One thing is for certain: If you own a car, you need auto insurance. It can help protect you financially if you’re in an accident.
Read more: How an Ally Bank Spending Account can simplify your expenses
What is car insurance?
Like other types of insurance, car insurance is a contract between you and an insurer for which you pay a premium in exchange for coverage.
Primary types of car insurance coverage
The type of car insurance you need varies by the laws in your state, the value of your vehicle and your personal preferences. Common types of required coverage include:
Type of coverage | What it covers | Is it required? |
|---|---|---|
Liability | Damage you may do to someone else or their property | Yes, in most states |
Un-/underinsured driver | Your medical expenses if you’re in an accident with an un-/underinsured driver | Yes, in some states |
Comprehensive and collision | Repairs on your car both from accidents and non-accident causes like weather | Not required by the state, but it may be required by lessor or lender |
Personal injury protection | Medical expenses for you and your passengers | Yes, in some states |
Since at least some insurance is almost always a required expense of owning a car, it’s important to consider these costs in your overall vehicle budget. With an Ally Bank Spending Account, you can set up spending buckets to allocate money towards your premium and deductible expenses.
Other add-on options to explore
If you’re looking for extra protection beyond state minimums, consider:
Guaranteed asset protection (GAP) insurance: Helps cover the difference between what you owe on your auto financing and the car’s actual cash value if it’s totaled
Roadside assistance: Helps cover breakdowns, lockouts, fuel delivery, towing and flat tire changes
No-claims bonus (NCB) protection[JK2] [AB3] : Allows you to make a certain number of claims in a year without losing your accumulated no-claims discount
Rideshare insurance: Helps bridge the coverage gap between personal car insurance and the limited commercial insurance provided by rideshare companies
How do car insurance claims work?
A car insurance claim is a formal request for payment submitted by a policyholder to the insurance company. A claim allows you to get compensation for loss that is covered by the policy.
A claims adjuster will be assigned to your claim. The adjuster may investigate an accident, as well as review estimates for repairs to your vehicle. And finally, they will inform you whether your claim is accepted and how much money your policy will pay for the claim.
How much car insurance do you need?
The amount of car insurance you need depends on your state, leasing or financing requirements and the value of your vehicle. The specific coverage minimum required also varies by each finance company To protect yourself financially, you may need more coverage than the minimum.
How much does car insurance cost?
While the average annual cost of car insurance was $2,144 in 2025 and is projected to be $2,158 in 2026, the actual amount you’ll pay depends on a number of factors. Where you live, how old you are, what your driving record looks like, your credit score and what kind of car you have each impact the cost of insurance (in addition to how much and what kind of coverage you select).
To help you understand key costs in a car insurance policy, here’s a breakdown explaining premiums and deductibles:
Insurance Policy Type | Premium | Deductible |
|---|---|---|
Definition | The amount you pay the insurance company for your policy | The amount you pay out of pocket for a car insurance claim before your insurance begins to pay |
When it’s paid | At regular intervals, typically monthly, quarterly, semi-annually or annually | When you file a claim for covered damage |
Example | A $1,200 annual premium might be paid as $100 monthly, $300 quarterly, $600 every six months or $1,200 in one lump sum (often with discounts for paying upfront) | If repairs cost $3,000 and you have a $500 deductible, you pay the first $500 and your insurer pays the remaining $2,500 |
How to choose between a higher or lower deductible
If you have an emergency savings, a clean driving record and want lower rates, you might feel confident choosing a higher deductible. But if you prefer smaller emergency expenses, drive in high-risk areas or have a history of claims, a lower deductible could be the way to go.
How to buy insurance
Comparison shopping is a good way to get the best rate possible when buying car insurance, either directly, through an agent or online. It is helpful to have the information you’ll need at hand when shopping for coverage, including a valid driver’s license and information about your vehicle, such as the VIN number.
Hit the open road with security
Now it’s time to put the information to work to help protect you and your vehicle. Map out the right coverage for your car to ensure a smooth and protected road ahead.
