Car Insurance FAQ: Plain-English Answers to Common Questions

Most questions about car insurance come back to a few basic ideas: what each coverage pays for, when you share in the cost through a deductible, who is covered when they drive, and why your price is what it is. This page answers the questions drivers ask most, in plain English, using state insurance regulators as the source. Where the answer depends on your state, it says so, because car insurance is regulated state by state.

What does liability insurance pay for?

Liability is the coverage every state's requirements are built around. The Texas Department of Insurance describes it as paying to repair or replace the other driver's car or other damaged property, and paying other people's medical bills, when you are at fault in an accident. It covers harm you do to others. It does not pay to repair your own car.

How much coverage does the law require?

That depends on where you live, and the numbers vary a great deal. Texas requires at least $30,000 of injury coverage per person, $60,000 per accident, and $25,000 for property damage, which the Texas Department of Insurance refers to as 30/60/25 coverage. New York's minimum liability limits are $25,000, $50,000, and $10,000 according to the state's Department of Financial Services, and New York also requires no-fault and uninsured motorist coverage. Washington requires at least $10,000 of property damage liability. A state minimum is a legal floor, not a suggestion of what you should carry.

What do collision and comprehensive cover?

These are the coverages that pay for your own vehicle. The Washington Office of the Insurance Commissioner describes collision as paying for damage to your car when it collides with another car or an object or rolls over, and comprehensive as reimbursing you for theft or for damage caused by something other than a collision. Together they are what most people mean by full coverage, and lenders and leasing companies usually require both.

When do I pay a deductible?

A deductible is the share of a claim you cover yourself. According to the Texas Department of Insurance, you pay one on collision, comprehensive, and uninsured or underinsured motorist claims, and you do not pay a deductible on a claim against another driver's insurance company. In a repair claim, the insurer subtracts the deductible from its payment and you settle that amount directly with the body shop.

Does my insurance follow me into someone else's car?

Often, for liability. The Washington Office of the Insurance Commissioner notes that bodily injury liability coverage also protects you and the family members listed on your policy when you drive someone else's car. Damage to the borrowed car is a separate matter and normally goes through the owner's policy first. Rules vary by state and by policy, so read yours before lending or borrowing a car on a regular basis.

What determines my price?

Every insurer assesses risk in its own way, but the Texas Department of Insurance lists the factors most companies look at:

• Your driving record and claims history
• Where you keep the car
• The type of car you drive
• How you use the car
• Your credit score

Because each company weights those factors differently, the same driver can be offered very different prices. New York's Department of Financial Services says rates can vary considerably among insurers and suggests looking past price to claims handling, reliability, and service. Having identical coverage priced by your current insurer and one or two others is the surest way to find out where you stand.

What if my car is totaled?

When an insurer declares your car a total loss, the Texas Department of Insurance says it pays the car's value less depreciation, not the cost of a new car. If you still owe money on the loan, that payment may fall short of the balance. Gap insurance, which dealers and lenders typically offer, exists to fill that difference.

What about an SR-22, or a tight budget?

An SR-22 is not a separate type of insurance. It is a certificate your insurer files with the state to show you carry coverage after certain violations. How long you must keep one depends on your state and the violation, so the rules for an SR-22 in Utah, for example, differ from those elsewhere.

For drivers on a tight budget, a handful of states run their own programs, and a separate guide to low-income car insurance programs explains what exists and who qualifies.

The bottom line

Liability pays for harm you cause others, collision and comprehensive pay for your own car, deductibles apply mainly to claims on your own policy, and prices differ between insurers more than most people expect. Whenever a question turns on your state, your state insurance department is the authority, and most publish consumer guides and run hotlines that are worth using.

Still have a question this page did not answer? Lanewise Auto offers plain-English guidance on coverage, limits, and deductibles. Tell us what you want help with, call (888) 905-2130, or email contact@lanewiseauto.com. Nothing to buy, no obligation.