Car Insurance FAQ: Straight Answers to the Most Common Questions

Most car insurance questions come down to a handful of ideas: what each coverage pays for, when you share the cost through a deductible, who is covered behind the wheel, and why your price is what it is. This page answers the questions people ask most often, in plain English, using state insurance regulators as the source. Where the answer depends on your state, we say so, because car insurance rules are set state by state.

What does liability insurance pay for?

Liability is the coverage every state builds its requirements around. The Texas Department of Insurance describes it as paying to repair or replace the other driver's car or other damaged property, and paying other people's medical expenses, when you are at fault in an accident. It pays for harm you cause to others. It does not pay to fix your own car.

How much coverage does the law require?

It depends on your state, and the numbers differ widely. Texas requires at least 30,000 dollars of injury coverage per person, 60,000 dollars per accident, and 25,000 dollars for property damage, which the Texas Department of Insurance calls 30/60/25 coverage. New York's minimum liability coverage is 25,000, 50,000, and 10,000 dollars, according to the state's Department of Financial Services, and New York also requires no-fault and uninsured motorists coverage. Washington requires at least 10,000 dollars of property damage liability. State minimums are a legal floor, not a recommendation.

What do collision and comprehensive cover?

These are the coverages that pay for your own car. The Washington Office of the Insurance Commissioner describes collision as paying for damage to your car if you collide with another car or object or your car flips over, and comprehensive as reimbursing you for theft or damage caused by something other than a collision. Together they are what most people mean by full coverage. Lenders and leasing companies usually require both.

When do I pay a deductible?

A deductible is the part of a claim you pay yourself. The Texas Department of Insurance says you pay one for collision, comprehensive, and uninsured or underinsured motorist claims, and that you do not pay a deductible for claims against another driver's insurance company. In a repair claim, the insurer subtracts the deductible from what it pays, and you settle that amount with the body shop.

Does my insurance follow me to someone else's car?

Often, for liability. The Washington Office of the Insurance Commissioner notes that bodily injury liability coverage also covers you and the family members listed on your policy when driving someone else's car. Coverage for damage to the borrowed car is a separate question and usually runs through the owner's policy first. Rules differ by state and by policy, so check yours before lending or borrowing a car regularly.

What decides my price?

Every insurer weighs risk its own way, but the Texas Department of Insurance lists the factors most companies consider:

• Your driving record and claims history
• Where you keep your car
• The kind of car you have
• How you use your car
• Your credit score

Because each company weighs those factors differently, the same driver can get very different quotes. New York's Department of Financial Services says rates can vary considerably among insurers, and advises looking beyond price to claim practices, reliability, and service. Comparing several quotes with identical coverage is the most reliable way to find out where you stand.

What if my car is totaled?

If an insurer declares your car a total loss, the Texas Department of Insurance says it pays the car's value minus depreciation, not the price of a new car. If you still owe money on the car, that payment might not cover the loan. Gap insurance, which dealers and lenders usually offer, exists to cover that difference.

What about drivers who need an SR-22 or have a low income?

An SR-22 is not a separate kind of insurance; it is a certificate your insurer files with the state to prove you carry coverage after certain violations. How long you need one depends on your state and the violation, so rules like those for an SR-22 in Utah differ from other states.

For drivers on tight budgets, a few states run their own programs, and our guide to low-income car insurance programs covers what exists and who qualifies.

The bottom line: liability pays for harm you cause others, collision and comprehensive pay for your own car, deductibles apply mainly to claims on your own policy, and prices vary more between insurers than most people expect. When a question depends on your state, your state insurance department is the authority, and most have consumer guides and hotlines worth using.