting quotes for bodily injury coverages, you’ll have to pick the limits you want. On the low end, you can get bodily injury coverage for $25,000/$50,000, however, we suggest increasing your limits.

The first number ($25,000) refers to how much each person in the other car can claim. Whereas $50,000 is the maximum amount your insurance provider will pay out for any 1 accident. If there are 3 or more people hurt during the crash, your policy might not be able to cover all of their medical expenses.

As a result, you could wind up dealing with a personal injury lawsuit from an injured party. To prevent being underinsured, we suggest having bodily injury limits of at least $100,000/$300,000. Next, property damage will help pay for any damage you cause to the other vehicle. Again, having a higher coverage limit is wiser than going for the lowest coverage possible.

Uninsured and Underinsured Motorist

What happens if someone hurts you and they don’t have car insurance?  Let’s say for instance someone without any insurance hits your car, causing you to break your leg.

If that individual doesn’t have insurance, you’ll be on the hook to cover your medical expenses. That is if you don’t carry uninsured or underinsured motorist coverage, also known as UM coverages. UM, coverages come into play whenever the at-fault driver causes you injuries but doesn’t have the policy to cover your medical expenses.

You might think, “Can’t I just sue the driver that hit me?”. However, it’s not that simple. If the at-fault driver doesn’t have any assets, there’s no point in suing them. Another thing to consider is that personal injury lawsuits take time.

While you’re waiting for a settlement payout, you’ll be responsible for covering all of your medical bills. Instead of putting yourself in a bad position, always carry UM coverages with high limits.

Stack Coverages

If you have more than one vehicle, even if it’s a motorcycle, consider stacking your UM coverages. Stacking your UM coverages is more expensive, however, it means you can make money from each car’s UM coverage if needed. Let’s say for instance you have $100,000/$300,000 in UM coverages for 2 cars.

The $100,000 is the maximum you or any passenger can claim during an accident. The $300,000 refers to the total the insurance company will payout. However, if you stack your 2 car’s UM coverage the amounts will double. Now you’ll have $200,000 per injured person and $600,000 per accident.

Medical Payments and Personal Injury Protection

Both medical payments and personal injury protection will help cover your medical expenses. In some states personal injury protection, or PIP, is mandatory. It’s common to see PIP limits of $10,000/$20,000, and medical payments ranging from $500 to $2,000 or more. You can use PIP coverages to help pay for lost income from being hurt, physical therapy, and other injury-related expenses.

Rental Reimbursement and Roadside Coverages

Don’t miss out on rental reimbursement coverages when you’re starting an auto policy. If your vehicle’s made undrivable, even if it’s your fault, you’ll have a rental car fully paid for.

We suggest opting for rental reimbursement coverages that last at least 1 month. Next, roadside service is a cheap coverage that can make a world of difference. Tows, lockouts, and running out of gas are all things roadside services can help remedy.

Comprehensive and Collision Coverages

Next, let’s look at the coverages that will help protect your vehicle. Comprehensive coverage helps pay for damages to your car for things that don’t involve a car crash. For instance, hail, fire, vandalism, and theft, all fall under comprehensive coverages.

Next, collision coverage helps in the event you collide with another vehicle or object. For example, if you back up into a pole, you’d file a claim under your collision coverage.

Both comprehensive and collision coverages are optional unless you’re financing a vehicle. Typically if you’re financing a vehicle you have to carry both car coverages to secure your loan.

How Do Deductibles Work?

When you get comprehensive and collision coverages, you’ll have to pick deductibles. The deductible is the amount you’ll have to pay before the insurance company helps out. If you set your deductible to zero dollars you won’t have to pay anything to use your comprehensive or collision coverages.

However, a zero-dollar deductible is likely to raise your policy premium by quite a bit. Instead, we suggest choosing a deductible amount you could easily pay if the worst occurs. For example, $500 seems to be a deductible amount that a lot of drivers feel comfortable with.

Do you have an older vehicle that’s not worth very much? If yes, you might not need to carry coverage for the car itself. For instance, let’s say your cars worth less than $2,000. You’d be better off saving money each month rather than paying to cover the car.

Otherwise, you could wind up paying for coverage that will only pay out a few hundred dollars. Remember, you’ll still have to pay a deductible as well, which could cancel out the coverage altogether.

Comprehensive Coverages and Windshields

Certain states will replace your windshield with out a deductible with comprehensive coverage. In this scenario, set your comprehensive deductible as high as possible to keep your monthly payments low. Then if a rock hits your windshield and cracks it, you can replace it for free!

Mastering Car Insurance 101

Congratulations! You’ve successfully finished reading car insurance 101. We hope that this article was able to break down some complex auto insurance concepts into more digestible information. Now, the next step is to have an insurance agent review your current coverages.

Be sure to ask for any discount opportunities available that you might qualify for. Lastly, find out how much your premium would go up if your increase the policy’s coverage limits. If the worst happens and you’re in a car accident, you’ll be so glad you have enough coverage! For more tips like these, read another article.

Jeff Campbell

Jeff Campbell is a husband, father, martial artist, budget-master, Disney-addict, musician, and recovering foodie having spent over 2 decades as a leader for Whole Foods Market. Click to learn more about me

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