Your ultimate auto insurance guide

When was the last time you thought about your auto insurance needs? If you’re like most people, it was probably when you bought your car – your first car. You’ve likely carried the same insurance company or policy for most of your driving life.  

Think about it: you’ve changed over time. Shouldn’t your auto insurance also change? 

The right coverage for you as a single 22-year-old may not be the right coverage you need as a 35-year-old married parent. The key to getting the right coverage for you is understanding your options. We’ve put together this car insurance guide to help you do just that. This is a quick car insurance 101 to help you with the basics. The VIU by HUB Advisory Team is available to fill in any gaps you still have after reading through these questions and answers.  

What car insurance do you need? What are the types of car insurance?

• Liability insurance – This is the base-level of auto insurance, the policy that most US states require. This will help cover the damage and injuries that you are responsible for. This is limited to damages to others and does not cover your own damages. 
• Collision insurance –This policy covers damage to your car that occurs in a collision of any kind – with another car, a single car accident or if you hit a stationary object. If you have a car loan, you will be required to have this type of insurance.  
• Comprehensive insurance – A comprehensive policy is what it sounds like. It covers everything, even things like vandalism or natural disasters. You’ll likely need this type of insurance if you have a car loan as well.  
• Medical payments –If you are injured in an auto accident, this coverage will pay for your medical bills resulting from the accident, regardless of who is at fault. This covers anyone in the insured vehicle. 
• Personal injury protection –This is Medical Payments Coverage in states that have no-fault insurance laws.  
• Uninsured/underinsured motorist –While separate, these policies often overlap. They are designed to protect you in case you’re hit by someone who does not have enough coverage or is uninsured to pay for your medical or repair bills.  
• Gap insurance –When you get a car loan you are responsible for paying that entire amount back to the bank. If you get into an accident and total your vehicle, your insurance company would pay you the actual cash value. Gap insurance covers the gap between the cash value and the balance of your loan, so you’re not stuck paying for a loan on a car that you don’t have.

There are a few other types of coverage that you can select. Talk to our advisory team about what other options might be available to you. 

What should I look for when getting car insurance? What is the most important part of auto insurance? 

One car insurance guideline is to know thyself. How much do you drive? Where do you drive? How much can you afford to spend if you’re in an accident? What will your health insurance cover? What kind of vehicle do you have? And so on. The more information you have about yourself and your vehicle, the better an agent can match you to your ideal coverage.  

Make sure that your policy will include everything you need before you purchase. For example, if you have a car loan, you’ll need to be sure that your agent is aware that you will need comprehensive coverage. There is no most important coverage or best policy. There is only the most important coverage and best policy for you.  

How much car insurance do I need? How much insurance is required? What’s the minimum car insurance I need?

Some of the answers to these questions are based on personal preference and are dependent on your comfort level and finances. If you are comfortable with risk and have a sizeable savings, you might be okay with only liability insurance. Someone who is more risk-averse might want gap coverage and a comprehensive policy. 

That said, there are other factors at play. Your state may mandate that you carry certain coverages regardless of your personal preferences. The same goes for your bank. If you owe money on your car, you may be contracted to have certain coverages.  

Our advisory team can help you make sense of your personal requirements and preferences to find the right policy for you.  

Why do I need car insurance?  

Car insurance helps to protect you, your passengers, other drivers and even, potentially, pedestrians. It is what ensures you’re able to get your vehicle repaired after an auto accident and that injuries from an accident don’t bankrupt you. 

What is covered/not covered by auto insurance? 

To varying degrees, your car insurance policy will cover:  

• Injuries from an accident – both people in your vehicle and those harmed by an accident you caused 
• Property damage – anything your vehicle damaged and when collision coverage is purchased, damage to your vehicle

It will likely NOT cover:  

• Natural disasters – damage from hail, flooding, etc. (unless you have comprehensive coverage) 
• Items inside your vehicle – your laptop that was in the vehicle when it was stolen is covered by your homeowners or renters policy 
• Commercial use – you will need additional coverage if you want to use your vehicle for your side hustle 
• Accessories – you need supplemental coverage for your stereo and custom wheels 
• Pet injuries – sadly only human injuries are covered in the event of an accident  

Who is required to have auto insurance?  

There’s almost no getting around this one. While there are two states that do not require auto insurance, they do require that that you pay a yearly fine to drive without it (Virginia) or that you pay up to $50,000 of your own money for liability and $25,000 for property damage (New Hampshire). It’s better to get insurance.  

What happens if I don’t have car insurance?  

If you’re in an accident without insurance, you’re responsible for paying for your own auto repairs and any medical care that you need. That’s the best-case scenario. If you are at fault, you can also be required to pay for repairs and healthcare, out of pocket, for the other vehicle and its passengers.

You’re also likely to get a citation for driving without insurance if you’re in an accident or pulled over. Depending on where you are, that could mean a small fine up to losing your license or having your vehicle impounded.  

Get the insurance.  

How do car insurance claims work? What to do in the event of an accident? 

When an accident happens and you need to file a claim, follow these steps: 

• Gather as much information as you can at the scene to share with your insurance company 
• Talk to the other drivers and any witnesses to get insurance information and their version of events 
• File a police report 
• Call your insurance company to alert them of the situation and refresh yourself on your deductible and out of pocket expenses
• Get a repair estimate from a mechanic 
• Work with the insurance adjuster, if needed 
• Get your repairs done 

Your insurance company will need to know the details listed above in order to get you your payments quickly and painlessly.  

What is no-fault insurance?

Some states are “no fault” states. This means that your insurance company pays for your injuries, and the other party’s insurance company pays for theirs, regardless of the circumstances of the accident. In these states, you need to have personal injury protection. Note that this only applies to medical bills. You can still have your car repairs covered by the at-fault driver.  

There are 12 no-fault states:  

• Florida 
• Hawaii 
• Kansas 
• Kentucky 
• Massachusetts 
• Michigan 
• Minnesota 
• New Jersey 
• New York 
• North Dakota 
• Pennsylvania 
• Utah 

What attributes do insurers consider when they calculate my monthly premiums? 

Insurance carriers keep their exact formulas secret, but these are the items that are commonly considered to some degree:  

• Age 
• Driving history
• Credit score 
• Location 
• Gender 
• Insurance/claims history 
• Annual driving mileage 
• Marital status 
• Coverages and deductible 
• Vehicle make and model 
• Self-driving car features
• Vehicle ownership 
• Discount eligibility 
• Lapse of coverage

What are some common misconceptions about renters insurance?

• Only minimum liability coverage is required – While minimum liability coverage meets legal requirements, it may not provide sufficient protection in an accident. Higher coverage limits and additional options can better safeguard your finances.
• Your credit score doesn't affect your rates – Many insurance companies use credit scores to determine premiums. A lower credit score can result in higher rates, so maintaining good credit is important.
• Someone else's insurance covers them if they drive your car – Typically, your insurance follows the car, not the driver. If someone else drives your car, your policy is usually the primary coverage in case of an accident.
• A not-at-fault accident won't raise your rates – Even if you're not at fault, your rates can sometimes increase after an accident. Insurance companies consider various factors when adjusting premiums.
• The color of your car affects your premiums – Car color does not impact insurance premiums. Factors like the car’s make, model, age and safety features are more relevant in determining rates.
• Full coverage means everything is covered – "Full coverage" typically includes comprehensive and collision coverage, but it doesn't necessarily cover everything that might happen to your car. Understanding your policy details is crucial to know what is and isn't covered.
• You only need to shop for insurance when buying a new car – You should compare rates regularly, not just when purchasing a new car. Regular comparisons can help you find more competitive rates.
• A lapse in coverage and no coverage are the same thing – A lapse in coverage means there was a period when you had no insurance, which can lead to higher premiums or difficulty obtaining future coverage. However, if you were uninsured due to not driving (for example, living overseas, relying on public transportation or having a lengthy illness), you will not be penalized when purchasing a new policy when you begin driving again.
• Lapse in coverage does not affect my future rates or eligibility – A lapse in coverage can affect both your future rates and eligibility. Insurers view it as a higher risk, potentially resulting in increased premiums or coverage denial.

The VIU by HUB Advisory Team loves talking about insurance. They will be happy to talk to you about anything you’re still unsure of or help you evaluate your current insurance and discuss changes you can make to get your perfect coverage.