8 things about car insurance every driver needs to know

Understanding your car insurance: What you need to know to make smart choices

Shopping for car insurance is easier when you know what you want and why you need it. That means understanding what affects rates, like your driving record and the car you choose, what coverage is more costly and why, and how to avoid mistakes leading to overpaying, like letting your coverage lapse.

Here are eight facts about auto insurance that you need to know to buy the right coverage without overpaying.

1. It doesn't cost as much as you think to buy more coverage

Buying more coverage doesn't cost as much as you'd think, with the difference between state minimum liability coverage and 50/100/50 limits (which may be double the coverage in some states) averaging only $7 a month more. Full coverage insurance gets cheaper as your car gets older and depreciates.

Liability insurance It doesn't cost that much to increase your liability limits, and it could make a huge difference in an at-fault accident; on average, it costs only $7 a month to go from state minimum coverage to 50/100/50 limits, double what many states require.
Full coverage insurance, which includes comprehensive coverage and collision coverage, is the most expensive option, but if you have a lower-value vehicle it may be cheaper than you think. That’s because your insurance company will have to pay out the actual cash value on a comprehensive or collision claim.
Uninsured motorist coverage is generally very affordable, costing about $199 a year, and protects you in an accident with an uninsured driver.
If you live in a no-fault state, you might want to consider increasing your personal injury protection and medical expenses coverage. It's generally cheap and adds a lot of extra protection.

2. There are a lot of factors that affect car insurance rates

The factors that affect car insurance rates include age, gender and credit in most states, and in all other states your location, vehicle and driving history will all impact your rates.

Age (and years of experience). A handful of states don't allow the use of age as a rating factor, but they can still use years of driving experience.
Gender (at least when you're young). Again, gender isn't allowed as a rating factor in a few states, but where it is, the impact lessens with age. Male teens pay the highest rates.
Location (down to the ZIP code). Factors about where you live that impact rates include theft rates, weather, insurance regulations and crash statistics.
Credit history (your insurance score is related to your FICO score). There are a few states where this isn't allowed, but in most states your credit history affects car insurance because it's statistically correlated with the likelihood of filing a claim.
You vehicle (year, make and model). Everything from the age of your vehicle to how it scores on crash tests affect how much you pay for car insurance.

3. The right car insurance company is personal (there's no one best pick)

Because each insurance company uses its own formula to assess risk and decide what you pay for coverage, the right insurance company for you may be very different from someone else, even in your same ZIP code. Each carrierAn insurance carrier is the company that provides your car insurance policy and pays claims. determines how it will weigh each risk factor, so one carrier may offer a much lower rate to a driver with a ticket.

"Auto insurance is a highly competitive business and one of the most effective ways to reduce insurance costs is simply to shop around," says Jeanne Salvatore, senior vice president of the Insurance Information Institute. "Drivers should look for an insurance company that will provide a good price along with excellent service."

The best plan is to decide what coverages and options you need and comparison shop so you can find cheap auto insurance that still provides sufficient coverage.

4. If you let your policy lapse, you'll pay more in the long run

If you have allowed your insurance to lapse, insurers will view you as a bigger risk, and they'll charge you more; the average increase is 11%. Avoid a lapse by keeping a car insurance policy in place at all times if you own a car.

Always have the new coverage in place before you switch car insurance companies.
If you won’t be driving for a while, consider keeping some coverage in place to prevent a lapse.
If you're having trouble affording your car insurance, call your insurer for payment options or find a cheaper policy.

5. Higher deductibles save you money in the long run

Choosing higher deductibles means you pay more if you file a claimAn insurance claim is a request you make to your insurance company for coverage after your car is damaged or you have an accident. You can file a claim online, by phone, or in writing., but it also means you pay less in premiums. The average savings for switching from a $500 deductibleThe deductible is the amount you pay out of pocket for a covered loss when you file a claim. to a $1,000 deductible is $323 a year. If you don't need to file a claim, that money stays in your pocket.

Here's an example:

Let's say you choose a $1,000 deductible and your monthly rate goes down by $30. You save $360 a year. In three years, you will have saved more than it would cost to pay the deductible. If you don't have to file a claim in that time, you can have the deductible amount set aside. And, if you don't file a claim for several more years, that's money you could spend on something else.

6. Car insurance discounts can make a big difference

Most insurance companies offer auto insurance discounts for having a safe driving record, safety and security features on your vehicle and how you manage your policy and payments, like paperless billing. Discounts can save you as much as 30%.

Common discounts include:

A safe driving record
Car safety features
Anti-theft devices
Electronic payments
Payment in full up front

Make sure you're getting all of the discounts you qualify for; they can result in savings of 30% or more.

7. You should carry only the car insurance coverage you need to save money

There's no reason to pay for coverage you don't need; you can save money by dropping comprehensive and collision if your car is paid off and low-value, or by dropping roadside assistance or rental reimbursement if you don't need them. For example:

If you have an older car that isn't worth much and you own it outright, you probably don't need comprehensive and collision coverage.
If you have a second car, you may not need to carry rental reimbursement coverage.
If you are a AAA member, you don't need to pay for roadside assistance on your car insurance policy.

A car insurance coverage calculator can help you decide what coverage you really need and what you can safely drop.

8. The car you drive will affect your auto insurance rates

The car you drive has a big impact on your insurance, with the cheapest cars to insure in 2026 being the Honda CR-V and the Honda HR-V, both costing an average of $161 a month. Higher-value vehicles, particularly luxury vehicles, cost a lot more; the Maserati Quattroporte is the most expensive to insure at $591.

If the car you drive is expensive to repair, the company will have to pay more if you get in an accident. Conversely, if your car is extremely safe and protects occupants well, the risk of serious injuries is reduced. If your car model is generally less likely to be stolen, your car insurance company is less likely to have to pay to replace it.

Get quotes for the car models you are considering when shopping so you'll know before you buy how it will impact your budget.

It's important to have car insurance, but you don't have to overpay

You need car insurance because, in all states but New Hampshire, it's the law. But beyond that, it's important to have car insurance to protect yourself financially. If you cause an accident, you are responsible for the cost of injuries and damage (even in New Hampshire), and without insurance you will have to pay for everything out of pocket.

And unless you can afford to replace or repair your car, you need full coverage to protect that investment. Furthermore, your lender will required it.

That doesn't mean you should overpay. Armed with the facts about car insurance costs, you can shop smart and get covered at the best price.

Helpful auto insurance tools and calculators