Liability Coverage Is Required by Law—But Smart Shoppers Can Still Save Big on Car Insurance
If you’re driving in the U.S., there’s one thing you can’t legally hit the road without: car insurance. Specifically, liability coverage is mandatory in every state. According to the Insurance Information Institute (III), each state has its own rules, but at the very least, liability insurance is non-negotiable. Optional coverages like collision and comprehensive might be nice to have—but they aren’t required by law.
On average, car insurance costs around $800 per year, based on III data. That’s no small amount, so it’s important to make sure you’re getting real value for your money. Understanding your coverage needs—and shopping wisely—can help you avoid overpaying for protection you don’t actually need.
The “Six-Prong” Car Insurance Policy Explained
Most standard car insurance policies come with six types of coverage:
-
Bodily Injury Liability
-
Property Damage Liability
-
Medical Payments / Personal Injury Protection
-
Collision
-
Comprehensive
-
Uninsured / Underinsured Motorist
This is why you’ll often hear the term “six-prong policy.” But if you’re driving an older vehicle, for example, you may not need all six. Understanding what each type covers—and whether you need it—can help trim your costs significantly. You can research these coverage types online, or better yet, ask your insurance agent to break them down for you in plain English.
Choosing the Right Insurance Provider
While there are only a handful of nationally known insurers, A.M. Best—an independent credit rating agency—estimates that over 450 companies offer auto insurance in the U.S. The first step? Know what type of coverage you actually need. Then, find a provider that meets those needs—and is licensed to operate in your state. (This part is crucial: If an issue arises and the company isn’t licensed where you live, you could be left without support.)
How Insurance Rates Are Calculated
Your premium isn’t just pulled out of thin air. Insurers look at a variety of factors including:
-
Where you live
-
Your driving history
-
The make and model of your vehicle
-
Your credit score
-
Your age and gender
To ensure you’re comparing apples to apples, get quotes based on the same level of coverage. You can find free tools and rate comparisons through the Insurance Information Institute’s website, including which insurers are licensed in your area.
Don’t Just Look at the Price Tag
Price matters—but it shouldn’t be your only deciding factor. Some companies offer discounts if you bundle your auto and home insurance, or if you’re a safe driver. Be sure to check out available deals and ask about multi-policy discounts.
Just as important is the financial strength of the company you’re considering. You want to know that your insurer can actually pay out your claim when it counts. A.M. Best rates insurers from A++ (superior) to F (in liquidation). Anything rated B+ or higher is generally considered secure. You can check these ratings online for free.
Ask Around (and Read Reviews)
One of the best ways to gauge an insurer’s reliability? Word of mouth. Ask friends or family about their experiences—especially when it comes to claims processing. Were claims handled fairly and quickly? Were there any issues?
You can also look at online forums or consumer review sites to get a broader view of how companies handle real-world situations.
Easy Ways to Lower Your Premium
Looking to save? Here are a few tried-and-true tips:
-
Increase your deductible: A higher deductible (what you pay out-of-pocket before insurance kicks in) can lower your premium by up to 30%. Just make sure you can afford it if something happens.
-
Drop unnecessary coverage: For older cars, you might not need comprehensive or collision coverage.
-
Take advantage of discounts: Safe driver? Good student? Low mileage? Ask about discounts—you might be surprised what’s available.
Final Thoughts
Car insurance is one of those things that’s easy to overlook—until you need it. While liability coverage is mandatory, the rest of your policy should be tailored to you. With a little research and comparison shopping, you can find the right balance between coverage and cost—and maybe even put some money back in your pocket.
Ready for the next step? Get auto coverage today!