Buying your first car is an exciting rite of passage. But before you hit the road, it’s important to be sure your vehicle is insured. Let's discuss what you need to know about car insurance, from why it’s necessary to ways you can save money when it’s time to purchase.

What is car insurance?

Car insurance is a contract between you and an insurance company in which you agree to pay a set amount, called a premium, in exchange for financial protection in the case of an accident. Your insurance company may bill you monthly, quarterly, biannually or annually.

If you get into an accident, your insurance company may pay for all or a portion of your vehicle repair expenses, medical care or other costs resulting from the accident — depending on your coverage. Typically, however, you’ll need to pay a deductible before your auto insurance kicks in.

Types of auto insurance coverage

An auto insurance policy consists of several types of coverage, and each has its own payout limits and stipulations.

Liability coverage

Auto liability insurance is required in the state of Washington. It pays for damage caused by you to other people or their property. This may include passengers in your vehicle, the driver or passengers in other vehicles, and pedestrians. Some insurance providers may break this out into bodily injury liability coverage and property damage liability coverage.

The payout limits are often expressed as three numbers, such as 100,000/200,000/50,000 or simply 100/200/50. In this example, the insurance company would pay up to $100,000 in injury expenses for each person, up to $200,000 in total for injuries for everyone involved in the accident and up to $50,000 in property damage.

Collision coverage

Collision coverage is the portion of your auto insurance that pays for damage to your vehicle in an accident. This includes accidents that involve only your vehicle, such as a rollover or collision with a guard rail. Collision insurance is not mandated by law, but if you have a car loan, your lender may require it.

Comprehensive coverage

Comprehensive insurance covers damage to your car unrelated to a collision. This may include theft, vandalism, hail damage, a lightning strike or damage from a fallen tree. Miscellaneous accidents, such as striking a deer with your vehicle, may also fall under comprehensive insurance. Like collision insurance, comprehensive isn’t required by law but may be required by a lender if you’re still making payments on an auto loan.

Uninsured/underinsured motorist coverage

This coverage typically pays for injuries and damage to your vehicle when the driver who’s at fault has no insurance or doesn’t have enough insurance to cover them. It may also come into play in the case of a hit-and-run accident or an accident caused by an unidentified vehicle.

Personal injury protection (PIP)

This optional coverage may pay for your medical expenses, lost wages and other incidental costs resulting from an accident. It’s also known as “no-fault insurance” because it typically pays no matter who is at fault for the accident. An alternative offered by some insurers in Washington is Medpay, which covers only direct medical expenses but no incidentals.

Other types of coverage

• Glass coverage pays to repair damaged car windows if, for example, your windshield is cracked by a rock.
• Roadside assistance pays some or all of the cost of a jump-start or tow.
• Rental reimbursement pays some or all of the cost of a rental car while yours is being repaired.
• Guaranteed Asset Protection (GAP) insurance, also sometimes called guaranteed auto protection, is primarily for people who owe more on an auto loan than their car is worth. This can happen when you buy a car with zero down. If your car is damaged in an accident and declared a total loss — or if it’s stolen — GAP insurance typically pays the difference between what your vehicle is currently worth and the amount you owe on your auto loan.

Who is covered by your auto insurance?

A car insurance policy doesn’t just cover the people on the policy while they’re driving the cars on the policy. It may also cover you when you’re driving someone else’s car (with their permission, of course). Typically, liability coverage will follow the driver listed on the policy regardless of whose vehicle they’re driving. However, it’s important to read the exclusions on your policy to be sure.

Collision or comprehensive coverage, on the other hand, may only cover the vehicle listed on the policy. So before you borrow your friend’s car or decline the extra auto insurance for a rental vehicle, it’s important to check your individual policy. If you plan to let a friend or relative borrow your vehicle, the same is true. Check the exclusions on your policy to find out if damage to your vehicle is covered when someone else is in the driver’s seat.

Do you have a side gig driving for Uber or delivering for DoorDash? You’ll likely need to buy supplemental coverage. A standard personal policy won’t typically cover you for commercial use of your car. It’s yet another example of why it’s so crucial to understand not only who and what your policy covers but also who and what it doesn’t cover.

How much car insurance do you need?

Liability

For starters, you need to have the minimum liability insurance required by law. In Washington, that’s 25/50/10:

• $25,000 per person for bodily injury
• $50,000 per accident for bodily injury
• $10,000 property damage

If you’re caught driving without insurance, you could be ticketed and fined at least $550. In addition, your driver’s license could be suspended.

If you’re at fault for an accident and total someone’s $50,000 car, the legal minimum won't be close to enough to cover that loss. That’s why a commonly recommended level is 100/300/100. You might even consider 250/500/100.

Collision and comprehensive

Collision and comprehensive insurance will usually pay up to the actual value of your car if it’s a total loss and you find yourself owning nothing more than a hunk of scrap metal. This type of coverage is not required by the state, though some lenders may require the coverage and specify a required deductible range. It helps to know your lender's insurance requirements in advance.

If you fully own your vehicle, or have no financing requirements, you can choose how big a deductible to take or whether to have the insurance at all. If your vehicle isn’t worth much, that might be OK; it might not be worth insuring. However, if you can’t easily replace your car or get along without it, collision and comprehensive are a practical choice.

As for deductibles, it’s recommended that you carry the largest deductible amount that is allowed by your loan terms and can be quickly accessed if you have to repair your vehicle. Premiums are higher for lower deductibles, such as $250. With a deductible this low, you might pay more in premiums than you’d pay for your deductible if you had an accident.

Uninsured motorist

According to the Insurance Research Council, more than 21% of Washington drivers were uninsured in 2019. If an uninsured driver hits you, you may be liable for injuries to any passengers in your car. That’s why it’s a good idea to carry the same personal injury amounts as your liability insurance.

Personal injury protection

PIP coverage is not required in Washington, but insurers are required to offer it. In fact, if you don’t want it, you have to opt out in writing. If you’re not certain your other medical coverages would take care of your expenses, it’s a good idea to have PIP insurance. It’s also useful if you have a job where you don’t get paid if you’re out with an injury because it can help compensate for lost wages.

How to get auto insurance

Auto insurance policy coverages, terms and prices vary widely, so it’s important to get a few quotes and read through the coverages carefully. Before you buy car insurance, you’ll need to gather some basic documents and information:

• Driver’s license
• Vehicle identification number (VIN)
• Your vehicle’s make, model and year
• You driving history, including any tickets and accidents

You can request your driving history from the Washington State Department of Licensing for $13. Although insurance companies can also obtain your driving history, knowing it yourself may help you find the best rate.

Car insurance rates are typically determined by a number of factors, which may include your driving record; how much you drive your car; your location, age and gender; and the type of car you’re insuring. They may also take into account your years of driving experience and even your credit score. That’s because insurance companies base premiums on the risk involved in insuring each driver. They review accident and claims data when assigning you to a risk category.

Once you have all of the paperwork and documentation you need and are ready to start shopping, there are several ways to get an auto insurance quote:

Directly from an insurer

You can call an insurance company or get a quote on its website. Most insurers can provide you with an instant quote online, though you may receive follow-up calls and texts. Some insurance providers do a better job of explaining their policies than others, so it’s helpful to understand how auto insurance works so you know what you’re looking at. If you need someone to talk you through coverage options, a phone call may be the better solution.

Captive agent

This is a representative who works for only one insurance company. They may be knowledgeable about their company’s offerings but typically won’t tell you anything about competitors. Captive agents are usually paid, in part, by commission.

Independent agent or broker

This person can offer insurance from multiple companies, including well-known insurers and some good small ones you may not have heard of. They can match you with a company based on your needs. However, not all insurers offer their products through independent agents or brokers, so these agents won’t have access to everything. Some of the larger companies only sell directly to consumers or through their own agents.

Like captive agents, independent agents usually receive some kind of commission. They’re not required to give you the best deal, and some have favorite companies they work with.

Specialty agency

Some agencies work specifically with drivers who are hard to insure. This may include drivers with DUIs, recent accidents or lapses in coverage. As you might expect, these policies tend to have high premiums.

Credit union

If you’re a member of a credit union, you may be able to obtain a discounted insurance policy through your financial institution. Credit unions routinely partner with insurance providers to offer deals on everything from cellphone service and tax preparation to home security and auto insurance. You may find your credit union is able to offer you the best car insurance rate.

Important tips for buying auto insurance

Your insurance shopping should be more than grabbing the lowest quote and saying, “Sign me up!” Here are some things to keep in mind:

Compare apples to apples.

Get quotes for the same liability, comprehensive and collision insurance levels and the same deductibles. It’s OK if there’s some variation around the smaller factors, such as glass coverage and rental reimbursement, but the big items should be identical.

Check out the insurer.

This is especially important for insurers you haven’t heard of. Some small insurers are very good, but others aren’t. Use the rating agency AM Best, consult the Better Business Bureau and check online reviews.

The biggest red flag is when companies are reluctant to pay claims. Most insurers are prompt and courteous when you file a claim, but others delay, stonewall and won’t pay until a court orders them to.

How can young drivers save money on car insurance?

Drivers under 25 years old pay higher car insurance rates than older drivers. Because younger drivers are new to driving, they tend to have more accidents and file more claims than older drivers. Let’s explore eight tips for drivers between 20 and 25 years of age to save on car insurance:

1. Pay upfront. If possible, pay the entire premium at once rather than going on a monthly plan. You can save as much as 10% this way, which can amount to hundreds every year.
2. Combine policies. If you have homeowners or renters insurance, most companies will give you a discount if you bundle multiple policies with them. This applies to motorcycle and boat insurance as well.
3. Drive safely. The premium difference for a “clean” driver and one with even a single ticket can be significant. Some companies offer a discount if you take a safe driver course or defensive driving class.
4. Shop around. Insurance policies aren’t all alike. Some are simply a better deal.
5. Get good grades. If you’re in school, some insurers offer a better rate for students who maintain a high GPA.
6. Maintain a good credit rating. A lot of people don’t realize their credit score may affect their premium in some states. Always pay your premium on time.
7. Consider a usage-based discount. This is when your insurance company uses your cellphone or an installed device to track your driving habits. If you drive mostly during the day and avoid fast stops and starts, you might get a refund or a reduced premium. You have to be comfortable sharing your driving data, and you should be aware that your rates could actually go up if your driving is poor.
8. Get pay-per-mile insurance. With this type of policy, you pay a low base rate plus an additional variable rate for each mile your drive. If you drive fewer than 8,000 miles per year, this may be your best deal.

Now that you have car insurance

Once you’ve become a properly insured driver, there are several practices you need to adhere to:

Carry proof of insurance.

When you buy a policy, the company will usually send you a proof of insurance card, either by mail or email for you to print. Typically you can also access and print your insurance card through your insurer’s website after signing in. Put your insurance card in your glove compartment and leave it there. When your policy renews and you get a new card, replace the old one.

Another way to carry proof of insurance is to install the insurance company’s mobile app on your smartphone. These apps will usually give you ready access to your insurance card. But keep in mind this may not suffice if you’re in an area with little or no cell signal.

If you’re stopped by a police officer, you’ll likely be asked to show proof of insurance. If you don’t have it, you may be subject to a ticket and a fine.

Shop for a new policy.

It’s a good idea to check your car insurance options every year or two to ensure you’re still getting the best rate. If you’re a good driver, your current insurer will be happy to take your money and send you a renewed policy whenever your coverage is due to expire. This may or may not be the best deal for you.

Know what to do in case of an accident.

If you’re involved in an accident in Washington state, and if your vehicle is drivable, safely pull over to the side of the road, turn off your vehicle and turn on your hazard lights. If there are injuries, call 911 right away. If you’ve verified there are no injuries, exchange information with everyone involved in the accident, including the names, addresses, phone numbers of all drivers, passengers and witnesses. You should also gather driver’s license numbers, license plate numbers, insurance information, names of registered vehicle owners, and vehicle make, model, and year information.

Be polite. Don’t admit guilt or make accusations. If the other person admits guilt, don’t assume they’ll say the same thing later. Immediately report the accident to your insurance provider and to the police if you believe there is more than $1.000 in damages. It’s best to only discuss the accident with your insurance provider or your attorney, if you choose to seek representation, and the police. What’s most important, however, is not to panic and to be safe while you’re pulled over and exchanging information.