Let’s get one thing out there: no one is especially psyched to get car insurance. You get it because it’s a financial safeguard against damage to your car or injury to you or others (and maybe because it also happens to be legally required in some form nearly everywhere in the US). Car insurance is complicated, and drivers often don’t know what to expect from the process.

Let us break down the basics so you’re better able to find the right coverage for you. Here are six things you need to know.

1. What Car Insurance Is 

As a licensed insurance agent, I find that many people I talk to don’t quite understand what insurance is or why they need it. I get it. After all, insurance is rather abstract—it’s not a physical object you buy at a store. Further, if all goes well for you, you won’t ever have to use the coverage you paid for. So it’s often hard for people to see the value.

In the simplest terms, insurance is a promise from an insurance company to support you financially in the event that something unfortunate occurs and causes you financial loss or other damage. You pay an insurance company money (your premium) for a policy that details your coverage (who/what is protected and to what dollar amount), and the insurance company is responsible for paying if something happens and you incur a loss (damage to your car, a broken leg, etc.). Insurance companies do this by pooling risk among all the people they insure, collecting premiums from everyone and using those funds to pay claims for those who need it.

Of course, there are many other details that go into the whole system, but we’re keeping it simple.

2. What Different Insurance Types Cover

The type and amount of coverage each person needs varies, but these are the coverage basics you should know.

Liability coverage is legally required for drivers in almost every state. It covers the other driver in a crash you cause, and it includes injury and property damage. If you see numbers like 25/50/10 or 30/60/25, that shows the liability coverage limits for (1) bodily injury per person, (2) bodily injury per accident, and (3) property damage—each in thousands of dollars. For example, 25/50/10 means your coverage will extend up to $25,000 per individual injured in an accident, $50,000 for all persons injured in an accident, and $10,000 for property damage.

In no-fault states, you are required to carry coverage (normally personal injury protection or PIP) for your injuries regardless of who caused the accident.

Collision coverage, which covers damage caused in a crash, and comprehensive coverage, which covers damage from other events including weather (fire, flooding, etc.) as well as theft, are often collectively called full coverage.

Other coverages include uninsured motorist coverage, which protects you and your vehicle from damage caused by people who don’t have insurance, and medical payments coverage, which covers select costs for injuries you and your passengers sustain in a collision.

3. How to Get Car Insurance

You can easily go online, call a company or two, or even walk into a local insurance agent’s office to talk to them about getting coverage. But how do you know which company to contact?

Insurance companies spend billions of dollars every year on advertising, so you could probably rattle off a few big car insurance brands you’re familiar with. But it’s important for consumers to know that not all insurance companies are the same—in fact, they all have different ways of pricing policies, and many look for certain types of customers with certain risk profiles to do business with.

This is why it’s more important than ever to compare car insurance quotes from as many companies as possible. Getting multiple opinions and understanding the market will help you find the best rate around.

4. Why You Pay What You Do

Insurance companies determine what you pay for insurance based on dozens of “rating factors”—all having to do with who you are, where you live, what you drive, and other details of your history, both on and off the road. Everything is about statistics, and insurance companies assign certain levels of risk to each of these factors to gauge the likelihood that you will file a claim.

For example, teens are considered high-risk drivers because they have so little experience behind the wheel and are statistically likelier to be in an accident—and thus file more claims—than older drivers, so they often pay much more for their premiums.

Other risk indicators include some obvious ones (like your driving record) and some less-obvious ones (like your ZIP code). There are also certain factors, like your credit score, which only some states allow to be used in determining your rate (it’s prohibited in California, Hawaii, and Massachusetts).

5. How to Lower Your Risk and Your Rates in the Future

You can’t change certain insurance rating factors, like your age, but you can make a few changes to reduce your risk in other areas. Here are a few tips:

• Drive safely and maintain a clean driving record.
• Consider sharing a policy with someone you live with.
• Bundle your renters or homeowners policy if you can.
• Pay your premium in full at the start of your policy or sign up for auto-pay.
• Maintain insurance coverage with no lapse between policies (even for a day).

6. When to Get Insurance 

The obvious time to get car insurance is when you’re getting a car, but it’s critical that you don’t have a lapse in coverage between insurance policy terms. I highly recommend shopping around for car insurance before you begin the car-buying process. Shopping early also allows you to account for your premium in your car-related expense budget.

Other times to switch insurance could be if you get married, move, or have another big event in your life; if your rates increase for no apparent reason; or if you need to add a new teen driver to your policy.

Additionally, it’s important to compare rates every six months to make sure you’re staying up to date on any changes that might occur if you move, get a speeding ticket, or even have a birthday.

Once you’re ready to start your insurance search, you can use www.guideinsuranceagen... comparison tool to get a car insurance quote and compare rates.