How Does Car Insurance Work? (2024)

What is car insurance?

Car insurance covers damage to your vehicle and protects you financially if you're liable for someone else's injuries or damages. Auto insurance can also pay for medical bills if you or your passengers are injured in an accident or if you're hit by a driver who is uninsured or underinsured. Your policy protects you up to certain limits, as agreed upon by you and your insurer.

Watch this quick guide to how car insurance works. The video includes definitions of important terms, what's required by law, and more.

Do I need car insurance?

Auto insurance is required in nearly every state. Driving without insurance can result in a fine, license suspension, or even jail time. Progressive, like most other insurers, will make sure any policy you select meets your state's requirements.

What does auto insurance cover?

Auto insurance covers certain driving-related mishaps that occur on or off the road, as defined by your selected coverages. Although coverages may vary by state, these are the standard coverages on most auto insurance policies:

• Liability

  Auto liability coverage is required in nearly every state. If you're found at fault in an auto accident, liability coverage can pay for damage to other vehicles, damage to objects, bodily injuries to other drivers and their passengers, and lawsuits if you're sued due to an accident.

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• Comprehensive

  Auto comprehensive coverage protects against damage to your car caused by events that are your control, including theft, windshield and glass damage, vandalism, falling trees, and more.

• Collision

  Auto collision coverage covers your vehicle if it overturns or collides with another vehicle or object, including trees, guardrails, and fences.

• Medical payments/Personal injury protection (PIP)

  Medical payments coverage is offered in most states, while personal injury protection is a broader coverage that's available only in the states that require it to be offered. Both cover medical bills if you or your passengers are injured in a car accident (regardless of fault).

• Uninsured/Underinsured motorist bodily injury (UM/UIM) and property damage (UMPD)

  UM/UIM can pay for vehicle damages and injuries caused to you and your passengers when you're hit by a driver with no insurance or not enough coverage.

• Rental car reimbursem*nt

  Rental car reimbursem*nt coverage can pay for a rental car while your vehicle gets repaired or replaced after an accident.

• Roadside assistance

  Progressive's Roadside Assistance provides help if your vehicle is disabled on the road, for instance from a flat tire, dead battery, running out of gas, and more.

• Loan/lease payoff coverage

  Similar to "gap insurance," loan/lease payoff coverage may cover the difference, up to certain limits, if you owe more on your vehicle than it's worth and your car is stolen or totaled. Progressive's loan/lease payoff coverage covers up to 25% of your vehicle's actual cash value.

Explore more auto insurance coverage options with Progressive.

What does car insurance not cover?

A basic car insurance policy won't cover:

• Maintenance or mechanical failures

• Wear and tear

• People who regularly drive your car but aren't listed on your policy

• Driving on a ridesharing platform

However, you can sometimes add coverage or purchase a separate insurance policy or car warranty to cover the things your auto policy doesn't. For example, you can add rideshare coverage to your Progressive auto policy if you drive for a ridesharing service.

How much car insurance do I need?

When deciding how much auto coverage to get, you'll need at least your state's required amount of car insurance, which typically includes a minimum amount of liability coverage. Your state might also require some amount of UM/UIM and PIP or medical payments coverage. If you have a car loan or lease, your lender might require comprehensive coverage and collision coverage as well.

How is car insurance priced?

Insurers consider many factors when determining your auto policy rate, including your age, driving history, and location. For instance, yourcar's make and model can impact your insurance rate, especially if you carry comprehensive and collision coverage. Check out our car insurance discounts and tips for getting cheap car insurance.

What is a car insurance premium?

Your auto insurance premium is the amount of money you pay your car insurance company in exchange for coverage. You generally have the option to pay your premium monthly or all at once for your policy term.

What is a car insurance deductible?

Your car insurance deductible is the out-of-pocket expense you need to pay before your insurer will cover your claim.

Example:You have collision coverage with a $500 collision deductible. You hit a telephone pole, and your car repairs cost $2,000. If you file a car insurance claim, you'll pay for $500 of the repairs, and your insurer pays for the remaining $1,500.

You can choose your deductible amount from the options offered by your insurer. The higher your deductible, you'll be responsible for more when you make a claim, but your premium will be lower. If you choose a lower deductible, your premium will be higher but you won't have to pay as much when you make a claim.

Explore more insurance terms and definitions.

How to get car insurance