Understanding Your Auto Insurance

If you own a car, you probably understand the importance of protecting it with auto insurance, whether it’s just the minimum required by your state or a more robust policy designed to protect against a wide range of situations. But even if you’ve got car insurance, you might still find the policy information complicated or frustrating to understand. That's why we’re here with all the details to help you break down the specifics of auto insurance and help you gain confidence in your coverage.

Navigate to:

What Is Car Insurance?

Why Do You Need Car Insurance?

What Are the Benefits of Having Car Insurance?

What Are the Different Types of Car Insurance?

What Does Auto Insurance Cover?

How Does Car Insurance Work?

How Are Car Insurance Premiums Calculated?

What Causes Car Insurance Rate Increases?

How to Get Car Insurance

Car Insurance Discounts

What Is Car Insurance?

Car insurance is the agreement between you and an insurer that protects you from financial repercussions as a result of a collision. In other words, it keeps you off the hook for potentially costly expenses as a result of an accident.

Back to top

 

Why Do You Need Car Insurance?

Insurance is a way of transferring risk. For example, if you make a big purchase, like a new car or home, and you take out a loan, your lender wants to be sure that your vehicle or home is financially protected from potential damage.

How do they make sure of this? They protect their investment by requiring you to purchase insurance. The cost of a potential loss is placed into the hands of an insurance company in exchange for a premium that you pay. The insurance company will invest your premium payment funds and pay you in the event you file a claim — subject to the terms and conditions of your policy.


State minimum car insurance requirements

States mandate liability car insurance, which is what helps pay for damages caused by at-fault drivers to other people or property. This is so those affected in an accident won’t suffer financially as a result of an at-fault driver not being able to pay them for the loss that they’ve caused. Sure, you pay a fee to your insurance company and may never have to file a claim, but if the unexpected does occur, you’ll be glad you don’t have to pay entirely out of pocket. 

Did you know that each state has slightly different insurance requirements? This means there are types of insurance that may be required by your state and not required in another state. It’s best to contact your insurance agent to find out what’s required in your state, so you get the right insurance protection before hitting the road.

Remember, even if a coverage isn’t state-mandated, you may want to add more protection for your car, your passengers and yourself.

Back to top

What Are the Benefits of Having Car Insurance?

There are many benefits to having car insurance but perhaps the most common can look like these:

Financial protection if your vehicle is damaged in a collision

Having car insurance means that your finances are protected in the event of a collision. You’ll pay a deductible and, in exchange, your car will get the work it needs to get you running again.

Medical coverage in the event of an accident

With good car insurance you’ll find that you have added financial protection if you’re injured and need medical attention. Medpay covers you, your family and passengers regardless of who’s at fault. Costs traditionally paid for out of pocket, such as accident-related dental work or hospitalization, would be paid by a comprehensive insurance plan.

Peace of mind every time you hit the road

Perhaps the most important reason to have insurance is the peace of mind it brings when you’re out for a spin. Knowing that regardless of what happens out there, you have an insurer who has your back. Whether you’re in a morning commute fender-bender or a red-light bump from a distracted driver, we’ll have your best interests in mind.

Back to top

What Are the Different Types of Car Insurance?

What we typically think of as simply “car insurance” is a vehicle policy broken into several coverages. Let’s look at some of the most common ones:

  • Uninsured and underinsured motorist
  • Liability insurance
  • Collision insurance
  • Comprehensive insurance
  • Medical Expense coverage

Back to top

What Does Auto Insurance Cover?

Auto insurance financially protects you from a variety of events. Let’s take a closer look at coverages and what they mean for you.

Collision insurance

When you think of a car accident, you probably think of a collision between two or more vehicles. This is exactly what collision insurance is for, and it helps cover your damages whether or not the accident is your fault. Collision insurance doesn’t just kick in when another car is involved, it’s also your go-to if you hit an object such as a mailbox, a tree, a guardrail or other object.

Comprehensive auto insurance

While many accidents involve other drivers, there are accidents that don’t involve another vehicle — this is where comprehensive insurance steps in. Comprehensive pays for things like theft, collisions with animals, vandalism, fires or explosions, hail or natural disasters, floods and more.

Underinsured motorist coverage

It’s frustrating when you take all the precautions you can to protect yourself and then you’re injured by a driver who doesn’t have enough liability insurance to cover your injuries or damages. A quick fix to this problem is to talk to your American Family Insurance agent and ask how you can add underinsured motorist coverage to your policy.

Uninsured motorist coverage

While most states require all drivers to have some form of car insurance, not everyone complies with the law. If you’re hit by someone who has no auto insurance you’ll be relieved knowing that you have uninsured motorist coverage, which covers you from drivers without insurance and in hit-and-run cases.

Gap lease and loan insurance

If you lease a car or have a loan on it, this may be just what you need. Leases and loans tend to last for years, but your car depreciates rather quickly, which means at some point you may owe more on your vehicle than it’s actually worth. If you get into an accident within that time frame, your regular car insurance will cover up to the actual cash value of the vehicle, but that amount may not be enough to cover the entire lease or loan balance. This is where gap lease and loan insurance steps in and helps cover the difference.

Bodily injury liability coverage

If you’re responsible for a car accident, bodily injury liability coverage helps cover costs associated with injuries to your passengers, the driver and passengers of the other vehicle. It also can help pay for injury to pedestrians and bystanders who may have been involved.

Emergency roadside service

This is a smart addition to any insurance package. When you need service and support for your car, it’s right there to help! Emergency roadside service helps cover towing, battery jumps, some tire servicing fees, delivery of gas or oil, locksmiths and some roadside repairs.

Back to top

How Does Car Insurance Work?

Car insurance has you covered when accidents happen. Let’s say you’re at a red light and a distracted driver fails to stop in time and hits the rear of your car. If you didn’t have car insurance, you would have to pay out of pocket for any damage to the vehicle. If you didn’t have medical coverage associated with your car insurance, you would be left to pay for and medical expenses related to the accident.

Car insurance works by providing financial protection for you in the event of an accident or theft.

Back to top

How Are Car Insurance Premiums Calculated?

Car insurance premiums take a look at several variables based on you, your vehicle and your driving history. Some of which may include:

  • Driving record — Simply put, the better your driving record, the lower your premium. Avoiding tickets and driving safely will make your premiums much lower.
  • Make and model — The type of car you drive will also play a factor in your insurance premium. A car’s value will play a major part when considering things like the likelihood of theft, cost of repair and overall safety.
  • How much you use your car — The amount of driving you do can play a major role in determining your premiums. If you drive long distances regularly or commute to work, you’re exposed to more opportunities for an accident.
  • Your location — Because urban settings give rise to the rate of accidents and vandalism or theft, policy premiums in these areas tend to be higher than those in more rural or small town areas.

Back to top

What Causes Car Insurance Rate Increases?

An accident, traffic ticket or other damage to your car may affect your auto premium or insurability. Here are some examples of incidents that may be a factor in determining your premium:


You get a ticket

How a ticket affects your car insurance depends on what type of ticket it is. For example, an operating while intoxicated ticket will have a much more serious impact on your insurance than a minor speeding ticket.

You’re in an accident

Depending on the number and types of car accidents you have, you might see a rise in your insurance premium.

You’re arrested for driving under the influence

If you're arrested for driving under the influence, you may be placed into a higher risk category or with a higher risk auto insurance company, which will likely raise your rates or even cause your insurance to be canceled altogether. 

Back to top

How to Get Car Insurance

Getting car insurance with American Family is simple. Here are a few ways we make the process convenient for you.

Back to top

Car Insurance Discounts

While some of life’s big changes could earn you some discounts, consider whether these other car insurance discounts can work for you. The best approach is to connect with your American Family Insurance agent and discuss your personal situation to find out what discounts apply.

Bundle and multi-car discounts

It pays to keep your insurance under one roof. It’s also a lot easier to manage your policies when you have one insurance company, which is why American Family Insurance rewards you for your loyalty with discounts for multiple cars or bundling policies. Get a bundled insurance quote and see how much you can save.

Discounts for young drivers

Whether your young driver is a good student, enrolled in the Teen Safe Driver Program, away at school, a generous volunteer or just a generational customer, we’ve got a young driver discount for them. 

Good driver discounts

Sometimes it feels like doing the right thing goes unnoticed. That’s why we reward our good drivers with discounts. Ask your agent if you qualify for the good driver discount, the defensive driver discount or the auto safety discount. You deserve it!

Hopefully, you’re feeling more confident in your knowledge of car insurance! If you still have questions, your American Family Insurance agent is always happy to help. They’ll also help you review your policy to make sure you have all the protection you need and that you’re getting all the discounts you qualify for.

Are you an American Family customer? Make sure you’re taking advantage of the MyAmFam app to get the most out of your insurance. Download the app today for easy access to your proof of insurance, streamlined billing and the convenience of tracking your claims anywhere, anytime.

Back to top


Google Play  App Store


How would you rate this article?

Related Topics: Insurance Needs , Insurance Terms , Car Insurance