How Much Auto Insurance Do I Really Need?

Figuring out just how much car insurance you really need can be a challenge.

At minimum, you’ll want to make sure you have enough car insurance to meet the requirements of your state or the lender who’s financing your car. Beyond that, there’s coverage you might want to add to those required amounts. These policies will help ensure that you’re adequately protecting yourself, your family, and your assets. And then there’s the coverage that actually fits within your budget.

We know it may not be a fun topic to think about what would happen if you were involved in a car accident, but given that well over five million drivers are involved in one every year, it’s a priority to get coverage. Finding a car insurance policy that checks all those boxes may take a bit of research — and possibly some compromise. Here are some of the most important factors to consider.

How Much Car Insurance Is Required by Your State?

A good launching pad for researching how much car insurance you need is to check what your state requires by law. Only two states do not require a car owner to carry some amount of insurance: New Hampshire and Virginia. If you live elsewhere, find out how much and what types of coverage a policyholder must have. Typically, there are options available. Once you’ve found this information, consider it the bare minimum to purchase.

Types of Car Insurance Coverage

As you dig into the topic, you’ll hear a lot of different terms used to describe the various kinds of coverage that are offered. Let’s take a closer look here:

Liability Coverage

Most states require drivers to carry auto liability insurance. What it does: It helps pay the cost of damages to others involved in an accident if it’s determined you were at fault. Let’s say you were to cause an accident, whether that means rear-ending a car or backing into your neighbor’s fence while pulling out of a shared driveway. Your insurance would pay for the other driver’s repairs, medical bills, lost wages, and other related costs. What it wouldn’t pay for: Your costs or the costs relating to passengers in your car.

Each state sets its own minimum requirements for this liability coverage. For example, in California, drivers must carry at least $15,000 in coverage for the injury/death of one person, $30,000 for injury/death to more than one person, and $5,000 for damage to property. The shorthand for this, in terms of shopping for car insurance, would be that you have 15/30/5 coverage.

But in Maryland, the amounts are much higher: $30,000 in bodily injury liability per person, $60,000 in bodily injury liability per accident (if there are multiple injuries), and $15,000 in property damage liability per accident. (That would be 30/60/15 coverage.)

And some may want to go beyond what the state requires. If you carry $15,000 worth of property damage liability coverage, for example, and you get in an accident that causes $25,000 worth of damage to someone else’s car, your insurance company will only pay the $15,000 policy limit. You’d be expected to come up with the remaining $10,000.

Generally, recommendations suggest you purchase as much as you could lose if a lawsuit were filed against you and you lost. In California, some say that you may want 250/500/100 in coverage – much more than the 15/30/5 mandated by law.

Recommended: What Does Liability Auto Insurance Typically Cover?

Collision Coverage

Collision insurance pays to repair or replace your vehicle if it’s damaged in an accident with another car that was your fault. It will also help pay for repairs if, say, you hit an inanimate object, be it a fence, tree, guardrail, building, dumpster, pothole, or anything else.

If you have a car loan or lease, you’ll need collision coverage. If, however, your car is paid off or isn’t worth much, you may decide you don’t need collision coverage. For instance, if your car is old and its value is quite low, is it worth paying for this kind of premium, which can certainly add up over the years?

But if you depend on your vehicle and you can’t afford to replace it, or you can’t afford to pay out of pocket for damages, collision coverage may well be worth having. You also may want to keep your personal risk tolerance in mind when considering collision coverage. If the cost of even a minor fender bender makes you nervous, this kind of insurance could help you feel a lot more comfortable when you get behind the wheel.

Comprehensive Coverage

When you drive, you know that unexpected events happen. A pebble can hit your windshield as you drive on the highway and cause a crack. A tree branch can go flying in a storm and put a major dent in your car. Comprehensive insurance covers these events and more. It’s a policy that pays for physical damage to your car that doesn’t happen in a collision, including theft, vandalism, a broken window, weather damage, or even hitting a deer or some other animal.

If you finance or lease your car, your lender will probably require it. But even if you own your car outright, you may want to consider comprehensive coverage. The cost of including it in your policy could be relatively small compared to what it would take to repair or replace your car if it’s damaged or stolen.

Personal Injury Protection and Medical Payments Coverage

Several states require Personal Injury Protection (PIP) or Medical Payments coverage (MedPay for short). This is typically part of the state’s no-fault auto insurance laws, which say that if a policyholder is injured in a crash, that person’s insurance pays for their medical care, regardless of who caused the accident.

While these two types of medical coverage help pay for medical expenses that you and any passengers in your car sustain in an accident, there is a difference. MedPay pays for medical expenses only, and is often available only in small increments, up to $5,000. PIP may also cover loss of income, funeral expenses, and other costs. The amount required varies hugely depending on where you live. For instance, in Utah, it’s $3,000 per person coverage; in New York, it’s $50,000 per person.

Uninsured/Underinsured Motorist Coverage

Despite the fact that the vast majority of states require car insurance, there are lots of uninsured drivers out there. The number of them on the road can range from one in eight to one in five! In addition, there are people on the road who have the bare minimum of coverage, which may not be adequate when accidents occur.

For these reasons, you may want to take out Uninsured Motorist (UM) or Underinsured Motorist (UIM) coverage Many states require these policies, which are designed to protect you if you’re in an accident with a motorist who has little or no insurance. In states that require this type of coverage, the minimums are generally set at about $25,000 per person and $50,000 per accident. But the exact amounts vary from state to state. And you may choose to carry this coverage even if it isn’t required in your state.

If you’re seriously injured in an accident caused by a driver who doesn’t carry liability car insurance, uninsured motorist coverage could help you and your passengers avoid paying some scary-high medical bills.

Let’s take a quick look at some terms you may see if you shop for this kind of coverage:

Uninsured motorist bodily injury coverage (UMBI)

This kind of policy covers your medical bills, lost wages, as well as pain and suffering after an accident when the other driver is not insured. Additionally, it provides coverage for those costs if any passengers were in your vehicle when the accident occurred.

Uninsured motorist property damage coverage (UMPD)

With this kind of policy, your insurer will pay for repairs to your car plus other property if someone who doesn’t carry insurance is responsible for an accident. Some policies in certain states may also provide coverage if you’re involved in a hit-and-run incident.

Underinsured motorist coverage (UIM)

Let’s say you and a passenger get into an accident that’s the other driver’s fault, and the medical bills total $20,000…but the person responsible is only insured for $15,000. A UIM policy would step in and pay the difference to help you out.

Recommended: How to Pay for Medical Bills You Can’t Afford

Guaranteed Auto Protection (GAP) Insurance

Here’s another kind of insurance to consider: GAP insurance, which recognizes that cars can quickly depreciate in value and helps you manage that. For example, if your car were stolen or totaled in an accident (though we hope that never happens), GAP coverage will pay the difference between what its actual value is (say, $5,000) and what you still owe on your auto loan or lease (for example, $10,000).

GAP insurance is optional and generally requires that you add it onto a full coverage auto insurance policy. In some instances, this coverage may be rolled in with an auto lease.

Non-Owner Coverage

You may think you don’t need car insurance if you don’t own a car. (Maybe you take public transportation or ride your bike most of the time.) But if you still plan to drive occasionally — when you travel and rent a car, for example, or you sometimes borrow a friend’s car — a non-owner policy can provide liability coverage for any bodily injury or property damage you cause.

The insurance policy on the car you’re driving will probably be considered the “primary” coverage, which means it will kick in first. Then your non-owner policy could be used for costs that are over the limits of the primary policy.

Rideshare Coverage?

If you drive for a ridesharing service like Uber or Lyft, you may want to consider adding rideshare coverage to your personal automobile policy.

Rideshare companies are required by law in some states to provide commercial insurance for drivers who are using their personal cars — but that coverage could be limited. (For example, it may not cover the time when a driver is waiting for a ride request but hasn’t actually picked up a passenger.) This coverage could fill the gaps between your personal insurance policy and any insurance provided by the ridesharing service. Whether you are behind the wheel occasionally or full-time, it’s probably worth exploring.

Recommended: Which Insurance Types Do You Really Need?

Why You Need Car Insurance

Car insurance is an important layer of protection; it helps safeguard your financial wellbeing in the case of an accident. Given how much most Americans drive – around 14,000 miles or more a year – it’s likely a valuable investment.

What If You Don’t Have Car Insurance?

There can be serious penalties for driving a car without valid insurance. Let’s take a look at a few scenarios: If an officer pulls you over and you can’t prove you have the minimum coverage required in your state, you could get a ticket. Your license could be suspended. What’s more, the officer might have your car towed away from the scene.

That’s a relatively minor inconvenience. Consider that if you’re in a car accident, the penalties for driving without insurance could be far more significant. If you caused the incident, you may be held personally responsible for paying any damages to others involved; one recent report found the average bodily injury claim totaled more than $20,000. And even if you didn’t cause the accident, the amount you can recover from the at-fault driver may be restricted.

If that convinces you of the value of auto insurance (and we hope it does), you may see big discrepancies in the amounts of coverage. For example, there may be a tremendous difference between the amount you have to have, how much you think you should have to feel secure, and what you can afford.

That’s why it can help to know what your state and your lender might require as a starting point. Keep in mind that having car insurance isn’t just about getting your car — or someone else’s — fixed or replaced. (Although that — and the fact that it’s illegal to not have insurance — may be motivation enough to at least get basic coverage.)

Having the appropriate levels of coverage can also help you protect all your other assets — your home, business, savings, etc. — if you’re in a catastrophic accident and the other parties involved decide to sue you to pay their bills. And let us emphasize: Your state’s minimum liability requirements may not be enough to cover those costs — and you could end up paying the difference out of pocket, which could have a huge impact on your finances.

Finding the Best Car Insurance for You

If you’re convinced of the value of getting car insurance, the next step is to decide on the right policy for you. Often, the question on people’s minds is, “How can I balance getting the right coverage at an affordable price?”

What’s the Right Amount of Car Insurance Coverage for You?

To get a ballpark figure in mind, consider these numbers:

Type of Coverage Basic Good Excellent
Liability Your state’s minimum •   $100,000/person for bodily injury liability

◦   $300,000/ accident for bodily injury liability

◦   $100,000 for property damage

•   $250,000/person for bodily injury liability

◦   $500,000/ accident for bodily injury liability

◦   $250,000 for property damage

Collision Not required Recommended Recommended
Comprehensive Not required Recommended Recommended
Personal Injury Protection (PIP) Your state’s minimum $40,000 Your state’s maximum
Uninsured and Underinsured Motorist (UM, UIM) Coverage Your state’s minimum •   $100,000/person for bodily injury liability

◦   $300,000/ accident for bodily injury liability

•   $250,000/person for bodily injury liability

◦   $500,000/ accident for bodily injury liability

Here are some points to consider that will help you get the best policy for you.

Designing a Policy that Works for You

Your insurance company will probably offer several coverage options, and you may be able to build a policy around what you need based on your lifestyle. For example, if your car is paid off and worth only a few thousand dollars, you may choose to opt out of collision insurance in order to get more liability coverage.

Choosing a Deductible

Your deductible is the amount you might have to pay out personally before your insurance company begins paying any damages. Let’s say your car insurance policy has a $500 deductible, and you hit a guardrail on the highway when you swerve to avoid a collision. If the damage was $2,500, you would pay the $500 deductible and your insurer would pay for the other $2,000 in repairs. (Worth noting: You may have two different deductibles when you hold an auto insurance policy — one for comprehensive coverage and one for collision.)

Just as with your health insurance, your insurance company will likely offer you a lower premium if you choose to go with a higher deductible ($1,000 instead of $500, for example). Also, you typically pay this deductible every time you file a claim. It’s not like the situation with some health insurance policies, in which you satisfy a deductible once a year.

If you have savings or some other source of money you could use for repairs, you might be able to go with a higher deductible and save on your insurance payments. But if you aren’t sure where the money would come from in a pinch, it may make sense to opt for a lower deductible.

Recommended: Different Types of Insurance Deductibles

Checking the Costs of Added Coverage

As you assess how much coverage to get, here’s some good news: Buying twice as much liability coverage won’t necessarily double the price of your premium. You may be able to manage more coverage than you think. Before settling for a bare-bones policy, it can help to check on what it might cost to increase your coverage. This information is often easily available online, via calculator tools, rather than by spending time on the phone with a salesperson.

Finding Discounts that Could Help You Save

Some insurers (including SoFi Protect) reward safe drivers or “good drivers” with lower premiums. If you have a clean driving record, free of accidents and claims, you are a low risk for your insurer and they may extend you a discount.

Another way to save: Bundling car and home insurance is another way to cut costs. Look for any discounts or packages that would help you save.

The Takeaway

Buying car insurance is an important step in protecting yourself in case of an accident or theft. It’s not just about repairing or replacing your vehicle. It’s also about ensuring that medical fees and lost wages are protected – and securing your assets if there were ever a lawsuit filed against you. These are potentially life-altering situations, so it’s worth spending a bit of time on the few key steps that will help you get the right coverage at the right price. It begins with knowing what your state or your car-loan lender requires. Then, you’ll review the different kinds of policies and premiums available. Put these pieces together, and you’ll find the insurance that best suits your needs and budget.

A Simple Way to Get Great Car Insurance

Feeling uncertain about how much auto insurance you really need or what kind of premium you might have to pay to get what you want? Check out SoFi Protect, which uses the Root mobile app to measure your driving habits. The better you drive, the more you can save.

Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


Take These 4 Steps to Lower Your Cost of Living — Without Moving

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How Much Does Insurance Go Up After an Accident?

Those moments right after a car accident deliver some of the worst stress imaginable. You’re figuring out if anyone is hurt and how bad your car’s been damaged. And before too long you’re asking yourself this stomach-churning question:

“How much will my insurance go up after an accident?”

There are many factors at play: Who was at fault, how serious the injuries and damage, your driving record, what state you live in, and the policies of your chosen insurance company.

Understanding these factors and digging into the forces controlling car insurance rates can help you pursue the best options possible.

Why Do Rates Go Up After an Accident?

Auto insurance is a highly competitive business, and that competition plays a role in keeping rates low. But that also means that when an accident happens there can be quite a jump.

When you’ve had a car accident and you are at fault, your insurer now assumes you drive in a way that could cause an accident. That may sound unfair, but they are assuming a higher risk, and that is passed on to you in the form of a higher rate.

If you are found not at fault in the accident, your insurance rate may go up by a small percentage. California and Oklahoma are two states, however, that mandate insurance companies cannot raise insurance rates after an accident where the driver was not at fault.

This is yet another reason why it’s important to go over the policies carefully when making your choice. It’s smart to compare the rates among top insurers and even look at how much insurance increases after an accident with various insurers.

There is one bright spot in the insurance landscape when dealing with an accident. If your insurer offers and you elect to pay for accident forgiveness, your insurance rate will not go up after your first at-fault accident. Driving record and driving experience requirements must be met before this benefit is available.

Recommended: Auto Insurance Terms, Explained

Average Rate Increases by State

Experts say that after an at-fault accident, yes, your car insurance is likely to go up, with the average amount ranging between 38% and 53%.

In 19 states, average rates increased at least 50% after an at-fault accident, according to NerdWallet.

How much insurance goes up after an accident, on average, is dependent on the state in which you’re insured.

Average Car Insurance Rate Increase After an At-Fault Accident

State Average Rate Increase (%)
Alabama 34
Alaska 31
Arkansas 51
Arizona 34
California 74
Colorado 34
Connecticut 47
Delaware 28
District of Columbia 36
Florida 40
Georgia 45
Hawaii 39
Idaho 36
Iowa 44
Illinois 45
Indiana 47
Kansas 61
Kentucky 65
Louisiana 37
Maine 47
Maryland 45
Massachusetts 62
Michigan 50
Minnesota 36
Mississippi 44
Missouri 30
Montana 43
Nebraska 37
North Carolina 63
North Dakota 28
New Hampshire 34
New Jersey 65
New Mexico 34
New York 26
Nevada 36
Ohio 46
Oklahoma 40
Oregon 40
Pennsylvania 45
Rhode Island 48
South Carolina 40
South Dakota 36
Tennessee 38
Texas 43
Utah 40
Vermont 44
Virginia 43
Washington 38
West Virginia 44
Wisconsin 44
Wyoming 32

Source: Forbes Advisor

How Do I Keep My Rates Low After an Accident?

If you’ve had a car accident, there are some things you may be able to do to keep your car insurance rates from rising.

First, explore discounts that you may have overlooked. Check with your insurer to make sure you’re receiving discounts you’re eligible for.

•   If you haven’t already signed up for paperless billing, now might be a good time to take advantage of the discount you may receive with this option.

•   The number of miles you drive annually is one factor that goes into calculating your insurance rate. Check with your insurer to make sure your rate correctly reflects your annual mileage.

•   Consider a usage-based insurance that tracks different elements of your driving habits and sets your rate accordingly. Better driving habits equate to lower rates.

•   Ask about multi-policy discounts if you have all your policies with one insurer.

•   Check into military and government employee discounts.

Another tactic that might be worth pursuing if you’ve had an accident but are looking for ways to decrease your car insurance rate is to increase your deductible. The higher your deductible, the lower your premium.

Look into how much insurance you’re carrying on the car. It’s worth your time to determine how much coverage you need. If your car is worth less than the deductible plus your annual total for car insurance, it could be time to rethink your coverage.

And another thing to scrutinize is what kind of car you drive. Some cars are cheaper to insure than others.

When Does Car Insurance Go Down After an Accident?

Experts say it takes three to five years for car insurance to go down following most at-fault accidents. The insurers are going by the statistical wisdom that if you’re in one accident, the chances are higher that you will be in another. Some insurers also take into account the seriousness of the accident and whether impaired driving was a factor in the accident.

One tactic people employ to lower their rates is to shop around for a new insurer. While the record of the accident and claim will be visible to a second insurer, you may still be able to get better deals.

Your insurance rates will also be affected by your credit. Merely being involved in an accident will not damage your credit, but an improvement in your credit score can be used as leverage in getting a lower premium.

Don’t rule out getting a brushup on your driving to improve those skills. Some insurance companies will discount your rates if you complete a defensive driving or driver education course.

Recommended: Car Insurance Guide for New Drivers and 3 Ways to Save

The Takeaway

The question of how much does car insurance go up after an accident has an answer that can seem hard to figure out. The average rate increase ranges between 38% and 53%, and any potential increase may be dependent on a variety of factors including who was at fault, the seriousness of the accident, your driving record, and to a surprising degree, which state you live in.

Taking the opportunity to compare car insurance companies before committing to a policy can be a smart move that might save you money on your insurance rate. SoFi, powered by Gabi, provides a tool to compare car insurance rates from multiple companies so you can get the coverage and rate that works for your needs.

Find the car insurance rate that works for you.

Photo credit: iStock/simpson33

Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’swebsite .
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.


How to Buy Car Insurance in 5 Simple Steps

If you drive a car, you need car insurance — and not just because it’s the law in every state except New Hampshire and Virginia.

Fortunately, these days, getting car insurance is usually a simple process. You can buy car insurance online, over the phone, or even in person — but the easiest way to do so is with a few mouse clicks.

5 Steps to Getting Car Insurance

Knowing how to get car insurance for the type of vehicle you have and what your driving habits are is easier when you know your way around the car insurance market. Here’s our step-by-step guide to buying automobile insurance.

1. Figure Out What Type Of Coverage You Need.

The first step in learning how to get insurance on a car? Understanding what car insurance is in the first place and how much coverage you really need.

There’s a veritable dictionary of different auto insurance terms to understand, but one of the most important distinctions is between liability insurance and full insurance coverage.

•   Liability insurance is coverage that pays out to another driver if you’re found to be at fault in an accident. Liability insurance is further split into property damage and bodily injury coverage, coverage for vehicular damages and medical expenses, respectively.

•   Uninsured/underinsured motorist coverage is another type of liability insurance that pays out in the event of an accident involving another driver who doesn’t have insurance (or much of it).

•   Full coverage includes liability insurance but also pays out for damage to your own vehicle, even if you’re at fault. This may include collision coverage, which, as its name implies, pays out in the event of an accident involving another vehicle, and comprehensive coverage, which pays out in the event of non-collision damages, such as fire, falling objects, or glass damage.

•   You may also be able to purchase medical payments coverage, which can offset the cost of your medical bills in the event of an accident, personal injury protection insurance, which can help with lost wages and other expenses. These types of coverage kick in regardless of who’s at fault.

Most state laws only require liability insurance — though this varies, as do the minimum policy limits in each state, so be sure to get familiar with your state laws before you go shopping.

Still, full coverage might be a good idea: Even in a minor accident, you might be facing thousands of dollars in repair costs, not to mention random damages like a windshield crack due to a rock kicked up on the highway.

Keep in mind, too, that even full coverage doesn’t mean everything is covered, or coverages are unlimited. How much coverage you decide you want is up to you. It’s worth factoring in the age and value of your vehicle, other coverages you may have that can help, and how high a deductible you could afford to pay out of pocket in the event of an accident. Higher deductibles generally mean lower monthly car premiums — but, of course, you’re on the hook for a larger portion of the expenses if you do need to file a claim.

2. Gather Your Information.

Once you have an idea of what kind of coverage you need, it’s time to get serious about shopping. You’ll need certain information in order to buy an auto insurance policy, so in order to make the transaction go smoothly, it’s a good idea to gather those ahead of time:

•   The name and birth date of every driver to be put on the policy.

•   The driver’s license number and issuing state of every driver to be put on the policy.

•   The driving history (both at-fault and not-at-fault accidents) of every driver to be put on the policy.

•   The car’s make, model, and vehicle identification number.

•   The car’s current mileage.

•   The estimated mileage the car is driven each year, as well as its primary purpose (business or leisure).

•   Any car safety features, like car alarms.

•   The address the car is kept at most of the time.

•   The name and policy number of your current insurance plan, if you have one.

Other information may be required, too, but gathering these details ahead of time should help save you some time.

3. Choose Your Shopping Method.

There are three main ways to purchase car insurance: Directly, through a captive agent, or with an independent broker.

•   Buying auto insurance directly (either online or over the phone) from an insurance company means you can get hands-on and do the research yourself. However, getting individual quotes from a variety of different companies can take time.

•   Buying auto insurance through a captive agent means you’re working with a representative from a single insurance company, which can be useful if you want a single point of contact who can help walk you through every step of the process. This might also be a good idea if you have more than one insurance policy through the same company because they may offer multi-policy discounts.

•   Buying auto insurance through an independent broker can create a bespoke insurance-buying experience where the broker does the footwork of shopping around for the best deal to suit your needs. However, your premiums may include a broker’s fee, pushing them higher.

Each approach has its own drawbacks and benefits, and the best one when deciding how to get auto insurance for you will depend on your preferences.

4. Compare Quotes.

Car insurance is one of those areas of life where you can save a lot of money by shopping around. Of course getting multiple quotes can be time consuming, but given that car insurance premiums can cost more than $100 per month, it might just be worth your time.

Fortunately, these days, there are some great auto insurance comparison websites and apps that can help you see your potential savings by filling out just a single form. (Do be aware that you may start getting phone calls, emails, and letters from insurers eager to acquire your business, however.)

Recommended: Car Insurance Guide for New Drivers and 3 Ways to Save

5. Drive Happy — But Check In Regularly.

We’ve all heard the commercials, but it really is true: You may stand to save money by switching your car insurance to a different carrier, so it’s worth checking in at least once a year to make sure you’re happy with your coverage and its cost.

That said, many carriers also offer loyalty discounts to those who stay with their carrier for long periods of time, and your insurer may be able to match a lower offer you get elsewhere. Your car insurance premium may get lower over time if you improve your driving record or your credit history, and you may also be able to score discounts by bundling different types of insurance from the same provider (like renters insurance, homeowners insurance, etc).

Of course, it’s not just monthly costs that are worth checking in on. You may decide you want more or less coverage over time or as your life situation changes, which is another good reason to check in from time to time. Additionally, if you do decide to switch carriers, make sure you’re purchasing a policy of equivalent coverage — otherwise, you’re not saving money on an equivalent product, you’re just buying something cheaper from elsewhere.

Recommended: 5 Steps to Switching Your Car Insurance

The Takeaway

Knowing how to buy car insurance might not be exciting, but car insurance is an important financial product that could relieve a financial burden in the case of an accident.

And shopping around doesn’t have to be time-intensive or complicated. SoFi Protect has teamed up with Gabi to offer an easy-to-use auto insurance comparison tool that can help you find the best-priced policy for your specific requirements. Gabi can even help you cancel your old policy — all in just a few minutes.

Learn more about comparing car insurance policies.

Photo credit: iStock/LumiNola

Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.


5 Steps to Switching Your Car Insurance

To some, it may sound like as much fun as the dentist, but switching car insurance companies can make a great deal of sense. Besides, getting new car insurance really doesn’t have to be an ordeal.

That being said, to make sure you’re getting the best policy for your situation — and snagging that price cut that many people score when they make a successful switch — it’s important to follow a step-by-step plan. Read on to learn what to do if you’re wondering how to switch car insurance.

When Do You Need to Switch Car Insurance?

Wondering whether switching car insurance companies makes sense? Here are some common reasons to make the change:

•   Your life circumstances have changed: Many people seek a new policy when their life has changed. Clearly if you have bought a new car, you need to look into options. If you’re planning to move to another state (or even to a different zip code), if you want to add a spouse or a child to the plan or even if you have a new job, your existing insurance might no longer be the best fit.

•   You want to lower costs: Getting the least expensive premium is often the goal of getting new car insurance. If you noticed a sharp increase in your premium and didn’t have an accident or any other triggering incident, then switching may be a good way to lower your car insurance premiums.

•   You’re dissatisfied or looking to get certain perks: There are other reasons to change insurers aside from cost. Maybe you had a poor customer service experience with your current provider. Or perhaps you want a service that another insurer offers, like free roadside assistance.

•   Your credit score changed drastically: Another reason you might want to consider getting new car insurance is a drastic decrease or increase in your credit score. That shift could have a good (or bad) effect on your present policy, but a different insurer could look at it differently, so it’s worth your time to investigate. (Note: California, Hawaii, Massachusetts, Michigan, and New Jersey don’t let insurers set policy rates based on credit scores.)

On the other hand, there are some times when changing up your insurance might not be the best idea, including when:

•   You’ve just had an accident or gotten a ticket: If you’ve had a recent accident or received a ticket, it might not be a good time for a change. Your insurer will likely raise your rate but the recalculation won’t take effect until your annual renewal time. You may as well take advantage of the months you have left before the policy renews.

•   You’ll lose certain benefits if you switch: Some companies offer loyalty discounts or accident forgiveness clauses for customers who stick with them. Make sure the loss of those benefits is worth it to you.

How to Switch Car Insurance in 5 Steps

If you’re ready to change car insurance, here’s what to do.

1. Research and Evaluate Your Coverage Needs

Do you have too much insurance or too little? The former could strain your budget, but the latter could leave you exposed to financial disaster.

Nearly every state makes it a law that you pay for some liability coverage or you can’t drive the car. After figuring out that base, it’s time to determine your collision and comprehensive car insurance needs.

Taking into account your type of car, your driver’s record and your assets, you can determine how much coverage you really need. You need to know that before you approach insurers eager for your business.

2. Shop Around

There are many more car insurance companies out there than you may realize, making it a highly competitive business. Experts recommend that you get quotes from at least three insurers.

You’ll need to have facts ready to feed into the evaluation to get a quote, including:

•   The address where the car will be stored

•   The car’s make, model and year

•   The Vehicle Identification Number (VIN)

•   Your driver’s license or Social Security number

Be prepared to give the same facts to each insurer so it’s an accurate comparison.

Also, check out the companies’ customer service records and review each company’s payment options. Don’t forget to find out what discounts that you could qualify for too.

3. Contact Your Current Insurer

Once you’ve picked your new plan and have proof of insurance, contact your previous insurance company to cancel. Some insurance companies will penalize you if you cancel before the policy expires, so be sure to keep this in mind.

To be on the safe side, log onto your account and cancel the automatic payments after you’ve ended the old policy. Some experts recommend that you put this all in writing and send a letter to your insurer, specifying to cancel the coverage by the agreed-upon date.

4. Avoid a Coverage Gap

It’s extremely important to make sure there are no gaps in your auto insurance, even a single day. You’ll bring a firestorm of legal and financial problems on yourself if you have an accident while uninsured, and you may even lose your driver’s license.

Also, should you seek out a new insurer in the future, if you have a record of lapsed insurance, you could be stuck with an expensive policy. So before canceling your old insurance, make sure to triple-check the effective date of your new policy.

Recommended: Auto Insurance Terms, Explained

5. Print Out Your ID Cards and Switch

After you’ve signed up with your new insurer and canceled your old plan, take the former ID card out of your car or your wallet and replace it with your new one. If you haven’t received the card in the mail yet, you can always print it out.

If your state allows digital proof of ID, you can access your digital ID card through the insurer’s app.

How Often Can You Switch Car Insurance Providers?

You can switch companies as often as you like, and there is generally no penalty for doing so (though some insurers do charge a fee if you switch before the end of your coverage period). The Insurance Information Institute recommends reviewing your coverage once a year.

Aside from switching carriers entirely, you can also speak to your current insurer about updating your plan if your life circumstances have changed since you got your existing plan.

Recommended: Car Insurance Guide for New Drivers and 3 Ways to Save

The Takeaway

A better auto insurance plan might exist for you — but how to change car insurance, you wonder? It’s not that hard. Making the change requires research into how much coverage you really need, obtaining quotes, and then, once you’ve decided to switch, canceling properly and making absolutely sure there are no coverage gaps.

Once you’ve gathered all the information you’ll need, you can get those quotes. SoFi makes it easy to shop auto insurance quotes by providing an apples-to-apples comparison against your existing policy.

Photo credit: iStock/Edwin Tan

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.



Car Insurance Guide for New Drivers

Congrats, new driver: hitting the road goes a long way when it comes to freedom, autonomy, and just plain fun. But when it comes to driving, it’s safety first — and part of driving safely is having sufficient car insurance coverage.

The world of auto insurance can be a confusing one, especially for new drivers, who also often face the challenge of higher insurance premiums. Still, there are ways to save money on insurance, both immediately and as your time behind the wheel increases.

Here’s what new drivers need to know about auto insurance.

Car Insurance: The Basics

First things first: what is auto insurance, how does it work and why do you need it?

Car insurance pays out money for car repairs, medical bills, and other expenses in the event you get in an accident. Liability insurance, which pays out money to the other driver when you’re found at fault, is legally required in most states.

The amount of insurance you need depends on the law in the state you live in as well as your own risk tolerance level, but since even minor auto accidents can be very costly and most of us can’t afford to pay thousands of dollars out of pocket, auto insurance is a necessity.

Unfortunately, auto insurance can be more expensive for new drivers — but again, take heart. There are still ways to ensure you get the best possible rate.

Factors That Affect Car Insurance Price

Car insurance prices are affected by far more than just a driver’s experience level, though that’s certainly an important part of the equation. Here are some other factors that insurers will take into account while drawing up your quote:

•  Driver’s age

•  Driver’s gender

•  Driver’s marital status

•  Driver’s history of accidents and damage

•  Driver’s credit score

•  The primary location the vehicle is kept and driven in

•  The vehicle’s make, model and age

Although there are some general rules that hold true — for instance, that people with lower credit scores or worse driving records end up with higher premiums — the way some of these factors are used is less than transparent.

For example, a 2021 study by The Zebra found that women actually pay higher insurance costs than men on average in many parts of America, despite the Insurance Information Institute’s claim that women tend to have fewer accidents than men and therefore pay less for insurance.

In short, there’s no easy way to predict what your rates will look like without getting a custom quote — but it’s true that newer drivers tend to face higher insurance premiums. Which does make sense: after all, the insurance company is trying to hedge its bets that you won’t get in an accident (and therefore need an expensive claim paid out), and they don’t have a driving record to rely on while they make their best guesses.

Recommended: Auto Insurance Terms, Explained

Who’s Considered a New Driver?

Although the classic image of a new driver might be an eager teenager with their brand-new license and mom’s hand-me-down car, there are other people who fit the description, too. Drivers considered “new” include:

•  Teenagers with new driver’s licenses

•  Adults without a driving record

•  People with a gap in their driving history or car insurance coverage

•  Immigrants to the United States, whose driving records might not transfer over from their country of origin

Being a new driver doesn’t change how much insurance you’re required to purchase by state law. As mentioned, though, it can affect your price — so let’s take a closer look into solutions for each category.

Car Insurance for Teens

Teens — or, in many cases, teens’ parents — face some of the highest insurance costs out there because, let’s face it: youthful abandon and lack of experience can lead to accidents. There are some moves you can make to minimize the costs, however, including:

•  Staying on a parent’s policy: For starters, staying on a parent’s policy as long as they’re living under the same roof can keep costs relatively low for teenage drivers … but parents should still expect their policy cost to double.

•  Looking for discounts for good grades or defensive driving classes: Teens may also be able to score good student discounts by maintaining above-average grades in school, or get a discount if they attend and complete an approved defensive driving class.

•  Maintaining a good driving record: For all drivers, maintaining an accident-free driving history goes a long way toward lowering insurance costs over time. Of course, practicing care and vigilance on the road is always of paramount importance … but given how high the cost of teenagers’ insurance policies can be, there’s even more incentive.

Car Insurance for People Who Moved to the U.S.

Even if you have a robust driving history in your home country, if you immigrate to the United States, it’s unlikely to transfer over — which means you could face elevated insurance prices for the first few years you’re a U.S. driver.

Furthermore, the first step to attaining U.S. car insurance in most states is to acquire a U.S. driver’s license, which on its own can be difficult without the proper paperwork. However, certain states do offer driving privileges to unauthorized immigrants. You may need to provide documentation, such as a foreign passport or birth certificate, and the resultant license is not valid as federal identification.

Once you’re ready to shop for car insurance, we recommend obtaining several quotes to see which company can accommodate you with the coverages you need for the least amount of money.

Car Insurance for Adults Without a Driving Record

Maybe your teenage days are far off in the rearview mirror, but it’s been a long time since you’ve driven — or you’ve never driven at all.

Without a solid, recent driving history, car insurance companies will still consider you a new driver, which can push costs up. So can having a gap in car insurance coverage. (There may be exceptions to this rule if your driving gap was due to military deployment status, so be sure to run that information by your prospective insurer.)

Again, shopping around for the best quote and maintaining as clean a driving record as possible going forward will help your case considerably. If you’re confident in your driving ability and you’ve built up the savings to afford it if an accident does occur, choosing a higher deductible could also help you save money on monthly premiums.

3 Ways to Save on Car Insurance for New Drivers

Along with the tips we’ve included in the sections above, there are some universal tips that can help most new drivers — and, in fact, most drivers, period — lower their car insurance costs.

Choose Your Car Wisely

Certain cars are more expensive to insure than others — including flashy models that are likely to get stolen (or tempt their drivers into three-digit speeds). You can find lists of the cheapest cars to insure online, but generally speaking, slightly older, more modest vehicles are the least expensive to keep insured.

Improve Your Credit History

It’s really incredible how many parts of our lives credit history touches — and car insurance is no exception. While your quote is drawn up based on many factors, as mentioned above, your credit history is definitely part of it. Besides, maintaining good credit behavior is highly likely to help you elsewhere, too.

Bundle Up

Many insurance companies offer discounts to people who “bundle” coverage or purchase more than one type of insurance from the same company. So if you’re required to have renter’s insurance or have home insurance, see if buying them all from the same provider might save you some dough.

The Takeaway

Although new drivers do face higher car insurance costs, they can still find the very best deal available to them by shopping around. Better yet, these days, that doesn’t have to mean making five different phone calls. Auto insurance comparison tools, such as the one from SoFi and Gabi, make it easy to compare car insurance rates at a glance — and to seal the deal and get yourself ready to hit the road.

Photo credit: iStock/SolStock

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’swebsite .
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.



An industry Official Explains How Life Insurance Works

If you’re like most American adults, chances are high that you’ve heard of life insurance and know that it’s something you need. But what is it exactly, and how does life insurance work?
Ready to stop worrying about money?
At its basic level, it’s an agreement between you and a life insurance company. You agree to pay them and in turn, they provide you with insurance coverage. You can think of it like a subscription service: as long as you pay premiums, you’ll be covered.
Privacy Policy
The term: The length of time your policy will be in effect for — usually 10, 15, 20, 25, or 30 years, but you can also choose to be covered for your entire life, depending on the type of insurance that’s right for you.

Terms to Know

Life insurance can be extra important for small business owners. You might have taken on business debt using personal assets, like your home, as collateral. In that case, life insurance can help pay off debts that your family might otherwise have to cover.
Anyone with children should consider life insurance, whether they earn a salary or not. Even if you don’t have lost income to replace, you likely provide care that your family would have to pay for in your absence. Life insurance can also meaningfully contribute to college savings.
Covered for what? Well that really depends on you. Maybe you want to make sure your spouse will be able to pay the mortgage, no matter what happens to you. Maybe you want your kids to afford college. Or you might simply want to make sure your people will be ok paying day to day bills if you’re not around to provide for them.
This is a guest column written for The Penny Hoarder by Liana Corwin, director of communications and editor of the financial literacy blog at Ladder, a digital life insurance company that sells term life insurance at rates that can flex as customer’s financial needs change.
If you have a loan that someone else has co-signed, they may be required to make the full payments when you die. Consider life insurance if a parent has co-signed a student loan for you, for instance, or you co-borrowed a mortgage, personal loan, or home equity line of credit with a spouse, partner, or sibling.

How Does Life Insurance Work?

Premiums: The amount of money you pay in exchange for coverage.
The life insurance company will collect all that information when you apply in order to determine your premium. That process is called “underwriting.”

  • Your personal characteristics (age, health, gender, etc.)
  • The type of life insurance you choose, primarily between term and permanent
  • The coverage amount/size of your policy (how much money you want to leave your beneficiaries)

Plus, if you co-own the business, a life insurance policy where your business partner is the beneficiary can allow him or her to buy out your share from your heirs at a price you decide on now. That can prevent a scenario in which your partner isn’t able to afford taking on your share of the business, and your children are left without income from the business or the proceeds from your portion’s sale.
You can think of life insurance as a way of replacing your income if you die during your policy’s term. If you support (or will support) a spouse, kids, parents, grandparents, siblings, or others and the loss of your income would affect whether they can pay for costs like food, housing, or childcare, you need life insurance.

Do I Need Life Insurance?


1. You Contribute a Meaningful Portion of Your Family’s Income

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2. You Have Kids

Now that you have the basics, you might wonder if you need life insurance. To find out, ask yourself the following question: would your absence cause anyone financial strain? If so, the answer is yes, you need life insurance. Let’s take a look at the five top reasons you may need life insurance.

3. You Have a Mortgage or Other Shared Debt

Life insurance works like a subscription model: as long as you pay premiums, you’ll be covered. That means your beneficiaries should receive money (tax free) if you die, but it’s worth noting that claims can be denied for various reasons, like fraud or material misrepresentation (basically, not being honest on the application or the claim).

4. You Run a Business

Once you’re approved and have accepted your offer, you’ll start paying premiums. If you pass away while your policy is in place, your beneficiaries can file a claim to receive the amount of coverage you purchased.
You may want to consult with an attorney to ensure this is set up appropriately.
If you’re not in any of these groups, you may not need life insurance now, but make sure to reevaluate when major life changes happen, including when you take on debt. Also, keep in mind that buying life insurance when you’re younger can help you lock in a better price.

5. Your Life Insurance Through Work isn’t Enough

The amount you’ll pay in premiums depends on three big factors:
Most likely, it’s not. If you have access to a group life insurance policy at your workplace, there’s usually no harm in participating, especially if it’s included as part of your benefits package. But if you fall into any of the categories above, the death benefit included in your policy at work probably won’t be enough to adequately cover your beneficiaries’ needs.

None of the Above Apply?

Filing a claim: The process by which your beneficiaries can claim the coverage amount if you die.
No matter your goal, the right kind of life insurance should be a simple and affordable way to reduce the risk of getting there.


Beneficiaries: The people who will receive the coverage amount.