Understanding Your Car Insurance

After health insurance, auto insurance is one of the most necessary types of insurance to buy. Everyone who owns a car should have it, and in many cases, you may be legally required to carry a policy.

The cost of car insurance varies from hundreds a year to thousands a year, depending on how comprehensive the coverage, where you live, and how safely you drive. That’s not an amount you should spend without thoroughly researching your options.

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Types of Auto Insurance


This is insurance that covers accidents where you are at fault. You are legally liable for injury to the other driver or their passengers and for damage to their vehicle. This isn’t likely to be an amount you have on hand, so you need to carry insurance for it. In most states, it’s legally required for you to have both bodily injury liability insurance and property damage liability insurance.

Uninsured Motorist

Despite laws requiring everyone to cover liability insurance, not everyone does. What if you’re hit by an uninsured driver? Uninsured motorist coverage pays for accidents that aren’t your fault when the other driver isn’t carrying liability insurance.

Personal Injury Protection

This insurance covers medical bills if you or your passengers are injured in a car accident. In some cases, it also covers replacing your wages while you are recovering, or even funeral costs.


This insurance covers damage to your car from accidents, including crashes between cars and rollover accidents. It may not cover damage from animals, such as striking a deer. It covers even accidents that are your fault. If the accident is not your fault, the insurance company will first try to get the other driver’s insurance to pay.


Comprehensive coverage covers everything besides collisions: theft, hail, animal damage, falling objects, and more. It may include coverage for a broken windshield. If you have a car loan, you might be required to carry this insurance as a condition of your loan. This way, if something happens to your car, the loan holder is still reimbursed. If you own the car, you may not need this coverage— but it’s a good idea if you rely on the car and can’t afford to replace it.

Towing and rental

What if you have an accident or engine trouble and need to call a tow truck? What if you need to rent a car while yours is in the shop? Towing and rental coverage can make car trouble much less of a hassle. You may pay less getting this coverage through your insurance than having a membership in a towing service.

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How to Save on Auto Insurance

All these types of coverage can really add up. Besides not buying some of the types, what else can you do to cut costs?

First, you can accept a higher deductible. As with health insurance, the deductible is the amount you pay for an event before your insurance kicks in. The higher your deductible, the lower your premium will be. That said, if you can’t afford a high premium, you may not be able to afford a high deductible either. Don’t choose a deductible that’s higher than you will be able to pay in the event of an accident.

Second, look for discounts. If you have a good driving record, many insurance companies will give you a lower rate. If not, you might be able to lower your rate by taking a defensive driving course.

Car owners who drive more miles a week pay more, so taking mass transit can save you money on insurance. So can buying a smaller car. Some insurance companies have discounts for owning a hybrid.

Talk to an Advisor

A financial advisor in your state is an excellent source for auto insurance referrals. They will know what companies serve your area, and at what cost. They can also help you sort out coverage you’re likely to need from coverage you won’t. Contact us today to be connected to the financial advisor that’s right for you.