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Auto Insurance Reference Guide Reference Guide

Are you often confused about the ins and outs of car insurance? Well your confusion ends here! By taking advantage of this comprehensive Reference Guide from, you can get the answers to your car insurance questions then begin comparing quotes today!

Auto Insurance FAQ

Here is a list of Frequently Asked Questions many drivers find themselves needing answers to before purchasing car insurance:

  • What is auto insurance? Auto insurance is a form of coverage that protects you against financial loss if you have an accident in a vehicle.
  • Do I have to carry auto insurance? Currently, 49 out of 50 states require drivers to carry liability auto insurance to operate a vehicle. The only state that currently does not require coverage is New Hampshire.
  • Who can purchase car insurance? Anyone of legal driving age is able to own or be included on an auto insurance policy.
  • What types of auto insurance are available? The types of auto insurance available include liability, comprehensive and collision. Depending on the state, you may also be able to purchase no-fault coverage.
  • What does liability insurance cover? A liability policy pays for your legal responsibility to others for bodily injury or property damage.
  • What does comprehensive insurance cover? A comprehensive policy covers property damage to or theft of your car.
  • What does collision insurance cover? A collision insurance policy covers damage to your car in an accident, regardless of fault.
  • What is no-fault insurance? No-fault insurance covers costs incurred as the result of an accident without having to assign fault to any one of the participating parties involved in a collision in no-fault states.
  • What are the no-fault insurance states? As of July 2010, there were 12 states using some form of no-fault insurance. They are Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah.
  • What is personal injury protection (PIP)? Personal injury protection (PIP) is the no-fault portion of a no-fault insurance policy.
  • What is considered “full coverage”? The term “full coverage” usually refers to an auto insurance policy that contains liability, comprehensive and collision coverage.
  • What is an insurance premium? A premium is that cost you are responsible for paying to have your insurance company cover the costs of damage to your vehicle.
  • What is an auto insurance claim? An auto insurance claim is a request for payment of damages insured under a signed insurance policy.
  • Who is a car insurance claims adjuster? A claims adjuster works for your insurance provider to assess the damage caused to your vehicle after an accident, afterward making an estimate on the cost of repairs.
  • What is a deductible? A car insurance deductible is the amount of money you pay before comprehensive or collision insurance kicks in and covers the cost of damage in an accident.
  • What is the length of a standard auto insurance term? The standard auto insurance term is 6 months; however, it can be stretched out to one year.
  • What is medical coverage? Medical coverage or medical payments pay for the cost of treating injuries, rehabilitation and even sometimes lost wages and funeral expenses of the driver and passengers in your car.
  • What is roadside assistance? Roadside assistance is optional insurance that pays for towing and helps with lock-outs, tire blowouts and other issues that can occur on the road.
  • What is rental car reimbursement? Rental car reimbursement is an optional coverage that helps pay your rental car costs while your car is being repaired as a result of a covered claim.
  • How much car insurance should I buy? Deciding how much car coverage to purchase depends on the liability limits of your state, as well as how much coverage you prefer for your car.
  • What factors affect my insurance premium? There are a number of factors that affect auto insurance premiums, including age, vehicle model and year, marital status, location of residence, credit score and driving record.
  • Are car insurance laws the same nationwide? No. Each state governs its own car insurance policies. So if you move to a new state, you may have new rules to consider.
  • Why does an insurance quote change after SSN is provided? Your Social Security Number provides insight into your credit score. If your score is low, often times, your quote will increase.
  • Am I obligated to buy coverage after obtaining a quote? Insurance companies offer free, no-obligation quotes, allowing you to shop around worry-free.
  • Can car insurance payments be made monthly? Most auto insurance companies offer multiple payment options. You may pay in full, monthly or other ways as determined by your insurer.
  • Can my car insurance rate change? Companies have been known to adjust premiums in the middle of a term if a violation is reported. But typically, rates don’t fluctuate until the end of a term.
  • Can a violation affect my premium? Violations such as speeding or failure to wear a seatbelt can increase premiums; however, they often don’t occur until it is time to renew the policy.
  • Is buying insurance online cheaper? Very often, purchasing coverage over the Internet is cheaper because many companies offer online discounts. But it’s good to know that a lower price online isn’t guaranteed.
  • Will my policy cover damage from natural disasters? Comprehensive insurance was created to cover costs incurred from damage caused while the vehicle is not in operation. If a natural disaster strikes and your vehicle is damaged, comprehensive insurance will pay for the costs.
  • Can I cancel my policy before the end of a term? Insurance companies allow policyholders to cancel their policies at any time, but some companies charge fees for early termination.
  • Can an insurance company cancel my policy? Insurance companies have the right to cancel policies if they determine that a policyholder holds knowingly provided false information or commits auto insurance fraud.
  • Can I add drivers to my policy? Auto insurance companies allow additional drivers as long as they are of legal driving age.
  • What is auto insurance fraud? Auto insurance fraud occurs when a policyholder purposefully attempts to steal money from the company, whether it be via a filing one or more false claims or faking an accident.
  • Does car insurance cover rental cars? Most insurance companies allow their policies to transfer to rental cars; however, each company has its own policy on how much coverage transfers.
  • What is an SR-22? An SR-22 is a proof of insurance form specifically created to prove that adequate auto insurance coverage has been purchased. It is required for individuals convicted of moving violations.
  • What are multi-policy discounts? They are discounts often rewarding to customers who purchase more than one type of policy from a single insurance carrier.
  • What is a pay-as-you-drive insurance discount? Many insurance companies offer discounts to individuals who agree to be monitored for driving habits (miles driven, speed, location of vehicle, etc.).
  • What is gap coverage? Gap coverage is optional and ensures should the owner of the car find that they’re paying more in auto loan payments than their car is worth—a situation called “being upside down”—the loan will be forgiven.
  • What is high-risk auto insurance? This is coverage offered to individuals with a driving record that places them in a category as a driver at high risk of having an accident. This insurance is usually costlier than standard coverage.
  • What is CDL insurance? CDL is an acronym for “commercial driver’s license.” The coverage is available to individuals who have a CDL and drive professionally, such as truck drivers, taxi operators and bus drivers.

Tips for Comparing Auto Insurance Companies

Now that you have answers to some of the most commonly-asked auto insurance questions, it’s time to begin comparing auto insurance companies. When searching, you want to make sure that the company you choose not only offers an affordable rate, but also has a great reputation for paying claims and offering great customer service.

Here are some tips to help you make these determinations:

Check Your State’s Department of Insurance Site

A great way to determine whether the insurance companies you’re considering have good reputations is to check your state’s Department of Insurance website. On your state’s site, you can find out if any customer complaints have been filed against the companies you’re interested in. Also, you can check on basic rate information to decide which of the lot offer better deals.

Call Body Shops for Recommendations

Body shops are great resources for information about auto insurance companies since they work closely with adjusters to manage claims. Consider calling around to a few shops in your area to get recommendations on the best companies based on their experiences with the claims process.

Review Online Review Sites

There are tons of online review websites that allow customers to provide feedback on their experiences with auto insurance companies they’ve interacted with.  Before choosing a company, it’s good to read reviews to decide which one sounds like a good match for you.

Look on the Better Business Bureau Website

The Better Business Bureau (BBB) is another great site for revealing the reputation of a company. Check out the BBB site for more information about your companies of choice.

Locate Insurance Financial Ratings

Financial ratings for insurance companies are crucial to proving their success. To find out if a company has a good rating, you can check ratings agency sites like AM Best for more information.

Reducing Auto Insurance Rates with Discounts, Deductibles and More

Once you’ve chosen the right company, the next step is to try to lower your coverage amount. This can be accomplished a number of ways:

1. Look for discounts: Companies offer discounts for a number of reasons, including purchasing coverage online, having certain safety features on your vehicle, driving fewer miles, or even buying more than one type of policy. To make sure you’re getting the right price for your coverage, find out what discounts are available.

2. Increase your deductible: In the world of auto insurance, the higher your deductible is, the lower your premium payments will be. So consider increasing your deductible to lower your monthly payments. Just be sure to have that deductible amount set aside in case you need it.

3. Have health insurance? Avoid medical payments: Most insurance companies offer medical payments, which pay for your hospital costs when injured in an accident. However, if you already have health insurance, you’ll be paying this extra cost unnecessarily.

4. Consider a defensive driving course: Many auto insurance companies provide discounts to individuals who take a defensive driving course. Why? Because they’ve taken extra steps to ensure they don’t get into an accident. If you’ve already taken a course, don’t forget to mention it.

5. Skip the monthly payments: It’s quite common nowadays for policyholders to make monthly car insurance payments. To lower your overall premium costs, skip the monthly payments and instead pay one time up front.

6. Have a good credit score: It’s a hard fact of life that good credit makes life easier—and cheaper. If your credit score is in the prime category, your insurance rate will lower. Keep this in mind as you shop around.

7. Become a loyal customer: Insurance companies love and reward customer loyalty, so while it’s not guaranteed, there is a chance that your rates could lower over time just by sticking with the same company.

The world of auto insurance can feel a bit confusing, which is why it’s great to have a reference available to help you sort out the details. Now that you’ve acquired answers to frequently asked questions as well as tips on comparing coverage and lowering rates, it’s time to enter your zip code above and start searching for your perfect auto insurance policy!

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