{"id":2238,"date":"2022-09-18T18:07:00","date_gmt":"2022-09-18T18:07:00","guid":{"rendered":"https:\/\/www.freeway.com\/knowledge-center\/?p=2238"},"modified":"2025-05-16T19:28:53","modified_gmt":"2025-05-16T19:28:53","slug":"auto-insurance-101","status":"publish","type":"post","link":"https:\/\/www.freeway.com\/knowledge-center\/auto\/auto-insurance-101\/","title":{"rendered":"Auto Insurance 101 – Everything You Need to Know"},"content":{"rendered":"\n

If it is your first time getting a driver\u2019s license or owning a vehicle then you probably haven\u2019t thought about auto insurance<\/a> before. You may not even know how to get car insurance<\/a> or where to start. Advertisements from insurance companies make it seem like getting a policy is simple, but in the process you may encounter confusing choices or unknown terminology. In order to avoid frustration and to ensure you have the right coverage for your needs, learn the basics of \u201cAuto Insurance 101.\u201d<\/p>\n\n\n\n

What is Car Insurance?<\/h2>\n\n\n\n

It\u2019s essentially a contract between an owner and an insurance company. The insured pays a premium to the insurer and, in return, the company guarantees financial protection up to policy limits for the insured. Individuals can select their coverages and the limits they want for each option. Limits are the most the company will pay out in the event of a covered incident.<\/p>\n\n\n\n

Do I Need Insurance?<\/h2>\n\n\n\n

There are a number of reasons why you should invest in an policy, but the primary reason is you will likely be breaking the law without one. All states require some form of minimum insurance or proof that you are able to pay for an accident you cause. Failure to provide proof of coverage can result in penalties as minimal as fines or as serious as license suspensions or jail time.<\/p>\n\n\n\n

The second reason you will want to buy insurance is because accidents happen and they happen frequently. In fact, according to the U.S. Department of Transportation National Highway Traffic Safety Administration<\/a>, more than six million accidents happened in the United States in 2017. Accidents result in property damage and injuries that can be costly. In order to protect yourself and your assets it is wise to have an auto insurance policy.<\/p>\n\n\n\n

What Does Car Insurance Cover?<\/h2>\n\n\n\n

It\u2019s fairly customizable. Once you have the state-required minimum, you are free to increase the required amounts and\/or purchase additional for better protection behind the wheel.<\/p>\n\n\n\n

Think about when you made the decision to buy your car. Did you pick one with a basic package or did you opt for a customized vehicle with a larger engine and a sunroof? Insurance policies work the same way. There are standard policies as well as optional coverages.<\/p>\n\n\n\n

Let\u2019s take a look at some of the different types of coverage available and how they might work for you.<\/p>\n\n\n\n

Liability Coverage<\/h3>\n\n\n\n

Liability coverage has 2 components: bodily injury insurance and property damage insurance. All states but two require you to carry auto liability coverage<\/a> in varying amounts. Liability will either kick in to help you pay for injuries and damages you caused others if you are the at-fault driver in an auto accident or if you live in a no-fault state, liability will help you pay for your own injuries and damages. In an at-fault state, your liability will pay nothing for your own injuries and damages.<\/p>\n\n\n\n

One type of car insurance that isn\u2019t talked about much is umbrella coverage<\/a>. Umbrella coverage offers an extra level of personal liability protection on top of your car or home insurance.<\/p>\n\n\n\n

Full Coverage<\/h3>\n\n\n\n

Typically, when we talk about full coverage<\/a>, we are talking about a trident that consists of liability, plus comprehensive coverage and collision coverage. In most cases where your car is financed, your lender will require you to carry full coverage until your ride is paid off. Comprehensive insurance pays for things such as hail damage, theft and other events that mostly happen when you aren\u2019t behind the wheel. Collision helps pay for damages to your vehicle regardless of whose fault the wreck was.<\/p>\n\n\n\n

Personal Injury Protection (PIP) and Medical Payments (MedPay)<\/h3>\n\n\n\n

Some states require one or the other of these protections. Other don\u2019t, but request that you turn it down in writing. Regardless, these two protections offer additional help with paying for medical expenses, as well as other things like lost wages, in-home childcare and cleaning services and much more. These are good to have, even if you have health insurance.<\/p>\n\n\n\n

Uninsured Motorist \/Underinsured Motorist (UIM)<\/h3>\n\n\n\n

Again, some states require this as part of their minimum coverage \u2013 especially no-fault states. Others require you to turn it down in writing. But here\u2019s the thing: this insurance is cheap when you understand how many people are out there driving around without insurance. If you get into an auto accident with one of these drivers, you are going to need your UIM to help you pay for your injuries and damages.<\/p>\n\n\n

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What are Optional Insurance Coverages?<\/h2>\n\n\n\n

While some coverages are required by law or a lienholder, many companies offer options that you may want to consider. Some examples of optional coverages include:<\/p>\n\n\n\n