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.

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Why You Need Car Insurance
Types of Car Insurance
Making Changes to Your Car Insurance
Car Insurance Discounts
Car Insurance Rate Increases

Why 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.


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.
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Types of Car Insurance

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. Here are a few of the more common types of car insurance and instances they cover.

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 laws. If you’re hit by someone who has no auto insurance you’ll be relieved knowing that you were proactive about insurance and opted for 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 want 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 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 and/or oil, locksmiths and some roadside repairs.
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Making Changes to Your Car Insurance

Even before you drive that new car off the lot, your insurance agent has you covered because you let them know you were buying a car that day. But did you know there are other life changes that you should keep your agent aware of, too? Some of them could cause your rates and coverage to change.

Name changes. If you’ve had a name change, it’s best to let your agent know as soon as possible, just to keep your policy information accurate and up to date.

A new address. The most obvious reason to change your address with your insurance agent is to keep your records current. But there could be a benefit to moving, too. If you’re moving very close to your work, you might qualify for savings for being a low mileage driver.

Marital status. If you get married or divorced, it’s best to connect with your American Family Insurance agent as soon as possible to let them know of the change. Usually, this will mean you’ll be changing your policy, whether you’re including your new spouse or your ex and you will be taking out separate policies. It’s easy to forget about this during these busy times but one quick call can quickly get things in order.

Teen drivers. By the time your child turns 16 and is ready to hit the road, you’ve probably already been thinking about their safety. One way to ease your mind is to make sure they’re covered under your policy as soon as possible. Even before they start driving or get their own vehicle you should connect with your agent to reevaluate your insurance options. Another way to ease your parental concerns is to sign them up for American Family’s Teen Safe Driver program. This program not only teaches them how to master safer driving habits, you could also earn up to a 10 percent car insurance discount!
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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.

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!
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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 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 are 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.
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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.


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Related Topics: Insurance Needs , Insurance Terms , Car Insurance