Whether you’re a new driver or just want to know a little more about the how and why, it’s good to start with a basic definition of auto insurance. Simply put, auto insurance is an agreement between you and your insurance provider about what would happen in the event of an accident. It protects you from financial losses in the event of incidents covered by your policy. Rather than being on the hook for things like repair, replacement costs and even medical bills, you pay a car insurance premium to your insurance provider and they will help cover the costs based upon the coverage and limits you choose.
Your car insurance policy serves as a contract that defines what costs the insurance company is responsible for, and under what circumstances. In exchange for these services, you are required to pay a monthly insurance bill (or “premium”) to your insurer.
While the basic concept of insurance is pretty straightforward, accidents are anything but. That’s why it’s important to know how auto insurance works, what each type of car insurance covers and how to choose the coverages that are right for you.
How does it work when purchasing car insurance?
Here’s an overview of how the car insurance process works:
- Start by getting a quote. A “quote” is another word for a car insurance estimate. Based on information about you, your history, your car and the type of car insurance you wish to buy, insurance providers quote you a price (also known as your “insurance premium”). When you get a quote with Nationwide, it’s always free and there’s no obligation to purchase.
- Choose the type(s) of insurance you want. Liability insurance is mandatory for all U.S. drivers, though the required coverage amounts and types vary depending on your state’s laws. While some drivers opt for only state-minimum coverage, having additional coverage can provide extra protection on the road. There are also specialized types of insurance you can choose from, such as Classic Car Insurance. If you appreciate the classics, classic car insurance coverage is specifically designed to meet your unique needs so you can hit the road with the right protection.
- Select your deductible amounts. A deductible is the amount you are responsible for paying out of pocket in the event of an accident before your insurance kicks in. For instance, if you have a $500 deductible but your vehicle has $1200 worth of damages, you would pay the first $500 and your insurance provider would pay the remaining $700 (if the accident is covered under your policy). Note that a higher deductible means a lower insurance premium, but it could also mean paying more out of pocket in the event of damage.
- Purchase auto insurance. You can choose to pay your annual premium up front, or pay monthly. Remember to always have your insurance card (or “proof of insurance”) with you each time you drive.
- In the event of an accident, file a claim with your insurance company as soon as possible. A “claim” is the process of giving your insurance provider all the information about the incident so they can determine if it is or isn’t covered, and how much damage they may reimburse you for. Learn more about auto insurance claims.
Our insurance terms glossary may also be a helpful resource for those wanting to learn the basics of auto insurance. You can also start a quote and start protecting yourself with the right auto insurance policy today.