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Car Insurance

What it protects against

The financial consequences of damage to a vehicle or property, theft, vandalism, injury to the insured or other people, personal liability, and/or accidents with uninsured or underinsured drivers.

How it works

Policies are carefully underwritten by insurers, who take into account your driving record, address, age and even your credit history. The kind of vehicle also matters; some vehicles are stolen more often than others, and some have better safety features. Among the coverages you can purchase are collision; comprehensive, which covers physical damage from fire, theft, vandalism or other non-collision damage; and liability, in case you are legally liable for bodily injury or property damage caused by an automobile.

Who needs it

Only New Hampshire, Tennessee and Wisconsin do not require some kind of liability protection, but they have financial-responsibility laws. These laws require drivers to have sufficient assets to pay claims if they cause an accident. All other states require a variety of coverages. Insureds have wide latitude in how much and what kind of coverage to buy. For example, high annual deductibles can greatly reduce premiums. Old vehicles may no longer warrant collision or comprehensive coverage. Affluent drivers may want to maximize their liability coverage. Lenders may require owners to insure for collision and comprehensive.

Who may not need it

Even if you live in the few places that do not require auto insurance, you owe it to others, if not yourself, to have it.

When to buy it

Before you start driving.

How you pay for it

Annual or monthly premiums. Policies are generally renewable annually or semi-annually. Insurers charge interest on premiums paid less frequently than annually.


Terms to Know

  • Automobile Liability Insurance  (View Definition )
  • Collision Insurance  (View Definition )
  • Comprehensive Insurance  (View Definition )
  • Personal Injury Protection  (View Definition )
  • Umbrella Policy  (View Definition )
  • Uninsured Motorist Coverage  (View Definition )