Car insurance protects you against financial loss if you have an car accident. It is a contract between you and the car insurance company. You agree to pay the car insurance premium and the car insurance company agrees to pay your losses as defined in your policy.

Car insurance provides property, liability and medical coverage:

• Property coverage pays for damage to or car theft of your vehicle.
• Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
• Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses. 

An car insurance policy is comprised of six different kinds of coverage. Most states require you to buy some, but not all, of these coverages. If you're financing a car, your lender may also have requirements.

Most car policies are for six months to a year. Your car insurance company should notify you by mail when it’s time to renew the car insurance policy and to pay your car insurance premium.

Source: Insurance Information Institute, Inc. www.iii.org

What determines the price of my car insurance policy?

There are many factors that influence the price you pay for car insurance. The average American driver spends about $700 a year. Your premium may be higher or lower, depending on the following:

Your driving record

The better your record, the lower your premium. If you've had accidents or serious traffic violations, you will pay more than if you've had a clean driving record. You may also pay more if you haven't been insured for a number of years.

The number of miles you drive each year

The more miles you drive, the more chance for accidents. If you drive a lower than average number of miles per year, less than 10,000, you will pay less. For instance, some companies will give discounts to policyholders who carpool.

Where you live

Insurance companies look at local trends, such as the number of accidents, car thefts and lawsuits, as well as the cost of medical care and car repair.

Your age

In general, mature drivers have fewer accidents than less experienced drivers, particularly teenagers. So insurers generally charge more if teenagers or young people below age 25 drive your car.

The car you drive

Some cars cost more to insure than others. Variables include the likelihood of theft, the cost of the car, the cost of repairs, and the overall safety record of the car.

The amount of coverage

Of course, like anything else, the more coverage you have, the more you pay. However, you may qualify for discounts.