Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Melanie Musson is the fourth generation in her family to work in the insurance industry. She grew up with insurance talk as part of her everyday conversation and has studied to gain an in-depth knowledge of state-specific car insurance laws and dynamics as well as a broad understanding of how insurance fits into every person’s life, from budgets to coverage levels. She also specializes in automa...

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Reviewed by Melanie Musson
Published Insurance Expert

UPDATED: Mar 13, 2020

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If you have a car, you need auto insurance. Since the expense cannot be avoided, it’s important to do some research to understand exactly how much insurance you need and how to select the best insurance company. By taking the time to understand what insurance is, how it works and what to look for when shopping for a company, you can be sure that you get coverage that will suit your needs and be easy on your pocketbook.

Why You Need Auto Insurance?

Insurance serves two primary purposes. The first, liability, is to cover damage or injuries that you might cause while operating your vehicle. The second is to cover your own damage or injuries following an accident. Together, they create full coverage auto insurance. Liability auto insurance is required by state law, while full coverage is a requirement of most lien holders for financed vehicles.

States require that drivers carry liability insurance as a condition of vehicle ownership. Each state will have a minimum requirement for liability coverage; if a policy does not meet the minimum conditions of insurance in the state, the driver will be penalized.

Drivers do not necessarily require full coverage insurance unless their lien holder demands it, but it’s a good idea to carry full coverage on any new or valuable car. Otherwise the driver may be unable to repair it after an accident occurs, especially if the accident is that driver’s fault.

What Happens if You Don’t Have Insurance?

Drivers who don’t carry the appropriate amount of auto insurance are subject to numerous potential consequences:

— They will be ticketed by police if they’ve been caught driving without insurance.
— They will have their license suspended by the DMV until insurance is purchased.
— They will need to pay for any accidents that they cause out of pocket or be sued for the damage.
— They will not be able to repair damage caused to their own vehicle.

Because the consequences of driving without insurance are so severe, it’s a good idea to always maintain the proper amount of coverage on all vehicles that you own or drive. The expense of insuring a vehicle is worth avoiding legal trouble or expensive court battles down the line.

How Much Does Auto Insurance Cost?

Auto insurance costs vary from one person to the next. Numerous factors influence the cost of insurance, and the cost of premiums varies from state to state. Because insurance costs differ, it’s important to fill out a personalized quote so that you can figure out exactly what your auto insurance will cost.

On a personal level, auto insurance costs are calculated based on an individual’s risk. People who are considered to be high-risk drivers will pay more for auto insurance. This includes individuals with a history of accidents or traffic citations, young drivers and men. People with poor credit will also pay more for auto insurance as will drivers with luxury vehicles, sports cars, foreign cars or any other vehicle that’s expensive to repair.

On a geographic level, insurance premiums are dependent on the population of an area, the number of uninsured drivers in the state, the DUI statistics in the state and whatever the state insurance requirements may be. The more uninsured drivers a state has, the more auto insurance must cost to compensate. States with high insurance requirements will have a higher average cost but the actual policy may be more affordable than a similar policy in another state.

The amount of insurance coverage an individual buys will also play a role in determining how much the policy will cost. The more coverage a person carries, the more the auto insurance will cost. A basic liability policy will be much less expensive than full coverage insurance, and a policy with high limits or a low deductible will cost more as well.

The insurance company itself also plays a role in determining the cost of coverage. Some companies operate in ways that keep costs low, such as maintaining a small staff; other companies may have more expensive premiums. Because insurance is very competitive, companies will often offer discounts and special programs to encourage drivers to move from one company to another.

Auto insurance costs can vary from $40 a month for a very basic liability policy to upwards of $200 or more a month for full coverage. The national average cost of auto insurance is around $1,500 per year.

Are There Any Auto Insurance Discounts?

Auto insurance companies offer multiple types of discounts to help keep the price of insurance low. Some companies offer unique discounts that may make those insurers more attractive than competitors. A few common discounts you might qualify for:

— Good student discount
— Home owner discount
— Multiple policy discount
— Safe driving discount
— Safety feature installation discount

You may even be able to reduce the cost of your auto insurance by taking a driver’s education course or participating in various programs that the insurance company offers. When purchasing auto insurance, be sure to ask the company if there are any discounts that you may qualify for that will reduce the overall cost of your insurance coverage.

How to Choose an Auto Insurance Company?

Choosing an auto insurance company is somewhat subjective. The best company for another person may or may not be the ideal choice for you. There are numerous different insurance companies and each has its own unique set of benefits and drawbacks. Here are a few things to consider:


Do a quick check on any company’s background before choosing it. You’ll probably recognize some of the big names like Geico or Allstate, but some smaller independent companies exist and it’s smart to research them before choosing a company. Most companies available through an online quote site will be filtered for legitimacy, but sometimes you may find a scam artist.

Cost of Premiums

How much does the insurance cost, and is that figure within your budget? If you cannot afford the coverage that you need, you cannot maintain that insurance company. At the same time, if one insurer is substantially cheaper than all the others, there may be a reason for it. It may help to do more research.

Do you want an Agent?

Some companies sell policies through agencies, while others rely on direct sales over the phone or through a website. Some customers prefer being able to maintain their own policies online, while others like having a personal contact to go to for questions or concerns. Many companies offer both options, but some do not, so it’s important to choose a company that will.

Customer Service

If a company has terrible customer service, you won’t be satisfied with your insurance. Try to talk to at least a couple of representatives from the company before you decide if you want to purchase the insurance or not. Call the customer service line and see how long hold times are, whether or not the customer service representatives are friendly and whether you feel welcomed and appreciated. If you have an agent, make sure you trust your agent enough to maintain a business relationship.

You can also ask friends and family members for suggestions. Most people will have positive and negative experiences with insurance companies that they’ll be happy to share. You can also read reviews of various insurance companies online; you may need to sort through a lot of conflicting information, but after reading several reviews you can get a good idea of what a company is like and if there are any major over-arching problems that customers there face.

Shopping for auto insurance is easy when you can compare quotes online. By comparison shopping between multiple insurers, you can be sure that you’re getting the best deal on the coverage that you need. Once you’ve found a company that you like, you can discuss your needs with them to ensure that you are a good match before you finalize the purchase of your insurance.