What to Do If You Can’t Get Home or Renters Insurance in Your State

What can you do if you’re buying or living in a home that’s considered “high risk” because of its location or other factors, and you can’t find the insurance protection you need? In some states, including Florida and California, where insurers are limiting their coverage or exiting the market altogether, it can be challenging to find a renters or homeowners policy. You may even find the insurer you’ve had for years is no longer willing to provide coverage.

There’s no need to panic just yet, or give up on your efforts to get the policy you want or need. There may be options you haven’t thought about that are just a few computer taps away.

What Makes a Home, Area, or State High Risk?

There are a few different factors that can make a home, neighborhood, region, or state high risk when it comes to getting insurance coverage. Some of these factors may affect homeowners only, while others can affect both homeowners and renters.

Sometimes a home is determined to be high risk because it’s fallen into a state of disrepair. The insurance company may say, for example, that the home needs a new roof, the foundation is unsafe, or the plumbing or electricity needs updating. If that’s the case, following through on those repairs may make it easier to keep or qualify for a traditional homeowners policy.

It’s also possible that the way the home is constructed — with certain types of building materials or a roof style that doesn’t meet the insurer’s underwriting standards — is making it harder to get insurance. Or it could be that the home is in an area that makes it more vulnerable to certain crimes, such as burglary or vandalism. Sometimes, a person’s own history (a criminal background, bankruptcy, or too many past claims) could lead an insurer to cancel a policy or say no to a new one.

Increasingly, it’s the propensity for serious, damaging weather that can cause an entire region or state to be considered high-risk. In California, wildfires are one reason insurers cite for pulling out. In Louisiana, it’s flooding. And in Florida, insurers are leaving the state because of the expensive damage hurricanes and tropical storms can cause.


💡 Quick Tip: A basic homeowners insurance plan doesn’t cover floods, earthquakes, or sinkholes. If you live in an area prone to natural disasters, you may want to look into supplemental coverage.

What Can You Do If You’re Denied Coverage?

Though homeowners and renters insurance policies aren’t mandated by any state or federal laws, mortgage lenders and landlords can and often do require a certain amount of coverage. Even if yours doesn’t, you may find it makes sense to get a policy to protect yourself, your home, and/or your belongings.

It can be frustrating and scary to find out you’ve been denied the insurance you want or need, or that the policy you have is being canceled. Here are a few things you can do to find protection:

Shop Around

There are many insurance companies out there, so don’t feel as though you have to give up just because the carrier you wanted won’t cover you. You may be able to find a similar or better policy online, or you could search the old-fashioned way and call around. While you’re looking, try not to limit your options based on brand names or because you have car insurance or another type of policy through a certain company.

If you’re buying homeowners insurance: Before you start shopping, consider how much and what types of coverage you need and what your lender requires. Depending on where you live, you may need to buy additional protection for flooding, earthquakes, sinkholes, etc. This coverage is usually not a part of a basic homeowners policy.

If you’re buying a home, you may want to ask the current homeowners or your new neighbors what coverage they think is necessary.

If you’re buying renters insurance: Keep in mind that even though your landlord might have insurance that covers the building you’re living in, that policy won’t cover your possessions should they be damaged or stolen. And the landlord’s policy probably won’t pay for additional living expenses if you need to move out while your unit undergoes repairs.

As you shop renters policies, it’s important to compare apples to apples, and to be sure you’re getting the renters insurance coverage you might need in a worst-case scenario. Remember: Most renters policies won’t cover damage from flooding. To be sure you’re protected, you’ll likely need to purchase a separate renters policy from the National Flood Insurance Program, which is managed by FEMA.

Use a Broker or Independent Insurance Agent

If you don’t have the time to shop for a policy yourself, you may want to hire an insurance broker or independent insurance agent to get quotes from multiple insurers for you. Before you get started in this process, it’s a good idea to be clear on how your insurance professional will be paid (fee, commission, or both), and how broad or limited the policy search will be.

Contact Your State Department of Insurance

The consumer division of your state insurance department can provide you with a list of insurers that are writing policies in your area. And they may be able to help you work with your current provider regarding a nonrenewal — that is, if the company isn’t pulling out of the state altogether.

Ask Your Current Insurance Professional for Advice

If your current insurance company is leaving your region or state and you need to change your homeowners insurance, your representative — who is familiar with your policy needs — may have suggestions for which companies you could try next.

Consider a FAIR Plan

Many states have Fair Access to Insurance Requirements (FAIR) plans available for homeowners who can’t get a traditional homeowners policy. FAIR insurance coverage is different for each state, but generally, these are bare-bones policies provided by a pool of insurance companies. They often do not include personal liability coverage, and you may have to make upgrades to your property to get or keep your policy.

A FAIR plan may be your last resort if you can’t get a policy anywhere else. Still, it’s important to be clear on what you are getting — and what your premium will be — before moving forward.

Look into Beach and Windstorm Plans

If you live in a coastal state that is prone to wind and hail damage, you may want to look into getting a beach and windstorm insurance plan. These plans are similar to FAIR plans and can provide coverage to homeowners in areas that aren’t insured through the voluntary insurance market.

Recommended: Renters and Homeowners Insurance Definitions

Can You Go Without Insurance If You Can’t Get Coverage?

Although you aren’t legally required to purchase a renters or homeowners policy, you may not have a choice. If you’re renting, your landlord might say it’s a must. And if you’re buying or still owe money on your home, your mortgage company will let you know how much homeowners insurance you need.

If you can’t get a policy, or if the coverage is deemed insufficient, your mortgage company might buy “force-placed” insurance for your home. With force-placed insurance, the lender typically pays upfront for the insurance, then adds the premium cost to your monthly mortgage payment. You won’t have control over the type of coverage you get, or the policy limits, and it might be more expensive than the policy you would purchase for yourself.

You also may be required to have homeowners insurance if you live in a condominium or co-op.

Recommended: Is Homeowners Insurance Required to Buy a Home?

What Are the Downsides of Going Without Coverage?

Even if you don’t have to get insurance, you may want to seriously consider the downsides of going without coverage. You might discover that the security a policy can offer is worth the extra effort or cost involved with finding coverage.

If you’re a homeowner: It’s quite likely your home is your biggest asset, and insurance can help you protect that investment and your overall financial wellness. Your homeowners policy doesn’t just cover the structure you live in; it also insures your belongings and provides liability protection in case of an injury or property damage.

If you’re a renter: Your personal property (furniture, electronics, clothes, jewelry, etc.) may be worth more than you think, and renters insurance can help you pay to replace belongings that are damaged or stolen. Renters insurance also typically includes coverage for property damage, or if a guest is accidentally hurt, or if your pet bites someone.

Worried about how much renters insurance costs and if it’s worth it? Usually, renters insurance is much less expensive than homeowners insurance, so you may want to at least check the price before passing on coverage.


💡 Quick Tip: Next time you review your budget, consider making room for additional insurance coverage. Think of it as an investment that can help protect you from a major financial loss.

The Takeaway

It can be frustrating and stressful to learn that you can’t get the insurance coverage you need for your home and belongings, or that you’re losing the coverage you thought you could count on. But just because one company won’t offer you a policy doesn’t mean you don’t have other options. You may have to spend a little extra time searching for the right policy, though, or get a little help finding the appropriate amount of coverage at an affordable price.

When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.

Find affordable auto, life, homeowners, and renters insurance with SoFi Protect.

FAQ

Is homeowners insurance required to buy a home?

While homeowners insurance isn’t required by state or federal laws, if you’re financing the home, your mortgage lender will likely require that you have a certain amount of coverage.

Is renters insurance required?

Renters insurance isn’t required by law, but your landlord or property management company may require that you purchase a renters policy.

How much renters insurance do I need?

To determine how much renters insurance you should purchase, you may want to do a quick inventory of what you own, including clothing, jewelry, electronics, artwork, furniture, etc. Then, using receipts if you have them, estimate how much it’s all worth.

How much homeowners insurance do I need?

If you’re financing your home, your mortgage lender will likely require a certain amount of insurance coverage. But you may want to purchase additional coverage based on your assets and the types of protection you want. Your insurance company can help you determine the appropriate amount of coverage.


Photo credit: iStock/svetikd

Insurance not available in all states.
Experian is a registered service mark of Experian Personal Insurance Agency, Inc.
Social Finance, Inc. ("SoFi") is compensated by Experian for each customer who purchases a policy through Experian from the site.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

SOPT1023004

Read more

Which Insurance Types Do You Really Need? Here Are 6 to Consider

These days, you can insure almost anything. Did you know, for example, that Julia Roberts has insurance for her teeth, and before Daniel Craig filmed a James Bond movie, he insured his entire body? While you probably don’t need to insure any of your body parts for millions of dollars, you might find yourself wondering when you should buy life insurance, or whether renter’s insurance is really necessary.

To help you decide on the right type and amount of coverage, we’ve broken down which kinds of insurance you will most likely need (other than health insurance, of course).

1. Life insurance

Life insurance is about more than just financing your funeral. It also allows your family to keep paying the bills if something happens to you.

People often think they don’t need life insurance if they don’t have dependents. But if you have debt such as student loans that someone has co-signed, your life insurance can be used to pay off your loans.

It’s common for employers to offer life insurance as part of their benefits package, but it’s worth noting that the life insurance your employer offers may not be enough, especially if you have dependents. Ideally, your life insurance payout should be enough to invest and yield returns that could replace your income annually. For example, if you assume that you’ll get a 5% return on the money you invest, you would need $1 million in coverage to replace a $50,000 income.

Here’s an overview of some of the most common life insurance options you might consider.

Term Life Insurance

Term life insurance is the simplest and most common form of life insurance. It covers your life for a specific period of time, and pays only if your death occurs during the term. This timeframe is typically anywhere from one to thirty years, the longer the term the higher the premium. Term life insurance can be more affordable than other types of life insurance.


💡 Quick Tip: Term life insurance coverage can range from $100K to $8 million. As your life changes, you can increase or decrease your coverage.

Whole Life Insurance

Whole life insurance covers you for your entire life. If you make consistent payments toward your policy, you’ll build a cash reserve for your family upon your death.

Universal Life Insurance

In exchange for premiums, universal life insurance can provide coverage for as long as the policyholder is alive, and some policies also accrue cash value. When the policyholder dies, their beneficiaries typically receive a tax-free death benefit in the amount specified by the policy.

Indexed Universal Life Insurance

Indexed universal life insurance (IUL) gives policyholders the option to put money towards either a fixed account or an equity index account. Index accounts with universal life policies often include well-known indexes and can be a good option if you’d like to accumulate tax-deferred cash as well as maintain a set amount of money in a fixed account.

2. Disability Income Insurance

Disability income insurance, also referred to as disability insurance, replaces a portion of your salary if you become disabled. Some employers don’t offer disability insurance, but even if yours does, you may want to consider a supplementary policy to top up the amount that you receive.

Depending on the policy, disability insurance kicks in when you become partially, completely, temporarily, or permanently disabled. Keep in mind that there is often a waiting period before benefits start, which could range from one month to a year, depending on your policy and whether you have short-term or long-term disability insurance. The longer the waiting period on your policy, the cheaper your premiums often are.

If you have to take a job that pays less because of a disability, some policies may pay you part of the difference.

Note that disability insurance is expensive, often between 1% and 3% of your salary, and many organizations offer it as a benefit. If you’re evaluating offers between two employers, it’s worth factoring in how valuable this type of insurance is to you.

3. Long-Term Care Insurance

If you’re considering a nursing home, day care, home health aide, or other type of long-term care, be prepared to pay. A Genworth survey found that the average price of a private room in a nursing home is $9,034 a month. A typical assisted living facility charges around $4,500 a month, while a home health aide runs $5,148 a month.

To ensure you can foot the bill, the American Association for Long-Term Care Insurance recommends buying a policy in your mid-50s to qualify for the best premiums. Benefits kick in when someone isn’t able to take care of everyday activities or suffers from severe cognitive impairments. Policies vary by the specific level of impairment, the type of services provided, and the length of time the covered person lives after becoming impaired.

Depending on your policy, your benefits may not start until up to 90 days after impairment, and some may require that you receive paid care in the meantime.

Recommended: 8 Popular Types of Life Insurance for Any Age

4. Car Insurance

If you own or lease a car, car insurance is a must. But there are different kinds to consider.

Collision and comprehensive insurance will cover damage to your car and can help replace it if it’s been stolen.

Liability insurance covers you if you get sued after causing an accident. There are three maximum liability limits you can get in a car insurance policy: bodily injury per person in a given accident, bodily injury for all injuries in a given accident, and personal property damage in a given accident. Each state requires different insurance minimums by law.

However, you may want higher limits than the minimum. You may be able to save money on collision and comprehensive coverage by getting a higher deductible of $500 or $1,000. If you drive a car that’s worth less than $1,000, you may want to consider dropping collision and comprehensive, though you’ll still need liability.


💡 Quick Tip: Saving money on your fixed costs isn’t always easy. One exception is auto insurance. Shopping around for a better deal really can pay off.

5. Homeowners or Renter’s Insurance

Homeowners insurance covers damages to your home or theft of personal possessions. It also includes liability insurance to cover accidents that happen on your property. However, it excludes things like floods, earthquakes, and the (hopefully unlikely) event of war.

You should have at least enough insurance to cover the replacement value of your home and possessions. This usually means getting guaranteed (or extended) replacement cost coverage. That’s different from actual cash value coverage, which covers you for the current value of your possessions.

If you’re renting instead of buying, renter’s insurance is similar, but only covers your possessions and personal liability for damages. It’s worth having in case you leave the water on and accidentally flood your kitchen. The minimum deductible for tenant or homeowner’s insurance is usually $500, but according to the Insurance Information Institute, raising the deductible could save you money.

One important element for both of these is liability insurance. This helps protect you against lawsuits, and covers things like people slipping and falling on your property. One hundred thousand dollars of liability coverage is a fairly standard amount.

Recommended: How Much Homeowners Insurance Do You Need?

6. Umbrella Liability Coverage

Umbrella coverage is essentially extra liability insurance, and most importantly, it protects you and your assets in the event of a lawsuit. It covers you beyond the limits of your car or home liability coverage. For example, umbrella coverage will protect you from libel, slander and false imprisonment.

Often it is more economical to get an umbrella policy rather than getting excess home or car liability coverage. It’s a good idea to coordinate car, home, and liability coverages. After all, you wouldn’t typically have a $100,000 deductible on your umbrella policy if your car and homeowner’s insurance have $100,000 of coverage.

The first $1 million in umbrella coverage typically costs about $150 to $300 a year, which is often less than what most people would pay for additional coverage in that amount. As your income grows and you accumulate assets, you may want to consider raising the limit.

The Takeaway

Insurance can offer peace of mind and a degree of financial security. But the type and amount of coverage you need will depend on a number of factors, including your lifestyle, health, budget, and financial goals.

When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.

Find affordable auto, life, homeowners, and renters insurance with SoFi Protect.


Photo credit: iStock/urbazon

Insurance not available in all states.
Experian is a registered service mark of Experian Personal Insurance Agency, Inc.
Social Finance, Inc. ("SoFi") is compensated by Experian for each customer who purchases a policy through Experian from the site.

Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, Social Finance. Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under Ladder Life™ policies. SoFi is compensated by Ladder for each issued term life policy.
SoFi Agency and its affiliates do not guarantee the services of any insurance company.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.


Third-Party Brand Mentions: No brands, products, or companies 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.

SOPT1023001

Read more
Car Insurance Guide for New Drivers

Car Insurance Guide for New Drivers

Congrats, new driver: Hitting the open road on your own can mean freedom and just plain fun. But remember that safety comes first — and part of driving safely is having sufficient car insurance coverage.

The world of auto insurance can be confusing, especially for new drivers, who also often face the challenge of higher insurance premiums. Still, there are ways to save money on insurance, both right off the bat and as you spend more time behind the wheel.

Here’s what new drivers need to know about auto insurance.

Car Insurance: The Basics


First things first: What is auto insurance, how does it work and why do you need it?

Car insurance pays out money for car repairs, medical bills, and other expenses in the event you get in an accident. Liability insurance, which pays out money to the other driver when you’re found at fault, is legally required in most states.

The amount of auto insurance you need depends on the law in the state where you live as well as your own risk tolerance level. But keep in mind that even minor auto accidents can be very costly, which makes auto insurance a necessity.

Unfortunately, auto insurance can be more expensive for new drivers — but again, take heart. There are still ways to ensure you get the best possible rate.

Factors That Affect Car Insurance Price


Car insurance prices are affected by far more than just a driver’s experience level, though that’s certainly an important part of the equation. Here are some other factors that insurers will take into account when drawing up your quote:

•  Driver’s age

•  Driver’s gender

•  Driver’s marital status

•  Driver’s history of accidents and damage

•  Driver’s credit score

•  The primary location the vehicle is kept and driven in

•  The vehicle’s make, model, and age

Although there are some general rules that hold true — for instance, that people with lower credit scores or worse driving records end up with higher premiums — the way some of these factors are used is less than transparent.

For example, a 2023 study by QuoteWizard found that women actually pay higher insurance costs than men on average in many parts of America. This is despite the Insurance Information Institute’s claim that women tend to have fewer accidents than men and therefore pay less for insurance.

While there’s no easy way to predict what your rates will look like without getting a custom quote, new drivers will likely need to prepare for higher insurance premiums. This makes sense. After all, the insurance company is trying to hedge its bets that you won’t get in an accident (and therefore need an expensive claim paid out), and they don’t have a driving record to rely on while they make their best guesses.

Discover real-time vehicle values with Auto Tracker.¹

Now you can instantly monitor vehicle prices in this unprecedented market—to help you make smart money moves.


Recommended: Auto Insurance Terms, Explained

Who’s Considered a New Driver?


Although the classic image of a new driver might be an eager teenager with their brand-new license and the family’s hand-me-down car, there are other people who fit the description, too. Drivers considered “new” include:

•  Teenagers with new driver’s licenses

•  Adults without a driving record

•  People with a gap in their driving history or car insurance coverage

•  Immigrants to the United States, whose driving records might not transfer over from their country of origin

Being a new driver doesn’t change how much insurance you’re required to purchase by state law. But as mentioned, it can affect your price — so let’s take a closer look into solutions for each type of driver.

Car Insurance for Teens


Teens — or, in many cases, teens’ parents — face some of the highest insurance costs out there because, let’s face it: youthful abandon and lack of experience can lead to accidents. There are some moves you can make to minimize the costs, including:

•  Staying on a parent’s policy: Staying on a parent’s policy as long as they’re living under the same roof can keep costs relatively low for teenage drivers. However, parents should still expect their policy cost to double.

•  Looking for discounts for good grades or defensive driving classes: Teens may also be able to score good student discounts by maintaining above-average grades in school, or get a discount if they attend and complete an approved defensive driving class.

•  Maintaining a good driving record: For all drivers, an accident-free driving history goes a long way toward lowering insurance costs over time. Of course, practicing care and vigilance on the road is always of paramount importance. But given how high the cost of teenagers’ insurance policies can be, there’s even more incentive.

Recommended: What Is the Average Monthly Cost of Car Insurance by Age in the U.S.?

Car Insurance for People Who Moved to the U.S.


Even if you have a robust driving history in your home country, if you immigrate to the United States, it’s unlikely to transfer over. This means you could face elevated insurance prices for the first few years you’re a U.S. driver.

The first step to attaining U.S. car insurance in most states is to acquire a U.S. driver’s license, which on its own can be difficult without the proper paperwork. However, certain states do offer driving privileges to unauthorized immigrants. You may need to provide documentation, such as a foreign passport or birth certificate, and the resultant license is not valid as federal identification.

Once you’re ready to shop for car insurance, consider obtaining several quotes to see which company can offer the basic auto insurance coverage you need for the least amount of money.

Car Insurance for Adults Without a Driving Record


Maybe it’s been a long time since you’ve driven — or you’ve never driven at all.

Without a solid, recent driving history, car insurance companies will still consider you a new driver, which can push costs up. Same goes for having a gap in car insurance coverage. (There may be exceptions to this rule if your driving gap was due to military deployment status, so be sure to check with your prospective insurer.)

Shopping around for the best quote and maintaining as clean a driving record as possible going forward will help your case considerably. If you’re confident in your driving ability and you’ve built up the savings to afford it if an accident does occur, choosing a higher deductible could also help you save money on monthly premiums.

3 Ways to Save on Car Insurance for New Drivers


Along with the tips we’ve included in the sections above, there are some universal suggestions that can help most new drivers — and, in fact, most drivers, period — lower their car insurance costs.

Choose Your Car Wisely


Certain cars are more expensive to insure than others, including flashy models that are likely to get stolen (or tempt their drivers into three-digit speeds). You can find lists of the cheapest cars to insure online, but generally speaking, slightly older, more modest vehicles are the least expensive to keep insured.

Improve Your Credit History


It’s incredible how many parts of our lives credit history touches — and car insurance is no exception. While your quote is drawn up based on many factors, as mentioned above, your credit history is definitely part of it. Besides, maintaining good credit behavior is highly likely to help you elsewhere, too.

Bundle Up


Many insurance companies offer discounts to people who “bundle” coverage or purchase more than one type of insurance from the same company. So if you’re required to have renter’s insurance or have home insurance, see if buying them all from the same provider might save you some dough.

The Takeaway


The price of car insurance is impacted by several factors, including the driver’s age, gender, marital status, credit score, and history of accidents and damage. Just as important is their experience level. Newer drivers and drivers with large gaps in car insurance coverage often end up paying higher premiums — at least at first. However, there are ways to potentially lower costs, including driving a more modest vehicle, bundling coverage, and improving your credit score.

Whether you’re a first-time driver or a seasoned pro, shopping around for insurance in your area can help you figure out how much coverage you really need and what your premium might be. SoFi’s online auto insurance comparison tool lets you see quotes from a network of insurance providers within minutes, saving you time and hassle.

Compare quotes from top car insurance carriers.


Photo credit: iStock/SolStock

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.


Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies 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.

SOPT0523020

Read more
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 bring 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?

Discover real-time vehicle values with Auto Tracker.¹

Now you can instantly monitor vehicle prices in this unprecedented market—to help you make smart money moves.


How Much Does Car Insurance Cost?

According to Bankrate.com, the average full-coverage car insurance policy costs $2,014 per year or about $167 a month. However, these averages vary widely by state. Michigan, Louisiana, Florida, and Nevada 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.

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. When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

Compare quotes from top car insurance carriers.


Photo credit: iStock/Melena-Nsk

¹SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. Vehicle Identification Number is confirmed by LexisNexis and car values are provided by J.D. Power. Auto Tracker is provided on an “as-is, as-available” basis with all faults and defects, with no warranty, express or implied. The values shown on this page are a rough estimate based on your car’s year, make, and model, but don’t take into account things such as your mileage, accident history, or car condition.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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, products, or companies 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.

SOPT0523023

Read more
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 choose different types of insurance and policy amounts. Depending on the state where 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 where you live, 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.

Discover real-time vehicle values with Auto Tracker.¹

Now you can instantly monitor vehicle prices in this unprecedented market—to help you make smart money moves.


Types of Car Insurance

When comparing car insurance, there are six main types to keep in mind.

Bodily Injury Liability

If you get into a car accident and are found to be at fault, 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 $22,734 in 2021. 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.

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, or a hail storm or other natural disaster. 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 help 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 your new 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 headphones or gym gear. This could be covered by a homeowners or renters 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. The type of coverage and limits required vary by state. When choosing a policy, you’ll also want to consider whether additional coverage like roadside assistance, car rental coverage, or new car replacement coverage is right for you.

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. When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

Compare quotes from top car insurance carriers.


Photo credit: iStock/tommaso79

¹SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. Vehicle Identification Number is confirmed by LexisNexis and car values are provided by J.D. Power. Auto Tracker is provided on an “as-is, as-available” basis with all faults and defects, with no warranty, express or implied. The values shown on this page are a rough estimate based on your car’s year, make, and model, but don’t take into account things such as your mileage, accident history, or car condition.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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, products, or companies 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.

SOPT0523024

Read more
TLS 1.2 Encrypted
Equal Housing Lender