The Best Car Insurance Companies of 2021

What Are the Different Types of Car Insurance Coverage?

Most U.S. states (except New Hampshire) have minimum requirements for auto insurance coverage.

Full coverage

When you have “full coverage,” it often means that you have liability, collision, and comprehensive coverages (all further detailed below).

Liability-only

Liability insurance coverage is meant to pay other parties for damage caused by your vehicle.

In nearly all states, this is the bare minimum level of auto insurance required.

Bodily injury liability

This coverage will pay for medical expenses, legal fees, loss of wages and other costs associated with injuries and death in accidents where your vehicle was in motion -- whether or not you were driving it.

Property damage liability

This coverage will pay others for damage to another vehicle and property caused while your vehicle was in motion -- whether or not you were driving it.

Depending on your state laws, additional coverage may be required. Your auto loan provider may as require these coverages:

Medical payments or personal injury protection (PIP)

Medical payments coverage pays for medical expenses for you and your passengers (even if you’re driving someone else’s vehicle) after an accident, regardless of who is at fault.

PIP covers medical expenses, lost wages, funeral costs and other expenses for you and your passengers after an accident.

Uninsured motorist coverage

This coverage will pay for bodily injury and, in some states, property damage to you and other passengers in your vehicle from an accident where the at-fault party does not have (or does not have sufficient) 

Optional Insurance Coverage

For the most part, the state-required minimum auto insurance coverages is focused on compensating other parties in accidents that result from your vehicle.

However, accidents and other types of incidents can also cause extensive damage to your car, which is where collision and comprehensive coverage can be useful.

Both types of additional coverages are not required by any U.S. state, but lenders may require them as long as you still have an outstanding loan for your vehicle. (You can remove them from your policy after paying off the loan.)

Collision

Collision coverage insures you against damage to your vehicle caused by a collision with another vehicle or object (e.g., parked vehicles, trees, and fences) when you’re the at-fault party.

This coverage applies only for damages sustained to your car while it is in motion.

Comprehensive

Comprehensive coverage covers hazards while your vehicle is parked and not in motion.

Common examples of such damages include those caused by falling trees, vandalism, storms, fire, and more.

The best part is that your car insurance premiums won’t increase as a result of a claim because you’re typically not at fault for these incidents.

What Factors Affect Your Car Insurance Rates?

Car insurance companies use a ton of data to determine your risk of accidents and likelihood of claims.

These are often the factors considered as part of their underwriting process:

Coverage

If you want more coverage, you’re going to pay more for it. So, for example, full coverage is going to cost significantly more than just liability-only coverage. Remember that you may have to pay for additional coverage depending on state requirements.

Gender and age

Gender and age are used to generalize the driver and to judge their risk of getting into more accidents.

Not surprisingly, young male drivers are often considered very risky and tend to pay higher car insurance premiums.

See car insurance rates for younger drivers:

• Car insurance for 16-year-olds
• Car insurance for 17-year-olds
• Car insurance for 18-year-olds
• Car insurance for 19-year-olds

Marital status

Married couples have been found to be in fewer accidents and file fewer claims.

Additionally, married drivers are often eligible for lower premiums through multi-vehicle discounts and bundling auto insurance with other types of insurance.

Driving experience and history

Those who have been driving longer and those who have few or minor violations and accidents are seen as less-risky drivers.

Credit score

The research found that people with lower credit scores are more likely to file claims and insurers may use this information to calculate premiums.

So, a higher credit score could play in your favor when it comes to calculating premiums.

That said, some states forbid insurers from using consumer credit histories when underwriting auto insurance policies:

• California
• Hawaii
• Massachusetts
• Michigan

Location

Location not only helps to identify the required coverages for the state, but insurance companies also use your location to look at the likelihood of natural disasters, crime, frequency of accidents, and other risks associated with your area.

Insurance history

Auto insurers find that drivers who’ve had uninterrupted coverage are less likely to get into accidents. So, if you’ve maintained an auto insurance policy continually (without lapsing), you’re more likely to get lower rates.

Claims history

Simply, a history of many claims -- whether with the current insurer or previous insurers -- will likely result in higher rates or denied coverage. To no surprise, this is especially the case for larger claims where you’re the at-fault party.

Vehicle

The insured vehicle will be considered for its purchase price, safety features, safety tests, repairs costs, and more. 

Data may reveal that your vehicle model is known to be involved in accidents more often or 

Purpose of vehicle

You will usually be asked what you use the car for, such as commuting to work or school. Or, you’re just driving it occasionally for recreation.

Additionally, if you plan to use the car for commercial purposes (such as ridesharing) or as part of running a business, you’d have to ensure that your vehicle is covered properly because insurers are picky with coverage depending on use case.

Mileage

Your annual mileage provides the car insurance company with information on how often you drive. The more you drive, the more likely to be part of accidents -- so you can expect to pay higher rates. (There are programs for lower rates if you drive very little.)

Auto insurance companies may not verify this information upon application but note that mileage information is often collected by servicers when your vehicle goes in for service, oil change, inspection, etc.

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