Released: October 15, 2018

Help Desk FAQ

What should I consider when buying auto insurance?

• Don't drive your car unless you have auto liability insurance. If you drive another person's car, you are covered by that person's insurance unless you live at the same address as the owner of the car. Always check to make sure the owner has adequate insurance. If you rent a car, purchase liability insurance unless your own policy covers rental cars.
• If you are at fault in an auto accident, liability insurance pays for the victim's injuries and property damage as well as your legal bills. Liability coverage is the most important form of auto coverage and is required in most states.
• State-by-state requirements vary for minimum levels of auto liability insurance. In most cases, you should buy more—often much more—coverage than required. Liability limits have three key numbers. If you have liability limits of 20/40/10, you have $20,000 to cover the injuries of each person hurt in an accident, up to a total of $40,000 for all injuries in any one accident, and $10,000 in property damage for each accident.
• When you buy auto liability coverage, make sure to cover or exceed the value of your "assets," such as your home or your savings account. If you are sued and you don't have enough coverage to protect your assets, you could lose money, possessions and even your home.
• If you have a car loan, you have to buy collision and comprehensive coverage because the lender wants to protect itself if the car is damaged. Collision coverage pays for damage to your car even if the accident was your fault. Comprehensive coverage pays for damages that weren't caused by an auto accident, such as car fire, theft or vandalism.
• Collision and comprehensive coverage are expensive but you can reduce the cost by choosing the highest deductible you can afford. A deductible is the amount you pay out-of-pocket for repairs, before your insurance will pay anything. The higher your deductible, the lower the cost for insurance.
• Uninsured motorist coverage pays for your injuries if you're hurt by a hit-and-run driver or someone without insurance. It is required in many states.
• Underinsured motorist coverage pays you if you are hit by a driver who does not have enough insurance to cover all injuries or damage.
• Most insurers will only pay for the fair market value of "totaled" cars. Fair market value is the amount the car would sell for, taking into account its condition and mileage.
• Gap coverage is insurance that pays the difference between the value of your car and the amount of your car loan if your vehicle is totaled in an accident. On new car loans, the car's value is often lower than the remaining loan payments.

Read Consumer Action's guide to auto insurance for more in-depth information.

Help on the web

Insure.com: Lots of information on insurance.

National Association of Insurance Commissioners: Links to all state insurance departments.