Insurance is your best bet to avoid out-of-pocket expenses after an accident. The law says so.

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Imagine, for a minute, that you’re living in 1891. You’re chugging along in your brand-spanking-new gasoline-powered automobile, feeling pretty damn fly, but also slightly uneasy about the fact that there are no stop signs, rules about right-of-way, or, you know, car insurance policies. What happens if you hit a wayward tree root and your car flies out of control and into a hitching post?

Believe it or not, there was a window of time between the invention of cars and the birth of car insurance. First, take a minute to give thanks that you weren’t around for that seven-year period of dread. Then bring yourself back to today and your more pressing questions, like:

What exactly is auto insurance?

Maybe it’s best to start with a definition of insurance, period.

Here’s Merriam-Webster’s definition:


  • Insurance: An agreement in which a person makes regular payments to a company and the company promises to pay money if the person is injured or dies, or to pay money equal to the value of something (such as a house or car) if it is damaged, lost, or stolen.


But we think we can do better:


  • Insurance* (noun) (*This Definition Written In Plain English): A deal between you and a company: You pay them a set monthly amount. In return, the company promises to pay for possible future damage, injury, or loss. In other words, because you know the unpleasant-but-undeniable stats about accidents (more on that in a minute), you pay a small chunk each month to cover them, instead of paying for the whole thing after the fact.



Insurance folks talk a lot about risk. The fact is, walking out your front door is a bold move. And for drivers, dangers lurk at every (literal) turn.  Car insurance industry experts estimate that you’ll file one claim every 17.9 years or so—that adds up to an average of three or four accidents over a lifetime. Think about that. Not one, not even two. If you know you’ll almost certainly have a wreck, doesn’t it make sense to protect yourself?

That’s exactly what auto insurance does. Instead of you having to pay for the damages from a wreck or act of nature (hello, hail!) out of your stylish-but-not-super-deep pockets, your insurance company does. How can they manage this? They ‘assume’, or take on, your risk, along with a bunch of other folks, too. Your monthly payment (or premium) goes into a pool with a lot of other premiums, and when a wreck happens and the money shark comes calling, the company can then pull out however many premium-fish are necessary to keep him satisfied—and keep him from tearing your arm off.

There are four basic components of auto insurance:

Liability Coverage: If you screw up on the road, this is what you need. (And what most states require legally). Liability covers the injury or property damage that you may cause someone else.

In other words: covers the OTHER person in an accident

Medical Coverage: Medical can cover the cost of treating your injuries or injuries of your passengers—sometimes extending even to include lost wages or rehab.

In other words: covers you & yours when you get hurt in an accident

Physical Damage (Full) Coverage:  If somebody steals your car and they get pulled over immediately for your broken taillight or your car gets damaged, physical damage coverage is your new best friend.  You'll often hear this referred to as "Full Coverage" but this only describes what covers damage to your car.  

In other words: protects your car against risks like theft, fire, weather, and accidents

Uninsured & Underinsured Motorist Coverage: Unfortunately, not everyone is smart enough to pay for car insurance. If you get in a wreck and an uninsured jerk driver is at fault, this helps protect you anyway, covering medical bills for you (and in some states, damage to your car).

In other words: You’re still protected even if the other driver is uninsured.

Why do I really need car insurance?

Well, like we said: You’ll get hosed without it. Without car insurance, each time you take that giant, fancy, dangerous machine out for a spin, you may as well take along the contents of your bank account and buckle them in for the ride. Could get bumpy!

Just in case you’re still not convinced, here are three other totally reasonable arguments for the intrinsic worth of car insurance:


  • The dumbest kid you graduated high school with? He has a driver’s license. Ditto the meanest bully and the principal, who was something like 70 years old back when you graduated. They all drive—and we share the same roads.
  • The law. No matter where you live, chances are the powers that be in your state (because insurance is regulated state-by-state) expect you to carry some kind of policy. And seriously: If you’re going to break a law, why not break a more exciting one?
  • After that inevitable accident we’ve already warned you that you’ll have someday, you really want take a stab at dealing with it alone? Making sure the other driver is insured, working with the other driver’s insurance, getting through claims and repairs All By Yourself, Celine-Dion style? Nah, not you, you smart, insured person.


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