Auto insurance

What is auto insurance?

Auto insurance is more than just a legal requirement. It’s a safety net for you, your passengers and others on the road. Whether it’s a fender bender or something more serious, the right policy can help cover repair costs, medical bills and even legal claims. It also gives you peace of mind knowing you’re financially protected if something unexpected happens.

In simple terms, auto insurance is a contract. You pay a monthly or annual premium, and in return, the insurance company agrees to cover certain types of losses outlined in your policy. Most policies can be customized based on your budget and coverage needs.

How does auto insurance work?

Understanding how auto insurance works can help you feel more confident when choosing coverage or filing a claim. At its core, you choose your coverage levels, pay your premium and if something happens like an accident or theft, you file a claim.

Here’s what a typical claims process might look like:

• Something happens – Your car is damaged in a crash, stolen, vandalized or affected by severe weather.
• You file a claim – You contact your insurance provider with the details and any needed documents.
• They investigate – An adjuster reviews your claim, assesses the damage and determines who’s at fault.
• You get a payout – The insurance company either covers repairs, reimburses you or pays a third party, depending on your policy.

Most auto policies last six months to a year and are renewable. Be sure to review yours so you know when your coverage renews or expires.

Do I need auto insurance?

If you drive, the short answer is yes. Nearly every state requires drivers to carry auto insurance, with New Hampshire being the only exception (and even then, there are financial responsibility rules). Driving without insurance can result in fines, license suspension or worse.

But it’s not just about staying legal. It’s also about protecting yourself financially. If you cause an accident, you could be on the hook for thousands in medical bills, vehicle repairs and lawsuits. Insurance helps shield you from those costs.

Keep in mind:

• Lenders often require extra coverage – If you lease or finance your car, you may need comprehensive and collision coverage.
• It doesn’t cover business use – Personal auto insurance only applies to personal driving, not food delivery or rideshare unless you add extra coverage.
• It protects more than just you – Family members listed on your policy are usually covered too, even when borrowing someone else’s car with permission.

What does auto insurance cover?

Auto insurance can be tailored to meet your specific needs. Most policies are made up of different types of coverage that work together to protect you in different scenarios.

Here are the most common ones:

• Liability coverage – Pays for injuries or property damage you cause to others. Required in most states.
• Collision coverage – Covers damage to your car from a crash, regardless of who’s at fault.
• Comprehensive coverage – Protects your car from theft, vandalism, weather and other non-collision events.
• Personal injury protection (PIP) – Helps cover medical expenses (and sometimes lost wages) for you and your passengers.
• Uninsured/underinsured motorist coverage – Kicks in if the driver at fault doesn’t have enough or any insurance.

Not sure which coverages you need? The VIU by HUB Advisory Team can help you choose the right mix for your situation and budget.

What does auto insurance not cover?

Even the best policy has its limits. Understanding what’s not covered can save you from surprises later on.

Common exclusions include:

• Wear and tear or breakdowns – Routine maintenance or engine trouble isn’t covered.
• Business use – Deliveries, rideshare driving or other commercial use require additional coverage.
• Intentional damage or illegal activity – Claims related to reckless or illegal behavior won’t be paid out.
• Unauthorized use – Driving someone else’s car without permission isn’t covered.
• Racing or off-roading – These activities usually require a specialty policy.

Every policy is different, so always read the fine print and ask questions if something’s unclear.

Buying auto insurance

Shopping for auto insurance can feel overwhelming, but it helps to break it down. Start with the basics: what do you need covered, how much can you afford to spend and what kind of protection gives you peace of mind?

Some things to think about:

• Deductibles – This is what you pay out of pocket before your insurance kicks in. A higher deductible usually means a lower premium.
• Coverage limits – Choose limits high enough to protect your assets in case of a serious accident.
• Optional coverages – Extras like gap insurance, roadside assistance or rental car reimbursement can offer more protection.

It’s smart to get quotes from multiple companies to compare coverage and costs. A brokerage like VIU by HUB can simplify this by doing the legwork of finding multiple policy options for you. Discounts for good driving, bundling policies or having a safe car can help lower your premium.

How to understand your auto insurance policy

Your insurance policy is more than just paperwork. It’s your roadmap for what’s covered and what’s not. Understanding the key parts of your policy can help you avoid surprises later.

Here’s what to look for:

• Declarations page – A summary of your coverages, limits, deductibles and premium.
• Insuring agreement – What the insurance company promises to cover.
• Conditions – Your responsibilities, like reporting claims quickly or cooperating with investigations.
• Exclusions – Specific situations or damages that aren’t covered.
• Endorsements – Optional add-ons that expand your coverage, like gap insurance or custom equipment protection.

Review your policy once a year, especially if you’ve had life changes like moving, buying a new car or adding a driver.

Factors affecting costs

Why does your neighbor pay less for the same car insurance? It all comes down to risk. Insurance companies set your rates based on how likely they think you are to file a claim.

Here are some common factors:

• Driving record – Fewer accidents or violations usually means a lower premium.
• Age and experience – Young drivers tend to pay more.
• Location – Urban areas often have higher rates due to traffic and theft.
• Vehicle type – Some cars are more expensive to repair or more tempting to thieves.
• Annual mileage – The more you drive, the higher your risk.
• Credit score – In many states, your credit can impact your rate.

You can often lower your costs by bundling policies, installing safety devices or maintaining a clean driving record. And don’t be afraid to shop around. Rates can vary widely between carriers.

FAQs

Who does auto insurance coverage protect?

Auto insurance mainly protects the policyholder, but it doesn’t stop there. It also covers family members listed on your policy even when they’re driving a borrowed car (with permission). And liability coverage protects third parties, like other drivers or pedestrians, if you’re at fault in an accident. In short, it’s designed to protect everyone involved.

What to do if you change or cancel an auto policy?

Switching or canceling auto insurance? Do it carefully so you don’t end up uninsured. First, check for any cancellation fees. Then make sure your new policy is active before canceling the old one to avoid a lapse in coverage.

After canceling, get written confirmation from your current provider. If you’ve sold your car, notify the DMV so they can update your registration and avoid penalties. Staying continuously insured is key for staying legal and staying protected.

Can I drive someone else’s car with my auto insurance?

In many cases, yes, but it depends on your policy. Most auto insurance policies follow the car, not the driver, which means the owner’s insurance is usually the first to cover any damage. However, if you have permission to drive the car and the owner’s policy isn’t enough, your insurance may help cover the difference.

That said, not all policies include this kind of flexibility. If you regularly drive a car you don’t own, consider being added to that person’s policy or exploring non-owner car insurance. When in doubt, check with your insurance company, or a VIU by HUB Advisor, so you’re not caught off guard in case of an accident.