Whether you’re looking to switch insurers or this is your first time picking out a policy, our picks for best auto insurance companies offer all the coverage you need.
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Car Insurance Guide
In this section, you will learn what auto insurance covers, the types of coverage most companies offer and what can raise (or lower) your monthly premium.
We also include a step-by-step guide on buying car insurance and explain why car insurance is worth your money.
How does car insurance work?
Auto insurance helps you cover losses stemming from theft, collision and liability involving your vehicle. In simple terms, you pay premiums to an insurer, and it pays for any losses as stipulated in your policy, which generally includes damage to other vehicles and injury to the persons involved.
These policies always feature a deductible, that is, an amount you must pay out of pocket before the insurer covers the rest. These can range from $250 all the way to $2,000. Policies with higher deductibles will cost less than those with lower deductibles because you’ll assume more of the cost of repair or replacement in the event of an incident.
Car insurance does not typically cover property within your vehicle, however. For example, if someone breaks into your car and steals your laptop, the insurer will pay to replace the window and any other damage done to the car, but not the computer. In order to cover that, you would need homeowners or renters insurance.
Auto insurance is regulated at the state level, so your policy’s minimum liability limits will depend on local laws. Except for New Hampshire and Virginia, all other states require drivers to buy car insurance or pay some sort of fee if uninsured.
Types of car insurance coverage
There are seven standard components of auto insurance coverage:
- Liability insurance includes property damage and bodily injury liability; the latter covers medical expenses to others stemming from an at-fault accident.
- Uninsured/underinsured motorist coverage covers medical bills and repairs if you’re in an accident caused by another driver with little or no insurance.
- Comprehensive coverage covers repairs if your vehicle is damaged by something other than another vehicle (including hail, fire, floods, theft and vandalism).
- Collision coverage covers repair costs to your vehicle if you're involved in a car accident that is deemed to be your fault.
- Medical payments coverage covers medical expenses if you or your passengers are injured in an accident.
- Personal injury protection (PIP), also known as no-fault insurance, covers medical bills, loss of wages and funeral costs for you or your passengers if you're in an accident, regardless of who is at fault.
- Guaranteed asset protection (GAP), supplements your car insurance when you owe more on the car than its cash value. This would typically not be covered under a regular policy.
In addition to these, optional insurance riders can give you additional coverage such as roadside assistance, glass replacement and rental reimbursement at an extra cost.
What does full coverage car insurance cover?
Full coverage auto insurance refers to a combination of liability, collision and comprehensive coverage. These coverage options financially protect drivers by reimbursing them for damages to their vehicle, injuries to passengers, and any damages to other cars and their occupants.
How much is car insurance?
Car insurance costs $1,176 on average, according to The National Association of Insurance Commissioners (NAIC)’s most recent Auto Insurance Database Report. However, this can vary greatly depending on a wide range of factors. In fact, the NAIC explicitly mentions that state-to-state comparisons are difficult to make because of the high degree of variability on insurance requirements and other factors.
Common factors that increase premiums
While your driving record and the type of car you drive influence your premium, there are other factors that affect what you pay for car insurance. Broadly speaking, the higher the risk you seem to present for an insurer, the higher the premium will be.
What drives up car insurance premiums?
Here are some of the factors that will determine your premium.
- Car usage: If you don’t drive often, there are fewer chances you’ll be involved in an accident. The opposite is also true; the more you drive, the more likely the insurance company has to pay out a claim, which leads to higher premiums.
- Place of residence: Where you live influences your car insurance premium. Generally, metropolitan areas like New York City, for instance, have higher vehicle theft and vandalism rates than rural neighborhoods, which means a higher risk.
- Age: Drivers under the age of 25 usually pay higher premiums because insurers see inexperience as a contributing factor in accidents. Teenagers, therefore, are considered high-risk drivers and will often have to pay the highest premiums.
- Gender: Statistically speaking, women are involved in fewer car accidents than men, resulting in lower premiums.
- Marital status: Insurers consider married drivers as safer than single drivers.
- Commute: Insurers ask for mileage information, such as how many miles you drive a year, because longer commutes increase your risk of being in an accident. Some companies have specific guidelines to determine whether your car is what’s known as a pleasure vehicle (around 7,500 a year or 20 miles a day), and offer lower rates.
- Homeowner status: Generally speaking, insurers regard homeowners as more financially stable, and thus less of a risk, than renters.
- Owning luxury or sports vehicles: These cars cost more to repair, have higher vehicle theft rates and plenty of horsepower, which makes them costlier to insure.
- Accidents or tickets: These can hike up your payments for three years or longer. Having a DUI violation on your record can also drive your rate up.
- Credit score: While some states have banned the practice, many states still let insurers use credit-based insurance scores to price policies. Statistical data reveals that drivers with poor credit are more likely to file insurance claims.
How to lower your car insurance premium
There are things you can do to lower the cost of your car insurance. You might already know about bundling and discounts, but there are other things you can do to help offset the high cost of insurance.
Bundle insurance policies
On average, bundling can save you 8% on your combined premiums. Consider one of our best homeowners insurance or renters insurance providers if you're looking to bundle auto and home.
Increase your deductible
The deductible is the portion of damages you’ll have to pay out of pocket before the insurance company pays the rest. Increasing your deductible can reduce your premium payments into more affordable auto insurance rates. This may be a worthwhile gamble, especially for infrequent drivers.
Review your policy regularly
Reassessing your current policy annually before renewal, or whenever you make life changes that affect who is driving your car, can ensure you’re getting the type and level of coverage you need and can afford.
Apply for discounts
Companies offer discounts to policyholders that maintain a clean driving record and drive vehicles with good safety features.
Although discounts vary from one lender to the next, they often include:
- Bundling policies with the same company
- Insuring multiple vehicles
- Taking a drivers education course
- Automatic and paperless payments
- A higher deductible
- Maintaining continuous coverage
- Safe driving
- Student driver with good grades
- Low annual mileage
- Students away at college
- Vehicle safety features
Reduce coverage on old cars
You can reduce your premium by dropping collision or comprehensive coverage on vehicles that are 10 years or older. Similarly, you might consider dropping collision coverage on vehicles you don't use or have in storage.
Consider usage-based insurance
Usage-based insurance (UBI) options take into account your current driving habits to establish your premium.
For example, pay-per-mile insurance can help infrequent or short-distance drivers save 20% to 40%, while pay-how-you-drive insurance could help good drivers save up to 40%, plus a discount for signing up.
Usage-based insurance options that measure how fast you drive, how quickly you turn and how abruptly you break could end up costing you more if you don't drive safely.
Shop for rates
Shopping around and comparing price quotes from at least three different insurance providers can help you get the cheapest car insurance rate, without sacrificing important coverage. Using a car insurance comparison tool can help match you with a provider that offers the best car insurance policy for your vehicle.
You can get rate quotes directly from insurance companies online or over the phone. Some state insurance commissioners also provide information on average car insurance prices in your state.
Besides average rates, consider available discounts, coverage limits and deductible options when shopping for coverage. If you don’t know where to start, an independent insurance agent or broker could help you narrow down your choices.
If you want to read more about savings opportunities with online insurers, read our guide to the best cheap car insurance companies.
Finally, check out our article on how to lower your car insurance premiums for more ways to save on auto policies.
How to get car insurance
Whether you’re getting car insurance because you just bought your first car or your current insurance contract is nearing the end of its term, it’s a good idea to review the steps for buying car insurance. These are:
- Gather your personal and vehicle information (driver's license, vehicle registration and a copy of your existing insurance declaration page if the vehicle is already insured).
- Get quotes from several providers (we recommend between 3 to 5)
- Compare the premiums, types of coverage and limits.
- Read customer reviews on the providers you’re considering to determine which is the best for your location.
- Buy your new insurance policy (and cancel your old one).
Read our article on How to Buy Car Insurance for detailed information on what you need to know before signing on the dotted line.
Is car insurance worth it?
Car insurance is mandatory in all states with the exception of Virginia and New Hampshire, so most auto owners don’t have much of a choice in whether to insure their vehicle.
Since it's mandatory, driving while uninsured is considered a misdemeanor and will result in a fine of anywhere between $50 to $1,500, depending on your location. In some states, it can even result in jail time of up to five years. Given that the average premium is $1,190, it’s easy to see how it’s definitely worth it.
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How We Chose the Best Car Insurance Companies
The methodology we used to find the companies that offer the best auto insurance out there, we vetted 23 insurers, all of which were featured on the NAIC’s 2021 Property/Casualty Market Share report for Private Passenger Auto as well as J.D. Power’s 2021 U.S. Auto Claims Satisfaction Study.
We only considered companies with relatively few complaints involving their private passenger policies, as reported by the National Association of Insurance Commissioners (NAIC).
We also prioritized nationwide auto insurers with superior financial strength ratings, ample discounts, technology integration through telematics programs and above-average customer satisfaction scores from J.D. Power.
Finally, we looked at CRASH Network’s most recent report which rates insurers based on feedback from 1,100 automotive collision repair professionals, taking into account payment practices and policy handling.
In short, we focused on the following factors:
- Financial stability: An insurance company’s financial stability can be gauged by its AM Best credit rating. We chose insurers with an A rating or better.
- Discounts: Auto insurance policies that cover anything beyond basic liability can be costly. We picked companies who offered plenty of bundling options and generous discounts.
- Technology: Most of the companies on our list use automation to provide auto insurance quotes in a matter of minutes and have a 24/7 claims process. Car insurance companies that allow policyholders to file car insurance claims via apps ranked higher on our list.
- Customer experience: Filing a claim can undoubtedly be a hassle. To help you minimize the stress, we chose companies with high customer satisfaction ratings as reported on J.D. Power's 2021 U.S. Auto Claims Satisfaction Study.
How much is car insurance a month?
Per the NAIC's most recent Auto Insurance Database Report, the national combined average cost of car insurance is $1,204 a year, which is about $100 a month.
Keep in mind however that the cost of car insurance will ultimately depend on a number of factors such as your age, location, gender, driving experience and annual mileage.
What is liability car insurance?
Liability car insurance covers drivers in the event of an at-fault accident and includes bodily injury liability and property damage coverage. In most states, this type of insurance is a requirement.
Bodily injury liability protects drivers if they're at fault for an accident by covering the medical expenses of the other driver or their passengers.
Property damage liability, on the other hand, protects at-fault drivers by covering the cost of the other person's property repairs.
What is comprehensive car insurance?
Although comprehensive auto insurance sounds like it provides coverage for everything, the truth is the name can be misleading and it is often confused with "full coverage."
However, comprehensive insurance only covers damage to your car that results from something other than a vehicle, such as theft, damage from fire, hail or vandalism.
The best car insurance companies provide what's called "full coverage," which refers to the combination of collision and comprehensive coverage. Although these two policies are optional, cars with both policies are considered "fully insured."
How much car insurance do I need?
In addition to state minimum coverage, you should get additional liability insurance for bodily injury and property damage to protect your assets in the event of an accident. The same goes for Uninsured/underinsured motorist insurance.
As for collision and comprehensive insurance, these cover the cost of damage to your car so you should focus on the deductible you want to pay. A high deductible will mean a low premium, whereas with a low deductible you'll pay a higher premium.
How much is car insurance for a 16 year old?
What is the best car insurance company?
The best car insurance company for you will be the one that best fits your needs and budget. That being said, Money's top pick for the best coverage package is Amica Mutual, which also garnered the highest overall customer satisfaction rating with J.D. Power.
We also consider Progressive to have the best offerings for customizable premiums and State Farm to have the best policies for younger drivers.