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How Much Auto Insurance Do I Really Need?

Figuring out just how much car insurance you really need can be a challenge.

At minimum, you’ll want to make sure you have enough car insurance to meet the requirements of your state or the lender who’s financing your car. Beyond that, there’s coverage you might want to add to those required amounts. These policies will help ensure that you’re adequately protecting yourself, your family, and your assets. And then there’s the coverage that actually fits within your budget.

We know it may not be a fun topic to think about what would happen if you were involved in a car accident, but given that well over five million drivers are involved in one every year, it’s a priority to get coverage. Finding a car insurance policy that checks all those boxes may take a bit of research — and possibly some compromise. Here are some of the most important factors to consider.

How Much Car Insurance Is Required by Your State?

A good launching pad for researching how much car insurance you need is to check what your state requires by law. Only two states do not require a car owner to carry some amount of insurance: New Hampshire and Virginia. If you live elsewhere, find out how much and what types of coverage a policyholder must have. Typically, there are options available. Once you’ve found this information, consider it the bare minimum to purchase.

Types of Car Insurance Coverage

As you dig into the topic, you’ll hear a lot of different terms used to describe the various kinds of coverage that are offered. Let’s take a closer look here:

Liability Coverage

Most states require drivers to carry auto liability insurance. What it does: It helps pay the cost of damages to others involved in an accident if it’s determined you were at fault. Let’s say you were to cause an accident, whether that means rear-ending a car or backing into your neighbor’s fence while pulling out of a shared driveway. Your insurance would pay for the other driver’s repairs, medical bills, lost wages, and other related costs. What it wouldn’t pay for: Your costs or the costs relating to passengers in your car.

Each state sets its own minimum requirements for this liability coverage. For example, in California, drivers must carry at least $15,000 in coverage for the injury/death of one person, $30,000 for injury/death to more than one person, and $5,000 for damage to property. The shorthand for this, in terms of shopping for car insurance, would be that you have 15/30/5 coverage.

But in Maryland, the amounts are much higher: $30,000 in bodily injury liability per person, $60,000 in bodily injury liability per accident (if there are multiple injuries), and $15,000 in property damage liability per accident. (That would be 30/60/15 coverage.)

And some may want to go beyond what the state requires. If you carry $15,000 worth of property damage liability coverage, for example, and you get in an accident that causes $25,000 worth of damage to someone else’s car, your insurance company will only pay the $15,000 policy limit. You’d be expected to come up with the remaining $10,000.

Generally, recommendations suggest you purchase as much as you could lose if a lawsuit were filed against you and you lost. In California, some say that you may want 250/500/100 in coverage – much more than the 15/30/5 mandated by law.

Recommended: What Does Liability Auto Insurance Typically Cover?

Collision Coverage

Collision insurance pays to repair or replace your vehicle if it’s damaged in an accident with another car that was your fault. It will also help pay for repairs if, say, you hit an inanimate object, be it a fence, tree, guardrail, building, dumpster, pothole, or anything else.

If you have a car loan or lease, you’ll need collision coverage. If, however, your car is paid off or isn’t worth much, you may decide you don’t need collision coverage. For instance, if your car is old and its value is quite low, is it worth paying for this kind of premium, which can certainly add up over the years?

But if you depend on your vehicle and you can’t afford to replace it, or you can’t afford to pay out of pocket for damages, collision coverage may well be worth having. You also may want to keep your personal risk tolerance in mind when considering collision coverage. If the cost of even a minor fender bender makes you nervous, this kind of insurance could help you feel a lot more comfortable when you get behind the wheel.

Comprehensive Coverage

When you drive, you know that unexpected events happen. A pebble can hit your windshield as you drive on the highway and cause a crack. A tree branch can go flying in a storm and put a major dent in your car. Comprehensive insurance covers these events and more. It’s a policy that pays for physical damage to your car that doesn’t happen in a collision, including theft, vandalism, a broken window, weather damage, or even hitting a deer or some other animal.

If you finance or lease your car, your lender will probably require it. But even if you own your car outright, you may want to consider comprehensive coverage. The cost of including it in your policy could be relatively small compared to what it would take to repair or replace your car if it’s damaged or stolen.

Personal Injury Protection and Medical Payments Coverage

Several states require Personal Injury Protection (PIP) or Medical Payments coverage (MedPay for short). This is typically part of the state’s no-fault auto insurance laws, which say that if a policyholder is injured in a crash, that person’s insurance pays for their medical care, regardless of who caused the accident.

While these two types of medical coverage help pay for medical expenses that you and any passengers in your car sustain in an accident, there is a difference. MedPay pays for medical expenses only, and is often available only in small increments, up to $5,000. PIP may also cover loss of income, funeral expenses, and other costs. The amount required varies hugely depending on where you live. For instance, in Utah, it’s $3,000 per person coverage; in New York, it’s $50,000 per person.

Uninsured/Underinsured Motorist Coverage

Despite the fact that the vast majority of states require car insurance, there are lots of uninsured drivers out there. The number of them on the road can range from one in eight to one in five! In addition, there are people on the road who have the bare minimum of coverage, which may not be adequate when accidents occur.

For these reasons, you may want to take out Uninsured Motorist (UM) or Underinsured Motorist (UIM) coverage Many states require these policies, which are designed to protect you if you’re in an accident with a motorist who has little or no insurance. In states that require this type of coverage, the minimums are generally set at about $25,000 per person and $50,000 per accident. But the exact amounts vary from state to state. And you may choose to carry this coverage even if it isn’t required in your state.

If you’re seriously injured in an accident caused by a driver who doesn’t carry liability car insurance, uninsured motorist coverage could help you and your passengers avoid paying some scary-high medical bills.

Let’s take a quick look at some terms you may see if you shop for this kind of coverage:

Uninsured motorist bodily injury coverage (UMBI)

This kind of policy covers your medical bills, lost wages, as well as pain and suffering after an accident when the other driver is not insured. Additionally, it provides coverage for those costs if any passengers were in your vehicle when the accident occurred.

Uninsured motorist property damage coverage (UMPD)

With this kind of policy, your insurer will pay for repairs to your car plus other property if someone who doesn’t carry insurance is responsible for an accident. Some policies in certain states may also provide coverage if you’re involved in a hit-and-run incident.

Underinsured motorist coverage (UIM)

Let’s say you and a passenger get into an accident that’s the other driver’s fault, and the medical bills total $20,000…but the person responsible is only insured for $15,000. A UIM policy would step in and pay the difference to help you out.

Recommended: How to Pay for Medical Bills You Can’t Afford

Guaranteed Auto Protection (GAP) Insurance

Here’s another kind of insurance to consider: GAP insurance, which recognizes that cars can quickly depreciate in value and helps you manage that. For example, if your car were stolen or totaled in an accident (though we hope that never happens), GAP coverage will pay the difference between what its actual value is (say, $5,000) and what you still owe on your auto loan or lease (for example, $10,000).

GAP insurance is optional and generally requires that you add it onto a full coverage auto insurance policy. In some instances, this coverage may be rolled in with an auto lease.

Non-Owner Coverage

You may think you don’t need car insurance if you don’t own a car. (Maybe you take public transportation or ride your bike most of the time.) But if you still plan to drive occasionally — when you travel and rent a car, for example, or you sometimes borrow a friend’s car — a non-owner policy can provide liability coverage for any bodily injury or property damage you cause.

The insurance policy on the car you’re driving will probably be considered the “primary” coverage, which means it will kick in first. Then your non-owner policy could be used for costs that are over the limits of the primary policy.

Rideshare Coverage?

If you drive for a ridesharing service like Uber or Lyft, you may want to consider adding rideshare coverage to your personal automobile policy.

Rideshare companies are required by law in some states to provide commercial insurance for drivers who are using their personal cars — but that coverage could be limited. (For example, it may not cover the time when a driver is waiting for a ride request but hasn’t actually picked up a passenger.) This coverage could fill the gaps between your personal insurance policy and any insurance provided by the ridesharing service. Whether you are behind the wheel occasionally or full-time, it’s probably worth exploring.

Recommended: Which Insurance Types Do You Really Need?

Why You Need Car Insurance

Car insurance is an important layer of protection; it helps safeguard your financial wellbeing in the case of an accident. Given how much most Americans drive – around 14,000 miles or more a year – it’s likely a valuable investment.

What If You Don’t Have Car Insurance?

There can be serious penalties for driving a car without valid insurance. Let’s take a look at a few scenarios: If an officer pulls you over and you can’t prove you have the minimum coverage required in your state, you could get a ticket. Your license could be suspended. What’s more, the officer might have your car towed away from the scene.

That’s a relatively minor inconvenience. Consider that if you’re in a car accident, the penalties for driving without insurance could be far more significant. If you caused the incident, you may be held personally responsible for paying any damages to others involved; one recent report found the average bodily injury claim totaled more than $20,000. And even if you didn’t cause the accident, the amount you can recover from the at-fault driver may be restricted.

If that convinces you of the value of auto insurance (and we hope it does), you may see big discrepancies in the amounts of coverage. For example, there may be a tremendous difference between the amount you have to have, how much you think you should have to feel secure, and what you can afford.

That’s why it can help to know what your state and your lender might require as a starting point. Keep in mind that having car insurance isn’t just about getting your car — or someone else’s — fixed or replaced. (Although that — and the fact that it’s illegal to not have insurance — may be motivation enough to at least get basic coverage.)

Having the appropriate levels of coverage can also help you protect all your other assets — your home, business, savings, etc. — if you’re in a catastrophic accident and the other parties involved decide to sue you to pay their bills. And let us emphasize: Your state’s minimum liability requirements may not be enough to cover those costs — and you could end up paying the difference out of pocket, which could have a huge impact on your finances.

Finding the Best Car Insurance for You

If you’re convinced of the value of getting car insurance, the next step is to decide on the right policy for you. Often, the question on people’s minds is, “How can I balance getting the right coverage at an affordable price?”

What’s the Right Amount of Car Insurance Coverage for You?

To get a ballpark figure in mind, consider these numbers:

Type of Coverage

Basic

Good

Excellent
Liability Your state’s minimum •   $100,000/person for bodily injury liability

◦   $300,000/ accident for bodily injury liability

◦   $100,000 for property damage

•   $250,000/person for bodily injury liability

◦   $500,000/ accident for bodily injury liability

◦   $250,000 for property damage

Collision Not required Recommended Recommended
Comprehensive Not required Recommended Recommended
Personal Injury Protection (PIP) Your state’s minimum $40,000 Your state’s maximum
Uninsured and Underinsured Motorist (UM, UIM) Coverage Your state’s minimum •   $100,000/person for bodily injury liability

◦   $300,000/ accident for bodily injury liability

•   $250,000/person for bodily injury liability

◦   $500,000/ accident for bodily injury liability

Here are some points to consider that will help you get the best policy for you.

Designing a Policy that Works for You

Your insurance company will probably offer several coverage options, and you may be able to build a policy around what you need based on your lifestyle. For example, if your car is paid off and worth only a few thousand dollars, you may choose to opt out of collision insurance in order to get more liability coverage.

Choosing a Deductible

Your deductible is the amount you might have to pay out personally before your insurance company begins paying any damages. Let’s say your car insurance policy has a $500 deductible, and you hit a guardrail on the highway when you swerve to avoid a collision. If the damage was $2,500, you would pay the $500 deductible and your insurer would pay for the other $2,000 in repairs. (Worth noting: You may have two different deductibles when you hold an auto insurance policy — one for comprehensive coverage and one for collision.)

Just as with your health insurance, your insurance company will likely offer you a lower premium if you choose to go with a higher deductible ($1,000 instead of $500, for example). Also, you typically pay this deductible every time you file a claim. It’s not like the situation with some health insurance policies, in which you satisfy a deductible once a year.

If you have savings or some other source of money you could use for repairs, you might be able to go with a higher deductible and save on your insurance payments. But if you aren’t sure where the money would come from in a pinch, it may make sense to opt for a lower deductible.

Recommended: Different Types of Insurance Deductibles

Checking the Costs of Added Coverage

As you assess how much coverage to get, here’s some good news: Buying twice as much liability coverage won’t necessarily double the price of your premium. You may be able to manage more coverage than you think. Before settling for a bare-bones policy, it can help to check on what it might cost to increase your coverage. This information is often easily available online, via calculator tools, rather than by spending time on the phone with a salesperson.

Finding Discounts that Could Help You Save

Some insurers (including SoFi Protect) reward safe drivers or “good drivers” with lower premiums. If you have a clean driving record, free of accidents and claims, you are a low risk for your insurer and they may extend you a discount.

Another way to save: Bundling car and home insurance is another way to cut costs. Look for any discounts or packages that would help you save.

The Takeaway

Buying car insurance is an important step in protecting yourself in case of an accident or theft. It’s not just about repairing or replacing your vehicle. It’s also about ensuring that medical fees and lost wages are protected – and securing your assets if there were ever a lawsuit filed against you. These are potentially life-altering situations, so it’s worth spending a bit of time on the few key steps that will help you get the right coverage at the right price. It begins with knowing what your state or your car-loan lender requires. Then, you’ll review the different kinds of policies and premiums available. Put these pieces together, and you’ll find the insurance that best suits your needs and budget.

A Simple Way to Get Great Car Insurance

Feeling uncertain about how much auto insurance you really need or what kind of premium you might have to pay to get what you want? Check out SoFi Online Auto Insurance, which uses the Root mobile app to measure your driving habits. The better you drive, the more you can save.


Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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What Does Car Insurance Cover?

What Does Car Insurance Cover?

Should you get into a car accident and harm someone else or yourself with your car, your car insurance may cover the costs of medical bills. Depending on the coverage included in your policy, car insurance could also cover damage to your car while it’s parked, like if a large tree branch were to fall on it.

Ultimately, what your auto insurance will cover — and how much — depends on what type of car insurance you have and the amount of coverage you select. Read on to learn more about how exactly auto insurance works.

How Car Insurance Works

When you purchase car insurance, you can opt for different types of insurance and policy amounts. Think of it as one of those “create your own” burrito places where you can add different fillings to your burrito. Depending on the state in which you live, there are certain car insurance requirements you’ll need to meet — more about this later on.

Adding more types of insurance and higher coverage limits provides greater coverage, but it also raises your premiums. Having a lower deductible can also bump up your rates. On the other hand, a higher deductible can lower your rates. (A deductible is a common insurance term that means how much you would need to pay upfront before insurance coverage kicks in.)

Recommended: How Does Car Insurance Work?

Car Insurance Requirements

Most states require car insurance, with the type of insurance and minimum coverage amounts depending on the state.

The only two states that do not require car insurance are Virginia and New Hampshire. While auto insurance is not mandatory in New Hampshire, if you’re at fault in an accident, you would need to show that you have enough funds to meet the state’s motor vehicle financial responsibility requirements. In Virginia, if you don’t have the minimum coverage amounts for car insurance, you’ll need to pay a yearly uninsured motor vehicle fee of $500 on top of your regular registration fees.

If you’re not sure what the minimum requirements for car insurance are in your state, you can check your state’s DMV site. Keep in mind that while you can squeak by with the minimum coverage, how much car insurance you need varies. Depending on your situation, it may be a good idea to get more coverage.

Types of Car Insurance

When shopping for car insurance, there are six main types of car insurance to keep in mind.

Bodily Injury Liability

Should you get into a car accident and are found to be the one who caused the crash, bodily injury liability coverage can help cover medical bills and wages lost for taking time off of work because of bodily harm. It can also cover named drivers, such as family members on your policy or drivers who are using your car with your permission.

Bodily injury liability is typically must-have coverage. According to the Insurance Information Institute (III), the average claim for bodily injury was $20,235 in 2020. Having enough coverage could help protect your property, assets and home.

Collision

If you crash into another car or an object, or your car gets damaged from driving over a pothole, collision coverage can pay for the costs to repair any damages to your car. It can also cover damages should your car flip over. Once your deductible is paid, the coverage will kick in.

If the other driver is the one at fault, then typically a claim can be filed with their insurance company and they’ll cover the costs. In the case the other driver’s coverage amounts aren’t enough, and you don’t have uninsured motorist coverage (sometimes called underinsured coverage), then your own collision policy can step in.

If you’re taking out a loan and still paying off your car, lenders likely require you to have full coverage, which includes liability, collision, and comprehensive insurance, which we’ll go over next.

Recommended: How Much Does Insurance Go Up After an Accident?

Comprehensive

While collision coverage can cover the costs of damage during a car crash, comprehensive liability includes everything else — like a deer running into the front of your car, riots and vandalism, a tree branch falling on your car, a hail storm and natural disasters. Comprehensive coverage can also pay for a broken windshield (though whether it makes sense to file a claim depends on your policy and deductible). It can also cover theft, of either your entire car or a piece of your car, such as a hood ornament.

As mentioned before, if you’re still making payments on your car, you most likely are required to have both comprehensive and collision insurance in addition to liability coverage.

Personal Injury Protection (PIP)

Should you, the driver, or your passengers get harmed in a car accident, personal injury protection (PIP), also known as medical payments coverage, can help pay for medical bills, lost wages and sometimes funeral costs. It can cover these costs no matter who is at fault, hence why it’s sometimes called no-fault insurance.

Depending on your policy, PIP can also help pay for bodily harm should you get injured while walking or riding a scooter or a bike.

Property Damage

Like bodily injury liability, property damage coverage is also usually required in most states. Let’s say you or a named driver on your policy damages another vehicle or property, such as the side of a building. In these situations, property damage can reimburse the cost of repairs.

Uninsured or Underinsured Motorist

In the case of a hit-and-run, uninsured or underinsured motorist coverage can foot the bill for covered damages. Or, should someone who hits you not have adequate insurance, this type of policy can pay for any shortfalls.

Special Considerations When Choosing a Policy

Besides the standard types of policies, there are some additional considerations to keep in mind when it comes to choosing an auto insurance policy.

Roadside Assistance

While not a type of insurance, roadside assistance can come in handy should you get a flat tire or your battery dies while on the road. While you can usually attach this to your existing auto policy as an add-on, what exactly is covered might vary by carrier.

Outside of purchasing roadside assistance as an add-on to your car policy, you can also shop around for companies that offer roadside assistance as a standalone service.

New Car Replacement Coverage

If you have a new ride and your car gets totaled, new car replacement coverage can replace the vehicle in its entirety. This is usually available as an add-on if you purchased a policy with collision and comprehensive insurance.

Depending on the insurance company and carrier, this might cover cars that are no more than two years old. Plus, restrictions and limitations might differ.

Rental Reimbursement Coverage

If your car is getting repaired and those repairs are covered under a car insurance claim, a policy might include an add-on to cover the fees for getting a rental car or other transportation while your vehicle is in the shop. Whether you take public transit, rent a car or take a rideshare, what exactly is covered depends on your specific policy and limits.

Rideshare Coverage

If you’re a rideshare driver for a company like Uber or Lyft, you’ll need to meet the minimum coverage amounts for that particular company. Some insurance companies provide rideshare coverage in their policies. If not, you might need to get a rideshare endorsement or a separate rideshare insurance policy.

Car Rental Coverage

If you have liability and comprehensive coverage on your car, then that coverage can typically carry over to when you rent a car within the country. As mentioned before, depending on the particulars of the policy and car insurance company, this might not be applicable in every state, and the amount of coverage can also vary.

Recommended: Car Insurance Guide for New Drivers and 3 Ways to Save

What Does Car Insurance NOT Cover?

While auto insurance can cover a lot of things, it doesn’t cover normal wear and tear or routine maintenance. And unless it’s a rental car, it doesn’t provide coverage when you’re driving someone else’s car.

A policy also doesn’t pay for lost personal belongings in your car, such as air pods or gym gear. This could be covered by a renters or homeowners insurance policy.

At the end of the day, not all policies are alike nor are they created equally. It’s important to check to see what your policy will cover.

The Takeaway

There are six main types of insurance — bodily injury liability, collision, comprehensive, personal injury protection, property damage and uninsured or underinsured motorist coverage. But the type of coverage and limits required vary by state.

Not sure what type of car insurance you need and how much it could cost? To find a policy that meets your needs, it can be helpful to do some comparison shopping. Check out SoFi Protect, which helps you easily compare car insurance rates from top insurers.

Photo credit: iStock/tommaso79


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.

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How Does Car Insurance Work?

How Does Car Insurance Work?

Most people know that after an accident, they’ll likely need to use the car insurance they’ve been diligently paying for. Car insurance can protect you from financial liability that has the potential to be devastating.

Being protected by a car insurance policy that is appropriate for your needs — and your budget — is vital.

What Is Car Insurance?

A car insurance policy is an agreement between you and your insurance company. At regular intervals — typically once a month, every six months, or annually — you pay the cost of the policy. In return, the car insurance pays for damages that occur when an accident happens, whether that damage is to your car or someone else’s car. What and how much the insurance will pay depends on the type of car insurance coverage you purchase.

How Does a Car Insurance Deductible Work?

If the time comes to put in a claim, you’ll most likely have to pay a deductible first. The deductible for car insurance works in a similar way to that for medical insurance. It’s the amount of money you will pay out of pocket on a claim before your policy picks up the rest — up to the limit you agreed to.

If you sign up for a high deductible, then your policy payments will be lower. A policy with a $1,000 deductible will not cost as much every month as a policy with a lower deductible. But if you find you need to put in a big claim to have your car fixed, you’ll have to come up with that $1,000 up front. If that is too big a hit for your bank account, then you may want to consider a lower deductible.

Most deductibles range from $100 to $2,000.

Recommended: 5 Steps to Switching Your Car Insurance

Types Of Car Insurance Coverage Options

Car insurance coverage varies by type of coverage, amount of coverage, and amount of deductible. Some drivers may want to purchase specialty coverage that will be priced separately, for example, coverage for antique automobiles or vehicles driven for commercial purposes, or ride-share insurance.

Insurance companies will pay up to the limits of the policy, after any deductible.

Liability Coverage

A basic car insurance policy is liability coverage that will pay if there are bodily injuries to people in the other car or vehicular damage to the other car, and you are at fault.

Uninsured or Underinsured Motorist Coverage

Sometimes included in a liability policy package, but also available as a separate part of a policy, is uninsured or underinsured motorist coverage. If someone without their own liability insurance coverage hits your car, this type of insurance pays for your bodily injuries and physical damage to your car.

Emergency Road Service Coverage

If your car breaks down, your battery dies, you lock your keys in your car, or other types of emergencies that might leave you stranded, emergency road service coverage can be helpful to have. This type of coverage, sometimes called Roadside Assistance coverage, may pay for a tow truck, a locksmith, or even bringing gas to you so you can make it to the next gas station. This is generally very affordable coverage to add to a policy.

Comprehensive and Collision Coverage

Comprehensive insurance covers repairs to a car that is damaged — outside of an accident — or stolen. Damage could be things like vandalism, a broken windshield, a fallen tree on your car, or other occurrences out of your control.

Collision coverage will pay to repair or replace your car if it’s damaged in an accident with another car or even an object such as a fence or tree.

These two coverages are sometimes listed together as “comp and collision” on a policy, but they are available as separate purchases in most cases. Both may be required by a lender if you’re leasing a car or still paying on an auto loan. They’re the most common types of car insurance to include in a deductible.

Personal Injury Insurance

Personal injury insurance, or medical payments coverage, will pay for your and your passengers’ medical expenses after an accident, no matter which driver was at fault.

Gap Insurance

If you are still making auto loan payments or you’re leasing a car, gap insurance might be something to consider. This type of coverage will pay the difference between the amount the car insurance company pays and what you still owe on the purchase or lease in the case of a total loss after an accident.

Understanding car insurance terms will help you make a smart decision about what types and amounts of coverage to purchase.

Do You Need Car Insurance?

In most states, you must have at least some form of liability coverage. In fact, to legally register and drive your car, you’ll have to establish and maintain a minimum level of coverage.

New Hampshire and Virginia are two exceptions.

•   New Hampshire drivers are not required to carry any automobile insurance unless they have been convicted of driving while intoxicated, have had their driver’s license revoked, or were at fault in a car accident and were uninsured, among other stipulations.

•   Virginia drivers who choose not to carry liability insurance must pay an uninsured motor vehicle fee when they register and license their vehicle.

In all U.S. states, driving without at least minimum liability coverage may result in being fined and even losing your driver’s license.

How Much Car Insurance Do You Need?

After you’ve purchased liability coverage, other coverage may be optional. Older cars whose value is lower than the coverage costs, including any deductible, might just need liability coverage, instead of comprehensive and collision coverage.

Some things to consider when purchasing insurance are the value of your car, your driving history, how far and how often you drive the car, and how much you could afford to pay out of pocket if you are in an accident.

Recommended: How Much Auto Insurance Do I Really Need?

How Much Does Car Insurance Cost?

According to Bankrate.com, the average full-coverage car insurance policy costs $1,674 per year or about $139 a month. However, these averages vary widely by state. Michigan, Louisiana, Florida, and California reportedly have the most expensive car insurance policies.

Other factors that go into car insurance policy prices are what kind of driving record you have, your age and gender, and the type of car you’re insuring, among others. If you get a speeding ticket or you’re at fault in an accident, your insurance policy is most likely going to go up in cost.

Car insurance is highly competitive, so comparison shopping can be a wise move.

Recommended: How Much Does Insurance Go Up After an Accident?

How to File a Car Insurance Claim

It’s recommended that claim filing should happen as soon as possible after an accident. Call your insurance company and be ready to inform your insurer which vehicle was involved, who was driving, the exact location and time of the accident, the description of the damage, and the name and insurance of the other driver.

If the incident you report is covered, your insurer will pay, up to the policy limits, for the cost of the damage you caused, or the damage to your car, minus the deductible if you have one. Your insurer may pay you directly. Or payment may be made to the other driver or to the repair shop working on your car.

Some insurers request a copy of the police report filed on an accident. If you didn’t call the police at the scene, you can still go to the local police precinct to file a report.

Recommended: Car Insurance Guide for New Drivers and 3 Ways to Save

The Takeaway

Car insurance pays a claim when there are injuries to people and damages to a vehicle when an accident has occurred. Types of coverage vary from minimal liability coverage to more broad-spectrum comprehensive and collision coverage, in addition to some coverage for special situations.

Comparing rates for car insurance coverage is made easier with SoFi, powered by Gabi. Regardless of what type and how much coverage you decide you need, comparison shopping will help you get a competitive price.

Compare auto insurance rates today.

Photo credit: iStock/Melena-Nsk


Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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How Much Does Insurance Go Up After an Accident?

How Much Does Insurance Go Up After an Accident?

Those moments right after a car accident deliver some of the worst stress imaginable. You’re figuring out if anyone is hurt and how bad your car’s been damaged. And before too long you’re asking yourself this stomach-churning question:

“How much will my insurance go up after an accident?”

There are many factors at play: Who was at fault, how serious the injuries and damage, your driving record, what state you live in, and the policies of your chosen insurance company.

Understanding these factors and digging into the forces controlling car insurance rates can help you pursue the best options possible.

Why Do Rates Go Up After an Accident?

Auto insurance is a highly competitive business, and that competition plays a role in keeping rates low. But that also means that when an accident happens there can be quite a jump.

When you’ve had a car accident and you are at fault, your insurer now assumes you drive in a way that could cause an accident. That may sound unfair, but they are assuming a higher risk, and that is passed on to you in the form of a higher rate.

If you are found not at fault in the accident, your insurance rate may go up by a small percentage. California and Oklahoma are two states, however, that mandate insurance companies cannot raise insurance rates after an accident where the driver was not at fault.

This is yet another reason why it’s important to go over the policies carefully when making your choice. It’s smart to compare the rates among top insurers and even look at how much insurance increases after an accident with various insurers.

There is one bright spot in the insurance landscape when dealing with an accident. If your insurer offers and you elect to pay for accident forgiveness, your insurance rate will not go up after your first at-fault accident. Driving record and driving experience requirements must be met before this benefit is available.

Recommended: Auto Insurance Terms, Explained

Average Rate Increases by State

Experts say that after an at-fault accident, yes, your car insurance is likely to go up, with the average amount ranging between 38% and 53%.

In 19 states, average rates increased at least 50% after an at-fault accident, according to NerdWallet.

How much insurance goes up after an accident, on average, is dependent on the state in which you’re insured.

Average Car Insurance Rate Increase After an At-Fault Accident

State Average Rate Increase (%)
Alabama 34
Alaska 31
Arkansas 51
Arizona 34
California 74
Colorado 34
Connecticut 47
Delaware 28
District of Columbia 36
Florida 40
Georgia 45
Hawaii 39
Idaho 36
Iowa 44
Illinois 45
Indiana 47
Kansas 61
Kentucky 65
Louisiana 37
Maine 47
Maryland 45
Massachusetts 62
Michigan 50
Minnesota 36
Mississippi 44
Missouri 30
Montana 43
Nebraska 37
North Carolina 63
North Dakota 28
New Hampshire 34
New Jersey 65
New Mexico 34
New York 26
Nevada 36
Ohio 46
Oklahoma 40
Oregon 40
Pennsylvania 45
Rhode Island 48
South Carolina 40
South Dakota 36
Tennessee 38
Texas 43
Utah 40
Vermont 44
Virginia 43
Washington 38
West Virginia 44
Wisconsin 44
Wyoming 32

Source: Forbes Advisor

How Do I Keep My Rates Low After an Accident?

If you’ve had a car accident, there are some things you may be able to do to keep your car insurance rates from rising.

First, explore discounts that you may have overlooked. Check with your insurer to make sure you’re receiving discounts you’re eligible for.

•   If you haven’t already signed up for paperless billing, now might be a good time to take advantage of the discount you may receive with this option.

•   The number of miles you drive annually is one factor that goes into calculating your insurance rate. Check with your insurer to make sure your rate correctly reflects your annual mileage.

•   Consider a usage-based insurance that tracks different elements of your driving habits and sets your rate accordingly. Better driving habits equate to lower rates.

•   Ask about multi-policy discounts if you have all your policies with one insurer.

•   Check into military and government employee discounts.

Another tactic that might be worth pursuing if you’ve had an accident but are looking for ways to decrease your car insurance rate is to increase your deductible. The higher your deductible, the lower your premium.

Look into how much insurance you’re carrying on the car. It’s worth your time to determine how much coverage you need. If your car is worth less than the deductible plus your annual total for car insurance, it could be time to rethink your coverage.

And another thing to scrutinize is what kind of car you drive. Some cars are cheaper to insure than others.

When Does Car Insurance Go Down After an Accident?

Experts say it takes three to five years for car insurance to go down following most at-fault accidents. The insurers are going by the statistical wisdom that if you’re in one accident, the chances are higher that you will be in another. Some insurers also take into account the seriousness of the accident and whether impaired driving was a factor in the accident.

One tactic people employ to lower their rates is to shop around for a new insurer. While the record of the accident and claim will be visible to a second insurer, you may still be able to get better deals.

Your insurance rates will also be affected by your credit. Merely being involved in an accident will not damage your credit, but an improvement in your credit score can be used as leverage in getting a lower premium.

Don’t rule out getting a brushup on your driving to improve those skills. Some insurance companies will discount your rates if you complete a defensive driving or driver education course.

Recommended: Car Insurance Guide for New Drivers and 3 Ways to Save

The Takeaway

The question of how much does car insurance go up after an accident has an answer that can seem hard to figure out. The average rate increase ranges between 38% and 53%, and any potential increase may be dependent on a variety of factors including who was at fault, the seriousness of the accident, your driving record, and to a surprising degree, which state you live in.

Taking the opportunity to compare car insurance companies before committing to a policy can be a smart move that might save you money on your insurance rate. SoFi, powered by Gabi, provides a tool to compare car insurance rates from multiple companies so you can get the coverage and rate that works for your needs.

Find the car insurance rate that works for you.

Photo credit: iStock/simpson33


Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
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External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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How to Buy Car Insurance in 5 Simple Steps

If you drive a car, you need car insurance — and not just because it’s the law in every state except New Hampshire and Virginia.

Fortunately, these days, getting car insurance is usually a simple process. You can buy car insurance online, over the phone, or even in person — but the easiest way to do so is with a few mouse clicks.

5 Steps to Getting Car Insurance

Knowing how to get car insurance for the type of vehicle you have and what your driving habits are is easier when you know your way around the car insurance market. Here’s our step-by-step guide to buying automobile insurance.

1. Figure Out What Type Of Coverage You Need.

The first step in learning how to get insurance on a car? Understanding what car insurance is in the first place and how much coverage you really need.

There’s a veritable dictionary of different auto insurance terms to understand, but one of the most important distinctions is between liability insurance and full insurance coverage.

•   Liability insurance is coverage that pays out to another driver if you’re found to be at fault in an accident. Liability insurance is further split into property damage and bodily injury coverage, coverage for vehicular damages and medical expenses, respectively.

•   Uninsured/underinsured motorist coverage is another type of liability insurance that pays out in the event of an accident involving another driver who doesn’t have insurance (or much of it).

•   Full coverage includes liability insurance but also pays out for damage to your own vehicle, even if you’re at fault. This may include collision coverage, which, as its name implies, pays out in the event of an accident involving another vehicle, and comprehensive coverage, which pays out in the event of non-collision damages, such as fire, falling objects, or glass damage.

•   You may also be able to purchase medical payments coverage, which can offset the cost of your medical bills in the event of an accident, personal injury protection insurance, which can help with lost wages and other expenses. These types of coverage kick in regardless of who’s at fault.

Most state laws only require liability insurance — though this varies, as do the minimum policy limits in each state, so be sure to get familiar with your state laws before you go shopping.

Still, full coverage might be a good idea: Even in a minor accident, you might be facing thousands of dollars in repair costs, not to mention random damages like a windshield crack due to a rock kicked up on the highway.

Keep in mind, too, that even full coverage doesn’t mean everything is covered, or coverages are unlimited. How much coverage you decide you want is up to you. It’s worth factoring in the age and value of your vehicle, other coverages you may have that can help, and how high a deductible you could afford to pay out of pocket in the event of an accident. Higher deductibles generally mean lower monthly car premiums — but, of course, you’re on the hook for a larger portion of the expenses if you do need to file a claim.

2. Gather Your Information.

Once you have an idea of what kind of coverage you need, it’s time to get serious about shopping. You’ll need certain information in order to buy an auto insurance policy, so in order to make the transaction go smoothly, it’s a good idea to gather those ahead of time:

•   The name and birth date of every driver to be put on the policy.

•   The driver’s license number and issuing state of every driver to be put on the policy.

•   The driving history (both at-fault and not-at-fault accidents) of every driver to be put on the policy.

•   The car’s make, model, and vehicle identification number.

•   The car’s current mileage.

•   The estimated mileage the car is driven each year, as well as its primary purpose (business or leisure).

•   Any car safety features, like car alarms.

•   The address the car is kept at most of the time.

•   The name and policy number of your current insurance plan, if you have one.

Other information may be required, too, but gathering these details ahead of time should help save you some time.

3. Choose Your Shopping Method.

There are three main ways to purchase car insurance: Directly, through a captive agent, or with an independent broker.

•   Buying auto insurance directly (either online or over the phone) from an insurance company means you can get hands-on and do the research yourself. However, getting individual quotes from a variety of different companies can take time.

•   Buying auto insurance through a captive agent means you’re working with a representative from a single insurance company, which can be useful if you want a single point of contact who can help walk you through every step of the process. This might also be a good idea if you have more than one insurance policy through the same company because they may offer multi-policy discounts.

•   Buying auto insurance through an independent broker can create a bespoke insurance-buying experience where the broker does the footwork of shopping around for the best deal to suit your needs. However, your premiums may include a broker’s fee, pushing them higher.

Each approach has its own drawbacks and benefits, and the best one when deciding how to get auto insurance for you will depend on your preferences.

4. Compare Quotes.

Car insurance is one of those areas of life where you can save a lot of money by shopping around. Of course getting multiple quotes can be time consuming, but given that car insurance premiums can cost more than $100 per month, it might just be worth your time.

Fortunately, these days, there are some great auto insurance comparison websites and apps that can help you see your potential savings by filling out just a single form. (Do be aware that you may start getting phone calls, emails, and letters from insurers eager to acquire your business, however.)

Recommended: Car Insurance Guide for New Drivers and 3 Ways to Save

5. Drive Happy — But Check In Regularly.

We’ve all heard the commercials, but it really is true: You may stand to save money by switching your car insurance to a different carrier, so it’s worth checking in at least once a year to make sure you’re happy with your coverage and its cost.

That said, many carriers also offer loyalty discounts to those who stay with their carrier for long periods of time, and your insurer may be able to match a lower offer you get elsewhere. Your car insurance premium may get lower over time if you improve your driving record or your credit history, and you may also be able to score discounts by bundling different types of insurance from the same provider (like renters insurance, homeowners insurance, etc).

Of course, it’s not just monthly costs that are worth checking in on. You may decide you want more or less coverage over time or as your life situation changes, which is another good reason to check in from time to time. Additionally, if you do decide to switch carriers, make sure you’re purchasing a policy of equivalent coverage — otherwise, you’re not saving money on an equivalent product, you’re just buying something cheaper from elsewhere.

Recommended: 5 Steps to Switching Your Car Insurance

The Takeaway

Knowing how to buy car insurance might not be exciting, but car insurance is an important financial product that could relieve a financial burden in the case of an accident.

And shopping around doesn’t have to be time-intensive or complicated. SoFi Protect has teamed up with Gabi to offer an easy-to-use auto insurance comparison tool that can help you find the best-priced policy for your specific requirements. Gabi can even help you cancel your old policy — all in just a few minutes.

Learn more about comparing car insurance policies.

Photo credit: iStock/LumiNola


Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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