How Does Car Insurance Work? Key Facts You Need To Know

Car insurance offers financial protection if you, your vehicle or passengers are injured in an accident. Aside from being required in many states, it’s important to have coverage so you can enjoy the ride with peace of mind, knowing you’re protected from a range of incidents.
Author:
Lily DiGregorio
Lily DiGregorio,Staff copywriter
Lily DiGregorio
Staff copywriter specializing in auto and home insurance for The Hartford.
Reviewed By:
Ben Ewbank
Ben Ewbank,Head of Personal Lines State Product and Pricing
Ben Ewbank
Head of Personal Lines State Product and Pricing at The Hartford.
LinkedIn Profile
Updated: 01/30/2026
Read Time: 7 minutes
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Key Takeaways

  • Car insurance covers you and your passengers in a variety of scenarios, from falling objects damaging your windshield to damaged property from a crash.
  • Car insurance is required by every state except New Hampshire. Each state may have different minimum mandated amounts. Not to mention, if you have a lease or loan on your vehicle, you’ll typically also have coverage requirements from your lender.
  • As a customer of The Hartford, you can drive with confidence by taking advantage of customizable coverage amounts and exclusive benefits for AARP members to extend your protection.

How Car Insurance Works

Knowing how car insurance works helps ensure you’re protected every time you’re behind the wheel. Car insurance policies are often customizable to fit your unique needs. They offer a range of coverages and benefits to protect you, your vehicle and your passengers from costly medical expenses and legal fees.
 
Remember, if you get into an accident or experience another covered loss, you’ll have to pay your deductible before insurance will kick in to cover the rest of the expenses for your car insurance claim.
 

What Is Car Insurance?

Car insurance offers financial protection if you, your vehicle or passengers get hurt in an accident. Required in most states, car insurance helps protect everyone on the road from unintended expenses and can be tailored to meet your specific needs.
 
Car insurance can help pay for:
 
  • Repairs or replacements to your vehicle.
  • Medical expenses for your passengers and yourself, even as a pedestrian in some cases.
  • Legal fees if you’re found responsible for hurting someone in an accident or damaging their property.
These are just a few of the many ways car insurance works to protect you and your loved ones.
a mother and her teen driver daughter protected by knowing how does auto insurance work

What Is the Purpose of Auto Insurance?

Why is car insurance important? Without it, you’d have to pay for costly claims out of pocket. This could put your personal assets at financial risk. If you’re wondering how to switch car insurance companies, start by researching as many as you can. This will help you compare car insurance quotes and the benefits that each insurer offers. Consider extra perks, like The Hartford’s help with finding a repair shop or getting a rental car, as well as our exclusive benefits offered to AARP members.

Do I Need Car Insurance?

Except for New Hampshire, every U.S. state requires drivers to have at least the minimum amount of car insurance coverage. In New Hampshire, you're required to show proof of financial responsibility after an at-fault accident.
 
If you don’t have car insurance where you’re required to, you’ll be responsible for claims costs as well as fines, legal fees and possible criminal charges. Your state’s laws will tell you the minimum amount you need for property damage liability and bodily injury liability insurance coverages.
 
Also, if you have a loan or lease on your vehicle, your lender will likely require you to have both comprehensive insurance coverage and collision coverage.
 
Together, these four coverages are key components to a full coverage auto insurance policy.
With AARP® Auto Insurance from The Hartford,1 you can enjoy customizable coverage options and additional benefits to help avoid paying out of pocket for repairs or injuries. 
 
Not sure how much car insurance you need? The Hartford’s car insurance calculator will help you estimate your coverage amounts based on where you live and your insurance goals.
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Why Do We Ask This?
States have requirements for how much car insurance coverage drivers must have. The minimum required amount can vary for bodily injury liability, property damage liability and uninsured and underinsured motorist coverage.
Why Do We Ask This?
If you lease or finance your car, the lender or leasing company typically has coverage requirements and may have to be named on the policy.
When It Comes To Insurance, What Matters Most?

Why Do We Ask This?
Everyone has different needs for car insurance. If you want to pay less for coverage, you'll have higher out-of-pocket costs with a claim. If you want the most protection, you'll pay more for coverage but have lower out-of-pocket costs with a claim.

What Does Car Insurance Cover?

Your car insurance helps pay for different costs if you get into an accident, even down to lost wages if you can’t work due to injuries caused by the accident. Through additional car insurance coverages and optional benefits, The Hartford makes it easy to increase your level of protection. Offerings include:
 
The Hartford can also help protect vehicles used for business purposes. Learn more about our commercial auto insurance offerings.
 

What Does Car Insurance Not Cover?

Car insurance offers extensive protection for you, your vehicle and your passengers, but it doesn’t cover everything. Car insurance does not cover:
 
  • Vehicle damage caused by general wear and tear
  • Intentional damage that you caused to your car
  • Routine maintenance like oil changes or tire rotations

How Does a Car Insurance Deductible Work?

When you get a car insurance policy, you’ll choose your coverage types and deductible amount. If you get into a car accident and file a claim, you’ll have to pay a deductible before your insurance will kick in to cover the rest.
 
Car insurance deductible amounts can range from $250 to $1,000. If you choose a high deductible, your rate for car insurance may go down, but you’d have more out-of-pocket claims costs. If you choose a lower deductible, you’d have lower out-of-pocket costs, but your car insurance premiums may be higher.
 

How Is Car Insurance Priced?

Insurers look at many factors when determining rates for auto insurance, such as your:
 
  • Driving record, because a clean claims history means you’re a safe driver.
  • Location, since car insurance prices can vary even by zip code, depending on how populated your area is.
  • Coverage history to make sure you’ve had continuous auto insurance protection.
  • Vehicle details, such as the make, model and year of your car.
  • Deductible amount, because a higher deductible can lower your rate.
 While prices are specific and vary based on individual factors, the average car insurance cost per month for The Hartford’s customers is between $121 and $162.2
new female car owner happy knowing how car insurance works

How To Get Car Insurance

Finding the right car insurance doesn’t have to be hard. At The Hartford, we make it easy for you to find the right policy for your unique needs. Within a few minutes, you can get a quote online for AARP Auto Insurance from The Hartford or by calling us at 888-546-9099.

Frequently Asked Questions About : How Auto Insurance Works

If you’re driving a rental car and have rental car insurance coverage, you may not need optional coverages that the rental company offers. At The Hartford, your car insurance coverage will automatically extend to your rental without needing to purchase anything extra.
Car insurance offers protection for both the vehicle and the person driving your car, as long as they are named on your policy. So, if someone else drives your car and gets into an accident, your insurance company will still help cover the claims.
If you get into an accident, you’ll first file a claim with your car insurance company. From there, your assigned claim representative will help you work with a repair shop or get a rental car so you can get back on the road. Your insurance will provide coverage for damages to your vehicle or injuries to yourself or other passengers, as long as it’s a covered loss.
If you have an accident and your vehicle is totaled, it means repairs cost more than the value of your vehicle. After you file a claim, car insurance companies can use information from an appraisal company and an adjuster to determine a car’s value. Insurers make offers based on the actual cash value of a car, which is less than the replacement costs or what it’ll cost you to get a new vehicle.
If you have multiple drivers on your policy, your car insurance will provide coverage for them as long as the vehicles they drive are also listed.

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2 Auto insurance rates by age range from 9/1/22 to 8/31/23.
 
Additional disclosures below.
AARP® Auto Insurance
Quick Links
FAQs
For AARP® Members
Additional Resources
Summaries of coverages and policy features are for informational purposes only. In the event of loss, the actual terms and conditions set forth in your policy will determine your coverage.
 
AARP and its affiliates are not insurers. Paid endorsement. The Hartford pays royalty fees to AARP for the use of its intellectual property. These fees are used for the general purposes of AARP. AARP membership is required for Program eligibility in most states.
 
The AARP Auto Insurance Program from The Hartford is underwritten by Hartford Fire Insurance Company and its affiliates, One Hartford Plaza, Hartford, CT 06155. It is underwritten in AZ, MI and MN by Hartford Insurance Company of the Southeast; in CA, by Hartford Underwriters Insurance Company; in WA, by Hartford Casualty Insurance Company; in MA, by Trumbull Insurance Company; and in PA, by Nutmeg Insurance Company and Twin City Fire Insurance Company. The AARP Home Insurance Program from The Hartford is underwritten by Hartford Fire Insurance Company and its affiliates, One Hartford Plaza, Hartford, CT 06155. It is underwritten in AZ, MI and MN by Hartford Insurance Company of the Southeast; in CA by Property and Casualty Insurance Company of Hartford; in WA, by Trumbull Insurance Company; in MA, by Trumbull Insurance Company, Sentinel Insurance Company, Hartford Insurance Company of the Midwest, and Hartford Accident and Indemnity Company; and in PA, by Nutmeg Insurance Company. The Hartford does not write new Home business in all areas, including the states of CA and FL. Savings, benefits and coverages may vary and some applicants may not qualify. The Program is currently unavailable in Canada and U.S. Territories or possessions.
 
1 In Texas, the Auto Program is underwritten by Redpoint County Mutual Insurance Company through Hartford of the Southeast General Agency, Inc. Hartford Fire Insurance Company and its affiliates are not financially responsible for insurance products underwritten and issued by Redpoint County Mutual Insurance Company. The Home Program is underwritten by Hartford Insurance Company of the Southeast.
 
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