The Smart About Money website will be retiring on July 31, 2021. Learn more about this decision.


Auto Insurance

Sport utility vehicleAuto insurance covers you in case of a vehicle accident, car break-in or theft. It also covers your passengers and anyone you might hit with your car. Typically, auto insurance doesn’t cover stereo or navigation systems installed after purchase, routine maintenance, mechanical breakdowns or items of value stolen from the car such as purses, wallets and smartphones — although possessions in your car might be covered by your renters or homeowners insurance. 

Six Types of Auto Coverage

There are six main types of auto insurance, each of which represents a risk in driving an automobile. They all will be priced separately on the policy.

  • Repairs and medical bills from damage you cause to other people’s property and their bodies.
  • Also covers legal bills if someone you injure in an accident sues you.
  • Required by all states.
  • Repairs to your car when an uninsured or hit-and-run driver damages it.
  • Required by some states.
  • Repairs and medical expenses when the other driver is at fault but doesn’t have enough insurance to fully cover your loss.
  • Required by some states.
  • Medical bills for you and your passengers no matter who caused the accident.
  • Required by some states.
  • Repairs for any damage you cause to your car.
  • Required by auto lenders.
  • Repairs for damage to your vehicle caused by anything that isn’t a collision. This includes natural disasters.
  • Required by auto lenders.


Two popular add-on riders to auto insurance policies include coverage for towing expenses and a car rental when your car is being repaired. Windshield replacement often is included as well. The declarations page of your policy will give you the coverage amounts for each item. 

Purchasing Auto Insurance

Car under umbrellaMost states require insurance if you own a car, but carrying the minimum coverage amounts may not be enough. Before you drop coverage or lower your coverage amounts, consider the savings on your premiums versus the potential loss. Insurance, particularly rental insurance if your car is being repaired, can be part of your financial success plan by helping you sustain your income.

Use these ideas to help reduce premiums:

  • Shop around for auto insurance, which is very competitive.
  • Drive safely to lower your potential risk to the insurer.
  • Insure all your cars (and other property) with the same insurance company.
  • Decrease collision coverage as your car ages.
  • Raise your deductible. 
  • Install anti-theft devices. 
  • Ask about available discounts for a good driving record, low mileage driving, age, and other positive situations (or factors).

Sign Up for Roadside Assistance

Ask about emergency roadside assistance coverage. You also can compare costs and potential benefits of other roadside assistance services such as the American Automobile Association (AAA). At the very least, you’ll want an affordable service that comes to the rescue if you:

  • Get a flat tire.
  • Need to jump your battery.
  • Lock your keys in your vehicle.
  • Run out of gas.
  • Need a tow.
Course Home