Financial Topics Archives

Sep

2025

A Black family of three smiling in a car, buckled up. A man drives, a woman is in the passenger seat, and a child is in the back.

Does Car Insurance Cover Other Drivers?

By Lauren Ward | Insurance | Comments Off

Table of Contents

Understanding Coverage for Other Drivers
Permissive vs. Non-Permissive Use
Whose Insurance Applies in an Accident?
Things to Consider Before Allowing Others to Drive Your Car
The Takeaway
FAQ

Oftentimes, car insurance policies do cover other drivers when someone besides you is using your vehicle. But a number of factors impact whether or not a claim will be approved by your insurer, including what drivers are listed on your policy and whether the driver had permission to drive your car.

Learn more about when your car insurance covers other drivers and when you may be liable for any damage that occurs when someone else is behind the wheel.

Key Points

• Car insurance typically covers other drivers with permission, but coverage limits apply.

• The policyholder is responsible for the deductible and potential premium increases after a claim.

• Regular users of the car should be listed on the policy to ensure coverage.

• Non-permissive use, such as a stolen car, usually isn’t covered by insurance.

• Verify that the driver has a valid license and a good driving record.

Understanding Coverage for Other Drivers

Does car insurance cover the car or the driver when an accident occurs? In general, your auto insurance policy is attached to the vehicle. But certain factors could impact whether or not another driver is covered.

How Car Insurance Typically Covers Additional Drivers

Car insurance usually covers other drivers if they have the owner’s permission to drive the vehicle. Any drivers who live in your household should be listed on your insurance policy, especially if they regularly drive your car. Otherwise, you run the risk of having a claim denied.

Coverage may also extend to people who don’t live with you. For instance, family guests staying at your home or a friend who borrows your car with your permission may be covered under your policy.

Of course, there are exceptions to keep in mind. Coverage might not apply if you rent your car out to a car-sharing company or if the vehicle is being driven for a commercial use not included in your policy. The same holds true if your policy lists any excluded drivers, such as an elderly relative or someone in the household with a poor driving record.

The Distinction Between Liability and Collision Coverage

Even if another driver is covered by your policy, getting approved for a claim depends on what your car insurance covers. Two common types of policies are:

• Liability coverage, which helps cover damage to other vehicles and property as well as medical expenses if you’re at fault.

• Collision coverage, which helps cover damage to your vehicle only when you’re involved in an accident and are at fault.

Both collision and liability auto insurance come with a maximum dollar amount covered. You’re also responsible for your deductible, which is subtracted from the reimbursement funds you may receive from your insurer.

Factors That Influence Your Coverage Limits

Coverage limits typically aren’t impacted when you let other drivers use your car, but it’s important to understand how you (and others) are covered.

• State minimums: Most states require liability insurance with a minimum amount of coverage. For instance, $25,000/$50,000/$50,000 refers to the maximum coverage for bodily injury per person, bodily injury per accident, and property damage per accident.

• Cost of premium: You can get higher coverage on both types of policies, but your premium will likely cost more.

Permissive vs. Non-Permissive Use

Whether or not car insurance covers other drivers also depends on if they had permission to get behind the wheel. This distinction is called permissive vs. non-permissive use.

Definition of Permissive Use and Its Implications

Generally speaking, permissive use is exactly how it sounds: You’ve given permission to another driver to use your car. In many cases, this means your car insurance coverage stays with your car and any driver who has your permission.

The term becomes less clear-cut when a driver regularly uses your car but isn’t listed on your policy. That could be a family member, a roommate, or a babysitter who picks up your kids, so pay attention to how frequently someone actually drives your car.

What Happens with Non-Permissive Use

There are several examples of non-permissive use, which also have an impact on whether or not car insurance covers the driver or the car.

When your car is stolen, for example, you didn’t give the driver permission. If an accident occurs and that driver is at fault, you won’t be held liable. Instead, the thief or victim will be responsible for any damages. However, damage to your own car will typically only be covered if you carry comprehensive insurance.

Examples of Scenarios for Both Types of Use

Determining whether a situation qualifies as permissive or non-permissive use involves a number of factors and plenty of nuance. Here are two interesting examples that went to court for a final ruling.

Permissive use

One court case involved a daughter who had permission from her parents to drive her car. Her friends were not allowed to drive the vehicle. But after getting sick, she asked a friend to drive, who then got in an accident. This was interpreted as an emergency due to the sudden illness and was considered permissive use.

Non-permissive use

In another court case, a mechanic had permission to drive a customer’s car while repairing it. But he was in an accident while driving the car late at night with friends (without any repair work happening), so this was ruled non-permissive use.

Recommended: How Car Insurance Works

Whose Insurance Applies in an Accident?

When two parties are involved in an accident, the insurance used to cover the damage depends on who is at fault.

Your Policy: The Role of Primary vs. Secondary Coverage

When your policy is used to cover damages from an accident, your primary insurance policy will pay out first. You can get coverage up to the limit of each component of your policy, such as liability and collision.

Remember, however, that you’re financially responsible for your deductible. So if the claim reimbursement totals $5,000 and your deductible is $500, you’ll only receive $4,500 from your insurance company.

Secondary coverage covers any eligible damage that goes beyond your primary coverage. Examples of secondary insurance include:

• Supplemental liability coverage

• Rental car insurance

• Health insurance applied to accident-related injuries

How Insurance Claims Are Processed with Multiple Policies

When you have multiple policies and someone else is driving your car, your primary policy will go into effect first. Any relevant supplemental policies will be used next, including the actual driver’s own car insurance policy.

But if the driver of another car is found at fault, their insurance coverage should pay for any damage or medical bills, even if someone else is driving your car.

If the driver of your car didn’t have permission, they will likely be liable for any damages that were their responsibility.

Situations That May Complicate Liability

One issue that can complicate liability is if you allow an uninsured driver to use your car. Your policy may still cover damages up to the policy limits, but that driver could also be liable for damages beyond your maximum coverage.

Need a refresher on how car insurance works? Consider checking out our auto insurance guide.

Things to Consider Before Allowing Others to Drive Your Car

Is it worth letting someone else drive your car? Here’s what to think about.

Potential Risks of Lending Your Vehicle

These are some common risks involved with letting someone else drive your car:

• Your insurance premium could increase after the claim.

• You’ll be responsible for the deductible.

• The claim could be denied if the other driver frequently uses your vehicle.

• You could be responsible for camera-enforced tickets .

Insurance Implications for Accidents Involving Other Drivers

When someone else is driving your car and gets into an accident, you’re responsible for the claims process. You must also pay your deductible, and as previously mentioned, your annual premium could go up.

Best Practices for Sharing Your Car Safely

Before you let anyone else drive your car, get the facts in order. Find out details around the driver’s license status, driving record, and age.

Also consider the condition of your car, as well as the weather conditions in which they’ll be driving. If you’re loaning your car to a new driver, for example, you may want to think twice if rain is in the forecast.

The Takeaway

If you’re considering loaning out your car to a friend, you may wonder, Does my car insurance cover other drivers? Typically, it does, but there are several factors that could impact whether your insurance company will approve a claim in the event of an accident. Before you decide to loan out your car, it’s a good idea to review your policy terms or talk to your insurance agent.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

SoFi brings you real rates, with no bait and switch.

FAQ

What happens if a friend crashes my car but they have their own insurance?

First, your own insurance will likely serve as the primary insurance to pay out any damages. If the damage exceeds your policy limits, your friend’s car insurance could kick in to cover the difference.

Am I covered if I get into an accident while borrowing a friend’s car?

It depends on the situation. Assuming you have permission to use the car and are not a frequent driver of their vehicle, you could be covered up to the limits of your friend’s insurance policy.

Do I need to add my roommate or a family member to my policy?

If your roommate or a family member regularly uses your vehicle, you should consider adding them to your policy.

What is an “excluded driver” on a car insurance policy?

An excluded driver is a specific individual listed on your policy who is not allowed to drive your vehicle. It could be someone in the household with a bad driving record (such as a DUI), or an elderly relative who is no longer allowed to drive.

Will my rates go up if someone else has an accident in my car?

Yes, it is possible that your rates will go up if someone else has an accident in your car. However, there may not be an impact if the driver of another vehicle was at fault.

Photo credit: iStock/Prostock-Studio

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

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.

SOPRO-Q325-025

Sep

2025

Comparing Stock Warrants vs Options

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

Table of Contents

What Are Stock Warrants?
What Are Options?
Similarities and Differences Between Warrants and Options
Pros and Cons of Warrants
Pros and Cons of Options
FAQ

Stock warrants give the holder the right to buy or sell shares of stock at a set price on or by a set date directly from the public company that issues them, whereas stock options convey the right to buy or sell shares on or before a specific date at a specific price.

The chief difference between stock warrants and stock options is that warrants are issued directly by a company that’s typically seeking to raise capital. Options are derivative contracts that investors can trade to take advantage of price fluctuations in the underlying security.

Key Points

• Stock warrants allow investors to buy shares at a specified price on a set date, directly from the issuing company, while stock options are derivative contracts traded among investors.

• Companies typically issue stock warrants to raise capital, whereas stock options are created and traded by investors, which may allow for more flexibility in trading.

• Exercising a warrant results in the issuance of new shares, which can lead to dilution, while exercising options does not typically create new shares and is settled between traders.

• Both stock warrants and options provide speculative opportunities, but differ in terms of issuance, market trading, and potential dilution effects.

• Understanding the differences between stock warrants and options is important for investors, as each serves distinct purposes and carries unique risks and potential benefits.

What Are Stock Warrants?

A stock warrant is a contract that allows the holder the right to buy shares of stock at a future date at a predetermined price. The terms of the stock warrant typically allow the holder to purchase shares at a price that is often set above the stock’s price at the time of issue. Warrants generally have longer expiration periods than standard options, often lasting up to 10 years or more.

Companies issue stock warrants directly to investors. The companies set the terms of the warrant, including the stock’s purchase price and the final date by which the investor can exercise the warrant. Warrant holders do not have an obligation to buy the shares, but if they decide to do so they would exercise the warrants via their brokerage account.

Stock warrants are typically call warrants, which give the holder the right to purchase the shares at the predetermined price, as noted above. However, there are also put warrants, which give holders the right to sell shares at a predetermined date by the expiration date.

Public companies may issue stock warrants as a means of raising capital to fund new expansion projects. A company may also issue stock warrants to investors if it faces financial trouble and needs to raise funds to potentially avoid a bankruptcy filing.

In some cases, warrants are issued by financial institutions rather than the company itself. These are called “covered warrants” and may be cash-settled, meaning they do not result in new shares or dilution of existing shares.

💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

What Are Options?

An option is a contract that gives holders the right, but not the obligation, to buy (in the case of a call option or sell, in the case of a put option, an underlying security on or before a specified date at a specified price. As with stock warrants, option holders do not have to buy or sell the underlying shares, but they have the right to do so. If they do, they would exercise the options through their brokerage account.

Exercising options means you use your right to buy or sell the option’s underlying shares. If an investor chooses not to exercise the option, it expires worthless. (Note that the seller, or writer, of an options contract is obligated to fulfill the terms of the contract if it’s exercised.) Investors can trade some options on a public exchange alongside stocks and other securities.

Recommended: How to Trade Options: An In-Depth Guide

Similarities and Differences Between Warrants and Options

Warrants and options sound alike and at first glance, they seem to imply the same thing: the right to buy or sell shares of a particular stock. But there are also important differences between these two contracts that investors should be aware of.

Similarities

Warrants and options both offer investors an opportunity to benefit from movements in a stock’s price, though options can be traded without exercising while warrants typically require exercising to acquire shares.

With both warrants and options, the investor must exercise the contract to actually acquire shares. Both have specific guidelines with regard to the price at which investors can purchase (or sell, in the case of puts) their shares and the deadline for exercising them.

Warrants and options are both speculative in nature, since investors are essentially making a directional bet on which way the underlying asset’s price may move. Neither instrument provides voting rights or dividend payments prior to exercise. Investors can use different strategies when trading options or exercising warrants to potentially improve profitability while attempting to reduce losses.

Differences

Warrants and options also have important differences. While companies issue stock warrants, traders typically buy and sell options with each other directly. Warrants create new shares when exercised, which can result in dilution. Exchange-traded stock options generally do not create new shares, aside from employee stock options, which are basically a type of call option that, when exercised, can also dilute existing shares by increasing the total amount.

When investors exercise a warrant, they receive the stock directly from the company, while options are typically settled between traders.

💡 Quick Tip: Options can be a cost-efficient way to place certain trades, because you typically purchase options contracts, not the underlying security. That said, options trading can be risky, and best done by those who are not entirely new to investing.

Stock Warrants vs Options: A Summary

Here’s a closer look at options vs. warrants.

Stock Warrants	Stock Options
Confers the right to purchase (or sell) shares of stock at a specified price on or before a specified date. Holders of the contract have the right, but not the obligation, to exercise the contract.	Confers the right to buy (or sell) shares of stock at a specified price on or before a specified date. Holders of the contract have the right, but not the obligation, to exercise the contract.
Warrants create new shares, which may result in dilution.	Options do not create new shares, so there’s no dilution (unless they are employee stock options).
Issued by the company directly to investors.	Issued by traders or market makers who write call or put options.
Original issue warrants are not listed on exchanges, but there is a secondary market for the securities.	Options can be traded on public exchanges alongside other securities.
Primarily used to raise capital for the company.	Traders can buy (or write) options to try to benefit from price movements.
Warrant holders may have a decade or more in which to exercise their right to buy shares.	Options tend to be shorter-term in nature, with expiration periods usually lasting anywhere from a few days up to 18 months.
Less commonly used in the U.S.	Options are regularly traded on public exchanges in the U.S.

Pros and Cons of Warrants

If you’re considering warrants versus options, it’s helpful to understand the advantages and disadvantages of each.

Stock warrants can offer both advantages and disadvantages to investors. Whether or not it makes sense to include stock warrants in a portfolio can depend on your individual goals, time horizon for investing and risk tolerance. Warrants are also considered geared instruments, meaning small moves in the underlying stock can produce amplified gains or losses. This leverage may increase risk.

Stock Warrant Pros	Stock Warrant Cons
Warrant holders have the right to purchase (or sell) shares of stock, but are not required to do so.	Price volatility can diminish the value of stock warrants over time.
Stocks may be offered to investors at a premium relative to the current market price.	When warrants are exercised, new shares are issued, which may result in dilution.

Pros and Cons of Options

As with stock warrants, trading options has both upsides and potential downsides. Beginning traders should have a thorough grasp of the essentials, prior to trading, to understand the complexities and risks involved. Here are some of the key points to know about trading options.

Stock Option Pros	Stock Option Cons
Options may amplify gains compared to trading in individual shares of stock.	Stock options are more sensitive to volatility which can mean higher risk for investors.
May be suited to active day traders who are hoping to capitalize on short-term price movements.	Frequent options trades can mean paying more in commissions, detracting from overall returns.
Traders can use options as a hedging tool to manage risk in uncertain market environments.	Time value decays the value of options over time.

The Takeaway

Understanding the difference between options and warrants matters if you’re considering either of these types of securities. While the language of stock warrants may sound similar to some of the terms used in options trading, these are in fact two different instruments.

Companies issue stock warrants primarily to raise capital, whereas traders typically buy and sell options with each other directly. Warrants create new shares of companies, while options do not typically cause any dilution.

SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.

With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.

Explore SoFi’s user-friendly options trading platform.

FAQ

Is a warrant the same thing as an option?

No. Warrants and options are not the same thing. Companies issue stock warrants to give investors the right to buy shares of stock at a specified price on a specified date. Stock warrants may allow investors to purchase shares of stock at a premium, while providing a longer window in which to decide whether to exercise the warrant.

Options are derivatives contracts that give buyers the right, but not the obligation to buy (in the case of a call) or sell (in the case of a put) an asset at a specific price within a certain period of time.

Can warrants exist in a SPAC?

Yes. A Special Purpose Acquisition Company (SPAC) is typically created for the purpose of acquiring or merging with an existing company. This type of arrangement may enable private companies to circumvent the traditional IPO process. A SPAC may use warrants to raise capital from investors. These warrants are generally good for up to five years following the completion of a merger or acquisition.

Why would you buy stock warrants?

Stock warrants may appeal to some investors seeking speculative exposure at a lower upfront cost than purchasing shares outright. Warrants offer the right, but not the obligation, to buy stock at a set price in the future, and this can be attractive if the stock’s price rises. Warrants may expire worthless if the share price does not exceed the strike price, however. They are generally considered higher-risk instruments and are not commonly used in traditional portfolios.

Can I sell my stock warrants?

Some stock warrants are transferable, and may be sold on a secondary market. This depends on the issuing company and the terms of the warrant terms. Liquidity can vary: while exchange-listed warrants may be easier to sell, others may have limited or no market activity. It’s important to check the specific warrant agreement to understand whether the security is tradable and what restrictions might apply.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

Photo credit: iStock/Inside Creative House

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

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.

SOIN-Q325-016

Sep

2025

What Are Power Hour Stocks? What to Know When Trading

Power Hour Stocks: What Are They and How Do You Trade Them?

By Brian O'Connell | Growing Wealth, invest, Investing | Comments Off

Table of Contents

What Is the Stock Market Power Hour?
When Does Stock Power Hour Occur?
Red Flags and Triggers to Look for During Power Hour Trading
FAQ

The power hour is a period of active trading, high volume, and volatility that tends to occur when the market opens and again when it closes. Many short-term traders find the power hour appealing because of the trading opportunities it presents.

Power hour trading generally isn’t as compelling to buy-and-hold and longer-term investors, as these short-term trades come with much higher risk exposure, despite the opportunity for gains.

Key Points

• The “power hour” refers to periods of high trading activity, volume, and volatility typically at the market’s open and close.

• While appealing to short-term traders, power hour trading carries more risk for longer-term investors.

• The first hour of trading is active due to reactions to overnight news, while the last hour sees increased activity as traders look to close positions or capitalize on heightened selling.

• Triggers for intense power hour trading include earnings reports, news about “daily gainers,” major economic news, and quarterly triple witching hour events.

• Due to increased volatility and risk, it is advisable for investors unfamiliar with choppy markets to avoid power hour trading.

What Is the Stock Market Power Hour?

During the trading day, the power hour is when traders have a concentrated time to leverage specific market opportunities. That goes for anyone trading common market securities like stocks, index funds, commodities, currencies, and derivatives, especially options trading and futures.

The power hour period typically occurs when the market opens at 9:30am ET and lasts until approximately 10:30am. Some traders identify a second power hour at the end of the day: roughly 3:30pm to 4:30pm, when the market closes.

The heightened activity during these periods comes from a confluence of factors.

• Traders digest recent news and upcoming events.

• They place new trades and look for opportunities.

• The combined activity can create short-term price volatility that some traders can take advantage of.

When Does Stock Power Hour Occur?

The term power hour is subjective, but most market observers land on two specific times in defining the term:

• The first trading hour of the market day. This is when news flows in overnight from across the world that can impact portfolio positions that investors may want to leverage, when investing online or using a brokerage.

• The last hour of the trading day. This is when sellers may be anxious to close a position for the day, and buyers trading stocks may be in a position to pounce and buy low when selling activity is high.

One commonality between the first hour of a stock market trading session and the last hour is that trading volatility tends to be higher than it is during the middle of a normal trading day. That’s primarily because traders are looking to buy or sell when demand for trading is robust, and that usually happens at or near the market opening or the market close.

Each power hour brings something different to the table, when it comes to potential investing opportunities.

Recommended: Stock Trading Basics

Power Hour Start of Day

The first hour of any trading session tends to be the most active, as traders react to overnight news and data numbers and stake out advantageous positions.

For example, an investor may have watched financial or business news the previous night, and is now reacting to a story, interview, or prediction.

Some traders refer to this scenario as “stupid money” trading, as conventional wisdom holds that one news event or headline shouldn’t sway an investor from a strategy-guided long-term investment position. The fact is, by the time the average investor reacts to overnight data, it’s likely the chance for profit is already gone.

Here’s why: Most professional day traders were likely already aware of the news, and have already priced that information into their portfolios. As the price goes up on a stock based on artificial demand, the professional traders typically step in and take the other side of the trade, knowing that in the long run, investing money will drift back to the original trade price for the stock and the professional investor will likely end up making money.

Power Hour End of Day

The last hour of the trading day may also come with high market volatility, which tends to generate more stock trading. Many professional traders tend to trade actively in the morning session and step back during mid-day trading, when volatility is lower and the market is quieter than in the first and last hours of the day.

Regular traders can perk up at the last hour of trading, where trading is typically more frequent and the size of trades generally climb as more buyers and sellers engage before the trading session closes out. Just as in the first hour of the trading day, amateur investors tend to wade into the markets, buying and selling on the day’s news.

That activity can attract bigger, more seasoned traders who may be looking to take advantage of ill-considered positions by average investors, which increases market trading toward the close.

Recommended: 7 Day Trading Strategies for Beginners

Red Flags and Triggers to Look for During Power Hour Trading

For any investor looking to gain an advantage during power hour trading, the idea is to look for specific market news that can spike market activity and heighten the chances of making a profit in the stock market.

These “triggers” may signal an imminent power hour market period, when trading can grow more volatile.

Any Earnings Report

Publicly-traded companies are obligated to release company earnings on a quarterly basis. When larger companies release earnings, the news has a tendency to move the financial markets. Depending on whether the earnings news comes in the morning or after hours, investors can typically expect higher trading to follow. That could lead to heavier power hour trading.

News on Big “Daily Gainers”

Stock market trading activity can grow more intense when specific economic or company news pushes a single large stock — or stock sector — into volatile trading territory.

For instance, if a technology company X announces a new product release, investors may want to pounce and buy that tech stock, hoping for a significant share price uptick. That can lead to higher volume trading stock X, making the company and the market more volatile (especially later in the day), thus ensuring an active power hour trading time.

Reserve/Economic News

Major economic news, like jobs reports, consumer sentiment, inflation rates, and gross domestic product (GDP) reports, are released in the morning. Big news from the Federal Reserve typically comes later in the day, after a key speech by a Fed officer or news of an interest rate move after a Fed Open Markets Committee meeting.

Make no mistake, news on both fronts can be big market movers, and can lead to even more powerful power hour trading sessions.

Anticipation of huge economic news, like a Federal Reserve interest rate hike or the release of the U.S. government’s monthly non-farm labor report, can move markets before the actual news is released, potentially fueling an even larger trading surge after the news is released, either at the open (for government economic news) or at the end of the trading day (for Federal Reserve news).

Triple Witching Hour Events

Quarterly triple witching hours — when stock options, futures and index contracts expire on four separate Fridays during the year — historically have had a substantial impact on market activity on those Friday afternoons, in advance of the contracts expiring at the days’ end.

When options contracts involving larger companies expire, market activity on a Friday afternoon prior to closing can be especially volatile. Thus, any late afternoon power hour on a triple-witching-hour Friday can be highly active, and may be one of the largest drivers of power hour trading during the year.

The Takeaway

The concept of a stock market “power hour” is based on the increased activity at certain times of day — typically the market’s open and close. While the power hour presents opportunities for some traders, others may find it risky.

Consequently, it’s a good idea to give power hours a wide berth if you’re not familiar with trading in choppy markets, where the risk of losing money is high when power trading activity is at its highest.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

Is the power hour a good time to trade?

For sophisticated short-term traders, trading power hour stocks can be advantageous. The heightened market activity often presents a number of opportunities. For those less skilled at maximizing these short windows of opportunity, power hour trading can be highly risky.

Is the power hour more volatile?

Yes, the hallmark of the power hour, whether at the market’s open or close, is its volatility. In short, the power hour is a high-risk time in the market for most ordinary investors.

Can you make money during the power hour?

It’s possible to make money during the power hour, assuming you have the skill and the strategies to seize the opportunities presented by short-term price movements.

Photo credit: iStock/Tatiana Sviridova

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.

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.

SOIN-Q325-089

Sep

2025

Do You Need a Long-Term Savings Account?

By Kelly Boyer Sagert | Budgeting & Goals, Financial Independence, money | Comments Off

Saving money is the first step toward achieving your financial goals. But not all savings goals are created equal. Some goals are short-term, like setting aside money for holiday gifts, while others may stretch years into the future, such as buying a home, paying for a wedding, or preparing for retirement. When your savings goals extend beyond a year or two, you may want to consider a long-term savings account.

But what exactly makes a savings account “long-term”? And with so many options — high-yield savings, certificates of deposit, money market accounts, or retirement-specific vehicles — which type is best for your situation?

Below, we’ll explore the essentials of long-term savings accounts, when to use them, and how they can help you reach your biggest financial milestones.

Key Points

• Long-term savings accounts are designed for goals that are at least a couple of years away.

• High-yield savings accounts, certificates of deposit, money market accounts, and retirement accounts can be good options.

• High-yield savings accounts offer higher-than-average interest rates and easy access.

• Certificates of deposit provide fixed, competitive rates but penalize early withdrawals.

• Retirement accounts offer tax advantages and long-term growth.

What Makes a Savings Account “Long-Term”?

In simple terms, a savings account becomes “long-term” when the money is meant to stay untouched for several years, and often much longer. Short-term savings, like an emergency fund or paying for an upcoming vacation, are designed for relatively quick use. Long-term savings, on the other hand, are earmarked for goals that might be a few years — or even decades — away.

While long-term savings accounts generally offer lower returns than investment accounts, they provide security, predictability, and liquidity. These three factors are especially important when you know you’ll need the money at a specific point in the future.

4 Best Types of Long-Term Savings Accounts

There is no single savings account that works for every saver. Instead, the best long-term savings option will depend on your timeline, your need for access to the funds, and how much you want to prioritize growth. Here are four types of accounts (including one investment account) that can help you reach your long-term savings goals.

1. High-Yield Savings Accounts (HYSAs)

A high-yield savings account is a type of savings account that offers a significantly higher interest rate, or annual percentage yield (APY), than a traditional savings account. These accounts are typically offered by online banks, which tend to have lower overhead costs than brick-and-mortar institutions and can pass that savings on to customers in the form of higher rates and lower (or no) fees.

HYSAs are usually insured by the Federal Deposit Insurance Corporation (FDIC), which means your deposits are covered up to $250,000 per depositor, per insured bank, for each account ownership category, even if the bank were to fail.

In addition to safety, HYSAs also offer easy access to your funds via debit card or transferring money online. That accessibility can make them a good fit for people who want to earn meaningful interest but still keep the option of withdrawing their money if a goal comes up sooner than expected.

If you’re saving for a home purchase, a new car, or a major renovation within the next few years, you may find an HYSA particularly useful. An HYSA is also a good place to stash your emergency fund (more on that below).

Recommended: Savings Goal Calculator

2. Certificates of Deposit (CDs)

Available at banks, credit unions, and brokerage firms, certificates of deposit are time-locked accounts where you agree to keep your money deposited for a set term — often ranging from six months to five years — in exchange for a fixed interest rate.

Rates on CDs are not only guaranteed but are generally higher than what you could earn in a traditional savings account. CDs are also typically insured by the FDIC or National Credit Union Administration (NCUA), which insures deposits at credit unions.

This type of long-term savings account can be ideal for savers with a clear timeline. For example, if you know you’ll need the money in three years for a down payment, a CD of the same length can help you protect your funds while also ensuring steady growth.

3. Money Market Accounts

A money market account (MMA) is an interest-bearing deposit account offered by banks and credit unions that blends features of both savings and checking accounts. MMAs typically offer higher rates than standard savings accounts, along with some of the conveniences of a checking account, such as checks and a debit card.

Similar to other types of savings accounts, MMAs are usually FDIC- or NCUA-insured. However, they often require higher minimum balances and may charge fees if you don’t meet monthly balance requirements.

An MMA can be a flexible option for long-term savers who want to earn more than the average savings rate but still want to access their funds occasionally. You might consider an MMA for an emergency fund, saving for a large purchase (like a car or wedding), or holding funds for future investments.

4. Retirement Accounts

Retirement-specific accounts — such as 401(k)s, Individual Retirement Accounts (IRAs), or Roth IRAs — are technically investment vehicles but are crucial for long-term savings. These accounts are designed specifically for retirement and offer unique tax advantages.

These accounts also allow savers with decades-long time horizons to benefit from compounding returns (which is when your returns start earning returns of their own) and, in some cases, employer contributions.

Because they are tied to investments like stocks and bonds, retirement accounts do carry risk, meaning balances can fluctuate in the short term. However, the long time frame can help smooth out those fluctuations. Plus, the tax benefits can make them hard to beat for anyone focused on retirement. Their tradeoff is limited liquidity, since withdrawing money early often results in penalties.

When to Use a Savings Account for Long-Term Goals vs an Investment Account

One of the biggest questions savers face is whether to use a savings account or an investment account for long-term goals. The answer largely depends on your exact timeline and tolerance for risk

Generally speaking, you want to use a savings account when:

• You’ll need the money within the next one to five years.

• You can’t afford to risk losing your principal.

• Your goal has a fixed date, such as a wedding or tuition payment.

Consider using an investment account when:

• Your goal is more than five years away.

• You’re comfortable with short-term market fluctuations in exchange for the chance for higher long-term growth.

• You’re saving for retirement or other distant financial milestones.

In short, savings accounts are about security and liquidity, while investment accounts are about growth and long-term wealth building.

Examples of Long-Term Savings Goals

What might you use a long-term savings account for? Here are three common examples.

Saving for a Down Payment on a House

Buying a home is one of the largest financial milestones most people will face. If you plan to buy in the next few years, keeping your down payment in a HYSA, CD, or MMA ensures your money is safe and growing without the risk of market downturns derailing your purchase plans.

Building a Fund for a Future Large Purchase (Like a Car or Wedding)

Whether you’re planning a dream wedding or upgrading your vehicle, large expenses require careful planning. By using a dedicated savings account — such as a money market or HYSA — you can separate these funds from your everyday spending while earning competitive interest.

Creating a Sabbatical or “Freedom Fund”

More people are saving for lifestyle choices, such as taking time off work to travel, study, or recharge. A sabbatical or “freedom fund” can provide peace of mind and flexibility. Keeping these funds in a long-term savings account like a HYSA, CD, or MMA, ensures they’ll be available when the time is right.

When to Consider an Emergency Savings Account

While long-term savings is essential for reaching your future goals, it’s equally important to have a separate emergency savings account.

This account provides a cushion for unexpected events, such as losing a job, facing a sudden illness, or needing to pay for urgent car or home repairs. Knowing you have funds available for emergencies can ease financial anxiety during a crisis. It also prevents the need to rely on high-interest credit cards or loans to cover surprise costs.

Experts generally advise setting aside at least three to six months’ worth of living expenses in a separate savings account earmarked for emergencies.

Emergency funds are generally best stored in HYSAs or money market accounts, where the money is accessible but still earning above-average interest. Having this safety net allows your long-term savings to stay intact, even when life throws an expensive curveball.

How to Use a Savings Account to Organize Your Long-Term Savings

Managing multiple goals can get tricky, but today’s digital banking tools make it easier. Many banks and credit unions allow you to:

• Open multiple accounts or create customized sub-accounts and label each fund (e.g., “House Fund,” “Wedding Fund”).

• Automate transfers so savings happen consistently without effort.

• Track your progress toward each goal with visual dashboards.

By assigning each goal its own dedicated account or sub-account, you reduce the temptation to borrow from one savings pot to pay for a different goal or expense. It also makes it easy to track your progress, since you can see exactly how close you are to reaching each milestone.

The Takeaway

Long-term savings accounts are powerful tools for turning your future plans into reality. Whether you choose a high-yield savings account for flexibility, a CD for guaranteed returns, a money market account for occasional access, or a retirement account for decades-long growth, the right choice depends on your goals and time frame.

The best long-term savings account is ultimately the one that supports your unique plans, provides the right balance of safety and growth, and makes it easy for you to stay disciplined until you achieve the milestones that matter the most.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What type of account is best for long-term savings?

The best account for long-term savings depends on your goals and risk tolerance. For safe, predictable growth, high-yield savings accounts, certificates of deposit (CDs), or money market accounts are good options. If you want higher returns and can tolerate risk, retirement accounts like IRAs or 401(k)s and investment accounts may be better. Many people use a mix: savings accounts for stability and investment accounts for growth. Diversifying helps ensure your money grows while remaining accessible for future needs.

What is a long-term savings account called?

A long-term savings account doesn’t have a single universal name — it depends on the purpose and institution. Common options include certificates of deposit (CDs), individual retirement accounts (IRAs), 401(k)s, or investment accounts. These accounts are designed for goals like retirement, buying a home, or funding education. High-yield savings accounts and money market accounts can also serve mid- to long-term goals, especially if you want to maintain access to your funds.

What is considered long-term savings?

Long-term savings generally refers to money set aside for goals that are several years or even decades away, such as buying a house, funding a child’s education, or retirement. Unlike emergency funds or short-term savings, which cover immediate or near-future needs, long-term savings are designed to grow over time through interest, dividends, or investment returns. These savings often benefit from compound growth, which is when the returns you earn also earn returns, which can help your money grow faster.

How much should I have in my long-term savings account?

The amount you should have in long-term savings depends on your financial goals, age, and income. A common benchmark for retirement savings is to aim to save at least 15% of your pre-tax income each year, including any employer match. By age 30, some experts suggest having one year’s salary saved, increasing to three times by age 40, and six times by age 50. However, smaller long-term saving goals, like a down payment on a house, will require less.

What kind of savings account makes the most money?

If you’re strictly looking at savings accounts, high-yield savings accounts and certificates of deposit (CDs) typically earn the most interest. However, if your goal is maximizing long-term growth, investment-based accounts — such as brokerage accounts, individual retirement accounts (IRAs), or 401(k)s — generally offer much higher returns over time, though with more risk. Money market accounts can also pay higher rates than standard savings. The best choice depends on your timeframe, risk tolerance, and need for liquidity.

Photo credit: iStock/AndreyPopov

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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SOBNK-Q325-107

Sep

2025

Cracked car windshield from the inside, showing radiating lines of damage across the glass.

Does Car Insurance Cover Windshield Replacement?

By Austin Kilham | Insurance | Comments Off

Table of Contents

Does Car Insurance Cover Windshield Damage?
When to Repair vs. Replace Your Windshield
How a Windshield Claim Works
The Takeaway
FAQ

Your car insurance is designed to cover the cost of repairs to your vehicle in case of accident or damage in events like theft, vandalism, or natural disasters. As a result, car insurance likely covers the replacement of a broken windshield, but it will depend on how the windshield was broken and what type of coverage you carry.

Understanding how different types of coverage work is key to knowing when you’ll pay out of pocket and when insurance will pick up the tab.

Key Points

• Car insurance can cover windshield replacement under collision or comprehensive coverage.

• Some states offer no-deductible comprehensive coverage for windshield replacement.

• Repair costs for minor damage are lower, ranging from $60 to $90, while replacements cost $200 to $500 or more.

• Filing a claim involves contacting the insurer, providing damage details, and determining deductible applicability.

• Car owners can usually choose their preferred repair shop, even if the insurance company suggests certain providers.

Does Car Insurance Cover Windshield Damage?

There are different types of car insurance coverage. Windshield damage is typically covered through collision or comprehensive insurance. How your windshield is damaged will determine which of these kicks in to pay the cost.

Types of Coverage That Apply to Windshield Damage

Here’s a closer look at the two types of auto insurance coverage that will typically apply to windshield damage.

• Collision coverage covers the cost of repairs after your car has been in an accident with another vehicle or a stationary object, such as a lamp post or tree, regardless of who’s at fault. It’s typically optional and not required by state law, though some lenders may require it if you finance the purchase of your vehicle.

• Comprehensive coverage protects your car from non-collision damage. This includes theft, vandalism, fire, falling objects, hitting an animal,and natural disasters like flooding or hail storms. Like collision insurance, comprehensive coverage is an optional add-on.

Both collision and comprehensive coverage usually have a car insurance deductible. This is an amount that you have to pay out-of-pocket before your insurance kicks in. For example, if you have a $500 deductible and a fallen branch causes $1,000 worth of damage to your car, you’ll have to pay $500 toward the cost of repair first before you comprehensive insurance steps in to pay the rest.

Differences Between Comprehensive and Collision Coverage for Glass

To be clear, your collision coverage pays for the cost of windshield replacement when it has been damaged in a collision with another vehicle or object. Your comprehensive coverage will pay in most other scenarios, like if a tree branch falls on your car, for example.

State-Specific Regulations and “Full Glass Coverage”

One important thing to know is that the cost of windshield replacement may be less than your insurance deductible. On average, replacement can cost between $200 and $500. But where you live could impact how much you’ll pay.

In Florida, Kentucky, and South Carolina, no deductible is charged for a windshield replacement if you carry comprehensive insurance and meet coverage requirements. A handful of states allow you to purchase separate glass coverage with no- or low-deductible options for windshield replacement. These states usually require that you carry comprehensive coverage as well. States that require insurers to offer separate glass coverage include Arizona, Connecticut, Massachusetts, Minnesota, and New York.

Drivers in other states may need to pay for the cost of windshield replacement out of pocket.

Recommended: Auto Insurance Guide

When to Repair vs. Replace Your Windshield

You don’t always have to replace a damaged windshield — chips and short cracks can be repaired. That’s a good option for chips that are less than an inch across and for cracks that are shorter than the length of a dollar bill.

Signs That Indicate a Windshield Needs Replacement

Sometimes, the damage to your windshield requires a full replacement. You’ll want to go this route if a crack is longer than a dollar bill or if it’s near the edge of your windshield, as this could affect the structural integrity of the glass.

Cracks or chips that are directly in your line of sight may signal that your windshield needs to be replaced. Even if they can be repaired, the resin used to fix them will still leave a mark that could impair your vision.

Cost Comparison Between Repair and Replacement

The cost of small repairs to a windshield can be relatively low, around $60 to $90. By comparison, the cost of replacing your windshield could be significantly more.

Replacing windshields on older vehicles tends to be the cheapest scenario. This is where you can expect to pay the above-mentioned $200 to $500. There are several factors that can increase costs from here. If your car has a larger-than-standard windshield, is a luxury vehicle, has a special design, or includes technology built into the windshield, be prepared for costs to be higher.

For instance, if your windshield includes advanced driver assistance systems, such as automatic braking and adaptive cruise control, plan on paying $1,000 or more to replace it.

Recommended: How to Lower Car Insurance

How a Windshield Claim Works

In general, a windshield claim is relatively simple to file. First, be sure the repair or replacement is covered by your comprehensive insurance or additional glass coverage. You can do this by calling your insurance provider or looking at your auto insurance terms and policy details.

Filing a Claim and Your Deductible

To file a claim, contact your insurer’s claims center and provide your personal information and policy number. Describe the damage and be prepared to provide documentation, such as pictures or a video. Your insurance company can help you determine the cost of repair or replacement. If cost is less than your deductible, you may need to foot the bill yourself.

When your car is serviced, you might need to pay the deductible amount first, and your insurance company will pay the remaining amount directly to the shop.

How Insurance Companies Handle Repair vs. Replacement Costs

Based on the severity of the damage, you may be able to repair your windshield or you may need to replace it entirely. In the case of a minor repair, your insurance company might waive your deductible. However, your deductible may apply to a full replacement.

Choosing a Glass Repair Shop

Your insurance company may provide a list of recommended repair shops to repair or replace your windshield. But in general, you have the final say over where to take your car.

The Takeaway

Does car insurance cover a cracked windshield? When it comes to a damaged windshield, covered repairs or replacements are not necessarily a given. It depends on your policy, how the damage occurred, and the cost of repairs. Understanding what your auto insurance covers and knowing your options ahead of time can help save you from surprises when repairs are needed.

SoFi brings you real rates, with no bait and switch.

FAQ

Will filing a windshield claim raise my insurance rates?

Unfortunately, filing a windshield claim could raise your insurance rates when you renew. However, this will depend on your coverage and other factors, such as state law.

Do I have to pay a deductible for a small chip repair?

Many insurance companies will waive the deductible for repairs to small chips, so you likely won’t have to pay for these fixes.

What is “full glass coverage” and how do I know if I have it?

Full glass coverage is an insurance add-on with low or no deductible for windshield and other auto glass repairs. This is coverage that you have to choose. If you can’t remember whether you have chosen it in the past, you can review your auto insurance policy.

Can I choose my own glass repair shop?

You can choose your own glass repair show, though your insurance company may provide a list of preferred shops.

What if the windshield was damaged in a car accident?

If your windshield is damaged in a car accident, the cost of repair may be covered by your collision insurance.

Photo credit: iStock/4kodiak

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