Insurance products are not insured by the FDIC, are not deposits, and may lose value.
Auto insurance helps you recover financially from damage, injuries and expenses – including legal fees – related to an accident. It's a contract between you and the insurance company in which you agree to pay a premium in return for the insurance company paying for losses outlined in your policy.
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Your car insurance coverage depends on the contract you choose and what you qualify for based on your driving history.
There can be many types of coverage on one policy, including:
All states but Virginia and New Hampshire require at least some insurance coverage. Failure to have insurance can mean a fine and/or time behind bars, as well as suspension or revocation of your driver's license. In most states, the minimum required coverage is liability insurance, though some states require additional coverage, like collision and comprehensive.
Auto insurance is a contract which can be canceled by either you or the insurance company. You can drop the contract by changing to another company. An insurance company can drop you for the following reasons:
Your claim can be denied for things like:*
*These rules vary state-by-state
Insurance companies check credit to help determine your insurability. A poor credit score can look like you're in financial trouble, and an insurer could decide you're too risky to insure. The insurance score that the insurance company pulls to determine your rate is called a "soft pull" and doesn't affect your credit score.
An insurance company could check your driving record when you are:
Your driving record helps the company determine how likely it is they'll have to pay a claim for you. If you have a record that includes tickets, accidents or points on your license, you will probably be a higher risk for them. To compensate for that, the insurer might charge you a higher premium than someone with a clean driving record.
Say you're at the rental car counter and the agent is strongly suggesting you get the special insurance coverage on your rental car – what should you do?
Most policies provide the same coverage for a rental car that you have for your personal vehicle, unless the rental is being used for business purposes. Check your policy before you go.
Theft is covered by comprehensive coverage, and there's a little bit of work and waiting on your end before you're compensated. First, you have to file a police report and wait while they try to find your car. If they don't find it, that's when you file a claim with your insurance company.
Unfortunately, insurance companies have an increased risk of fraudulent theft claims, so there's more paperwork involved with these. But you'll usually be compensated for the value of the vehicle up to the limit of your comprehensive coverage.
Most insurance companies won't cover someone who has a suspended or revoked driver's license. If you have no other way to get to work or school, talk to your local DMV for a Hardship License, then work with your insurance agent to help you file an SR 22, which guarantees insurance coverage for a specified period of time.
Insurance companies don't share your personal information directly with each other, but when you make an insurance claim or look for new insurance, information about your claims history goes into a national loss-underwriting database, which can be accessed by insurance companies that are considering insuring you.
Keep in mind though, that because your driving record is on file with your state's motor vehicle department, your information is public record – including tickets and accidents.