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Auto insurance is often one of the biggest costs of car ownership. On average, coverage costs $2,012 annually — up considerably from $1,459 a year ago. With monthly rates soaring, securing lower premiums is an important way you can manage expenses.

Here’s a look at some of the cheapest car insurance companies you may shop with in 2025, as well as some strategies to keep your premiums low.

Top Cheap Car Insurance Companies

As we mentioned, the average annual cost of car insurance is about $2,012, according to a 2025 U.S. News & World Report analysis of cheap car insurance companies. The chart below demonstrates which carrier has the cheapest car insurance rates.

It’s worth noting that many companies in the study offer annual rates well below this average. You can always switch car insurance at any time, so consider shopping around for the best rates.

Recommended: Cheapest Cars to Insure

Cheapest Car Insurance Companies for Young and Teen Drivers

The cost of car insurance varies widely depending on age and gender, among other things. For instance, teens are at significantly higher risk of getting into an accident, so premiums for young drivers can be sky high — especially for male teens. The national average for male teen drivers is $7,321 per year, while the average for female teens is $6,475, according to the 2025 U.S. News & World Report analysis.

A policy with the cheapest insurance providers may save you thousands.

Cheapest Car Insurance Companies for Good Drivers

A driving record free from accidents, traffic violations, and other infractions can help you qualify for lower premiums. The national average for good drivers is $2,012 a year, or $167.66 a month. But the cheapest insurance companies offer policies that may be less. As you’ll see, the rates for good drivers are the same as the overall cheapest rates in the study.

Cheapest Car Insurance Companies for Seniors

Seniors typically enjoy the lowest average car insurance. The average married 60-year-old woman pays $1,724 per year for coverage, while her male counterpart pays an average of $1,765.

Cheapest Car Insurance Companies for High-Risk Drivers

If you get a speeding ticket or are involved in an accident, you may see your insurance premiums go up, as insurers see you as a higher risk. After one speeding ticket, for instance, the national annual premium is $2,571 on average. After an accident, it’s $2,891. That said, you may be able to secure a better deal with one of the companies below.

How to Find the Cheapest Car Insurance for You

Here’s a look at some of the strategies you may consider for how to save on car insurance.

Gather Your Information

Before you apply for auto insurance, gather pertinent information, such as your Social Security number and driver’s license number. You’ll also want a record of your driving history, including any accidents you’ve had, tickets, and driver’s license suspensions.

Pull together information about your car as well, including make, model, year of the vehicle, the mileage, and whether you own, lease, or finance it.

Get Quotes from Multiple Sources

Different insurance companies may offer different prices for the same coverage. And some insurance companies might specialize in different areas, such as roadside assistance. Get car insurance quotes from at least three or four insurance companies, so you can compare prices and coverage options and find the best deal for your needs.

Ensure Apples-to-Apples Coverage Comparison

Variables such as coverage type, limit, and deductible can all have an impact on the price of an insurance policy. So, when comparing online auto insurance policies, make sure these variables are the same across the board so you are getting a true side-by-side comparison.

How to Save on Car Insurance

In addition to comparison shopping, there are several other important ways to save on car insurance.

First and foremost, maintain a good driving record. Insurance companies typically charge lower rates for drivers who have no speeding tickets and haven’t been involved in at-fault accidents.

Ask about possible discounts for having two or more vehicles on a policy, having safety equipment like airbags, paperless billing, or bundling auto insurance with other policies.

Consider raising your deductible, which can lower your monthly premium. However, be aware that doing so may mean you pay more out of pocket if you need to use your insurance.

Finally, regularly review your policy and update as needed. You may need to update your policy if you add or remove a driver, increase or decrease the mileage you drive each year, or add or remove a vehicle from your policy.

Recommended: Compare Coverage Types

The Takeaway

Finding the cheapest insurance for your car doesn’t have to be overwhelming. Compare quotes, understand your coverage needs, and take advantage of discounts to lower your premiums without sacrificing protection. As you review your options, remember that the best deal isn’t necessarily the lowest cost. Rather, it provides a balance between cost and the coverage that’s right for you.

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.

FAQ

Do cheaper companies offer lower-quality service?

While cheaper companies may offer lower premiums, this does not always mean that they will offer lower-quality services.

Are smaller or regional companies cheaper?

It’s possible that small or regional companies may be cheaper than national companies, but there’s no guarantee. The best thing to do is get quotes from insurers of different sizes to find a policy that meets your needs.

How much do quotes vary between companies for the same driver?

Quotes for the same driver can vary substantially between different insurance companies. That’s why it’s important to seek quotes from multiple companies.

Does bundling home and auto always result in the cheapest overall insurance cost?

Bundling home and auto doesn’t guarantee the cheapest overall insurance cost. However, many insurance companies will offer discounts if you choose to bundle policies.

How easy is it to switch car insurance companies?

Switching car insurance companies is usually relatively easy. It generally involves finding a new company and insurance policy and calling your old company to cancel. If you are financing your car, let your lender know that you have switched insurance companies.

Photo credit: iStock/FG Trade Latin

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.

Third-Party Brand Mentions: No brands, products, or companies 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.

SOPRO-Q225-034

Monthly car insurance premiums are one of the biggest expenses necessary for maintaining a car. Most states require you to have some form of car insurance. Only one — New Hampshire — doesn’t require it at all, though you will need to prove you can cover the cost of an accident.

Even if it’s not required by law, it is highly recommended to have insurance coverage for your car. Here’s a closer look at factors that can influence what you pay for insurance and what you can do to manage the cost.

Average Cost of Car Insurance in the U.S.

A big question on a driver’s mind when they shop for coverage: How much is car insurance per month? The average annual cost of car insurance premiums is $2,068, or about $172.33 per month, according to a 2025 study by U.S. News & World Report. That said, auto insurance quotes will depend largely on your individual situation, so the premium you’re offered may vary widely from the average.

💡 Recommended: Average Cost of Car Insurance in California

Factors That Affect Car Insurance Rates

Insurers consider a number of different factors when setting rates for their customers. Doing so helps them determine the amount of risk they’re taking on and what they are likely to have to pay should they get in an accident. In other words, they are trying to predict how likely you are to make a claim and what the cost of that claim may be.

Age of Driver

Statistically, age plays a big role in how likely an insurance customer is to make a claim. Young, inexperienced drivers, for instance, are at higher risk of being in an automobile accident. Consider this sobering fact from the Insurance Institute for Highway Safety: Teenagers aged 16 to 19 are three times more likely to be in a fatal car accident than drivers aged 20 and older.

As a result, insurance costs for young drivers tend to be much higher than for older adults. Premium prices due to age typically level out after about age 25.

Type of Vehicle

Vehicle type has a big effect on insurance costs for comprehensive and collision coverage. The more expensive your car, the more an insurance company will have to pay to replace or repair it.

Again, this represents a greater risk for your insurance company, which they compensate for with higher rates. So if you drive a 2024 Honda Civic sedan, for example, you can expect to pay less in car insurance than you might if you drive a luxury vehicle, like a Lexus or Audi sedan.

Driving Record and Claim History

Age and vehicle type can only tell insurers so much. They will also look at your driving record to gain insight into your past driving behavior. In fact, it’s one of the most influential factors that affect insurance rates.

If you have a clean driving record, without accidents, violations, or other infractions, insurers may see you as less risky and offer you lower rates. If you have caused an accident or have moving violations, your insurance rates will likely be higher. A major infraction, like a DUI, can cause your insurance rates to skyrocket by 50% to 100% or more.

💡 Recommended: Average Cost of Car Insurance in Florida

How to Lower the Cost of Car Insurance

Luckily, car insurance premiums are not set in stone. There are steps you can take to keep costs low. Let’s look at some common strategies.

Bundle Insurance Types

When you bundle insurance, you purchase multiple types of insurance from the same provider at the same time. For instance, you might bundle homeowners insurance with your auto insurance. Bundling helps streamline insurance providers’ operational costs, and it incentivizes customer loyalty. As a result, a lot of providers will offer steep discounts from 10% to 25%, depending on the coverage you choose and other factors such as where you live.

Check Insurance Coverage Needs

It pays to consider carefully how much auto insurance you really need. If you purchase more than necessary, you might not be getting much value for the extra money you spend.

You will need to purchase enough coverage to meet your state’s insurance requirements as well as requirements mandated by your loan or lease agreement if these apply.

However, consider factors such as the value of your vehicle when purchasing a policy. For example, older vehicles tend to be less valuable than newer ones. Weigh the cost of collision coverage and whether it’s worth the payout you are likely to receive if you were in an accident. If the payout is relatively low, you may be able to reduce your collision coverage.

Shop Yearly for Quotes

As the variables in your life change, so too will your insurance needs and costs. What’s more, insurance rates are always in flux due to factors such as industry trends and inflation. That’s why it’s a good idea to shop for car insurance quotes at least once a year.

Insurers set new rates for the upcoming year in December, so this may be a good time to look for the cheapest auto insurance companies. However, you can switch carriers at any time.

💡 Recommended: Average Cost of Car Insurance in New York

Understanding Different Types of Car Insurance Coverage

Generally speaking, there are six types of car insurance coverage.

•   Liability coverage: This coverage is mandatory in most states, and you are usually required to have a minimum amount that varies depending on where you live. It helps pay for the cost of injury to another person and the damage you cause to another person’s property.

•   Collision coverage: If you hit another car, or an object like a fence or a tree, collision coverage can help pay for the cost to replace or repair your vehicle.

•   Comprehensive coverage: This helps cover the cost of damage to your car by things like fire, hail, theft, and vandalism. There’s usually a deductible associated with comprehensive coverage, which you’ll have to pay yourself before the coverage kicks in.

•   Uninsured and underinsured motorist coverage: Unfortunately, not all drivers carry insurance. If you’re hit by an uninsured driver, uninsured and underinsured motorist coverage can help pay for the cost of your medical care and sometimes help repair your car.

•   Medical payments coverage: If you or your passengers are injured in an accident, this can help cover the cost of medical care.

•   Personal injury protection: Only available in some states, personal injury protection can help pay for medical expenses after an accident as well as related expenses incurred because you were injured, such as lost income.

The Takeaway

The cost of car insurance depends on a lot of factors, including the coverage you need, your driving history, your age, and the type of vehicle you drive. With so many variables, it pays to shop around for the best deals. Get quotes from several providers, and consider doing it at least once a year.

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.

FAQ

Is $200 per month a lot for car insurance?

A monthly premium of $200 per month is more than average for car insurance. However, price depends on a lot of factors. Depending on your circumstances, $200 per month may be appropriate.

Is $500 per month a lot for car insurance?

A monthly premium of $500 per month is quite expensive, generally speaking. It is more than twice the national average.

How much should insurance for a car be per month?

Average monthly car insurance premiums are about $172.33 per month. You may pay more or less depending on your circumstances.

How much should car insurance be per year?

Average annual car insurance premiums are $2,068, though costs will vary depending on a variety of factors.

How much is car insurance for a 16-year-old?

It can be quite expensive to insure a 16-year-old driver. On average, it costs $2,735 a year to add a 16-year-old to their parents’ policy. But it costs $8,765 per year on average for that 16-year-old to have their policy.

Photo credit: iStock/stanciuc

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies 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.

SOPRO-Q225-035

Often, there are two camps of people when it comes to wrangling financial documents: Some keep everything — every ATM receipt, every bank statement — sometimes in a drawer or box with little to no organizing principle. Others throw away (hopefully after shredding) just about everything that arrives in the mail.

The best approach is likely somewhere in between. Read on to learn how to keep just what you need, organize it well, and dispose of financial documents properly when they no longer serve a purpose.

The Importance of Financial Statements

“Out of sight, out of mind” is a cliché for a reason. Once taxes are filed, paychecks are deposited, and the rent or mortgage is paid, we tend to forget about these transactions, dumping the receipts in a deep file cabinet or throwing them away altogether.

However, the consequences of financial documents and bank statements stick around long after they’ve been settled. For example, the IRS can come calling years after a person files taxes if the organization suspects that income was misreported. Or, in the event of loss or damage, having a record of purchase for big-ticket items like electronics or jewelry can make it easier to file a claim.

Keeping track of financial statements can help serve as protection or proof if a transaction is challenged or misreported. Without the statement, you might spend days trying to obtain duplicate records, when you could have just had them neatly filed in the first place.

Not everything needs to be saved forever, but some things should be safely filed away for a rainy day.

What to Keep and For How Long

Like items in a grocery store, each type of financial document has its own expiration date. Some will be relevant years after they’ve been filed; others can be tossed within months. Here’s the general rule of thumb of how long you should keep each statement:

Tax-Related Documents: 3–7 Years

The IRS can audit anyone up to three years after they file if the agency suspects that an error was made in “good faith,” aka an accident.

That also applies to the opposite situation: If a filer thinks the IRS made an error, the filer can submit an amended income tax return up to three years after the fact for a refund.

Additionally, the IRS has six years to follow up on returns if it thinks the filer underreported income substantially, meaning by 25% or more. However, the IRS can go back as far as seven years in some situations.

It’s not a bad idea to keep the tax return, in addition to supporting documents, for seven years to cover your bases. That could include evidence of:

•   Retirement plan contributions

•   Charitable contributions

•   Interest payments on a mortgage

•   Alimony or child support payments

•   Records of stock sales

•   Records of home sale

Paycheck Stubs, Certain Bills, Bank/Credit Card/Investment Statements: 1 Year

If you aren’t using direct deposit for payday, you’ll want to keep your physical paychecks for a year. Once you receive your W-2 and confirm that the amounts match, the stubs can go.

Bank and credit card statements should stick around for a year, just to be safe. Budgeters can use them to compare balances month over month. It also can be a helpful habit to check over bank and credit card statements each month. It’s a chance to catch and dispute fraudulent or incorrect charges. In addition, bills for services like medical treatment and auto repair should be kept for at least for a year for reference.

Investment statements that are distributed quarterly should be kept on hand until the annual statement is revealed and the numbers are lined up.

💡 Quick Tip: Whether your check comes the first Wednesday of the month or every other Friday, if you sign up for direct deposit, you know when the money will hit your account. This is especially helpful for scheduling the payment of regular bills. No more guessing when you’ll have sufficient funds.

Purchase receipts, ATM Slips, Most Bills: 1 Month

Unless a purchase has a warranty or is tax-related, you can generally toss the receipt once it shows up on your credit card or bank statement. This is also the case for utility bills — you only need to hold on to them long enough to verify the charges on your bank account and bank statements.

As for bank deposits/withdrawals, including mobile check deposits, you can get rid of these records as soon as the transactions show up in your bank account.

Three Ways to Store Sensitive Documents

It won’t matter what you save if you don’t know where to find records in the long run. Safely storing sensitive financial documents doesn’t really mean tucking them away and forgetting about them. Here are a few ways to store and organize financial records:

•   Use an old-school filing system. Finding an affordable, fire-safe file box to keep statements in is already a massive step up from the bottom of a junk drawer. Everyone will have their own approach to logical filing, but it could be done by year, type of record, or institution the record comes from.

Some might be tempted to go extra safe and take this paperwork to a safety deposit box at the bank. However, if the documentation is needed, it won’t do a person much good sitting miles away in a bank vault. Keeping it close and safe is probably preferable.

•   Scan and save online. Many smartphones come with the capability to scan documents, and there are other well-reviewed scanning apps on the market. Those who tend to lose paper might choose to scan everything and save it online. The only hitch is keeping up with the scanning, and saving all documents to the cloud instead of just on the phone.

•   Go paperless. Many institutions offer paper-free transactions, meaning customers don’t get statements in the mail. Online banks vs. traditional banks have made this a priority. Going paperless means you don’t have to organize and file your financial records, but it’s still a good idea to come with a folder system on your computer so you can access what you need when you need it.

Recommended: Are Online Bank Accounts Safe?

The Takeaway

As a general rule of thumb, you want to keep any document that verifies information on your tax return for seven years, to play it safe. You can generally toss any non-tax-related financial documents (like pay stubs and bank/credit card statements) after one year, and get rid of monthly bills, ATM slips, and receipts for most purchases after one month.

With online banking, you can typically find past statements by logging into your account. Most financial institutions make electronic statements accessible for at least five years, and these statements usually come in printable formats. You can check with your bank to see how long it will keep your online monthly statements.

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.

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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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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.

SOBNK-Q225-029

A credit reporting agency compiles credit reports and provides that information to prospective lenders and others. Today, there are three main credit reporting agencies in the U.S.: TransUnion®, Equifax®, and Experian®. Though each agency serves a similar purpose, there may be some differences in the type of information found in their credit report.

Let’s take a closer look at credit reporting agencies and the differences between TransUnion and Equifax.

What Is the Role of Credit Reporting Agencies?

Credit reporting agencies, also known as credit bureaus, collect the information necessary to maintain credit reports. All credit reporting agencies manage their own records, which means the information they have about a consumer can differ depending on the information that was reported to them. While the reports may vary, no one credit reporting agency carries more weight than the other.

What Are Credit Scores?

A credit score is a number used by lenders to determine the risk level associated with lending money to a consumer. A borrower’s credit score can influence if a lender decides to work with a borrower and if so, how much credit, what terms, and how high of an interest rate they end up getting.

Credit scores are based on a consumer’s credit report. Everyone has more than one credit score as these scores are calculated by the three main credit reporting agencies.

Some lenders use internal scoring models as well, but generally, it’s more common for lenders to use one of the three main agencies’ reports to inform their lending decisions.

Recommended: Which Credit Bureau Is Used Most?

What Are Credit Reports?

A credit report details information about a consumer’s financial life, such as:

•   Payment history

•   Outstanding balances

•   Length of credit history

•   Applications for new credit accounts

•   Types of credit accounts (such as mortgages or credit cards)

Credit reports from each of the three major credit bureaus can be accessed weekly free of charge via AnnualCreditReport.com.

Need help keeping tabs on your finances year-round? Consider using a spending tracker, which can be useful when it comes to making progress toward short- and long-term financial goals.

Recommended: What Is Considered a Bad Credit Score?

How Does Equifax Calculate Credit Scores?

An Equifax credit score isn’t used by lenders or creditors to assess a consumers’ creditworthiness. Instead, many lenders use FICO Scores® to help determine a potential borrower’s creditworthiness. FICO uses credit scores from the three reporting agencies, including Equifax and TransUnion, to determine their score. Equifax recommends aiming for a score of 739 or higher if a “good” score is desired.

The Equifax credit score model falls on a credit rating scale that starts at 280 and ends at 850. The higher a score is on this scale, the better indication that the consumer poses a lower risk to creditors.

TransUnion and Equifax calculate credit scores differently. An Equifax credit score is an educational credit score. The point of this credit score is to provide consumers with the knowledge to help them predict their general credit position.

How Does TransUnion Calculate Credit Scores?

When it comes to TransUnion credit scores, this agency uses an outside model, the VantageScore® 3.0 model. The VantageScore scoring model ranges between 300 and 850 points. According to TransUnion, a “good” credit score to have on the TransUnion and VantageScore 3.0 model is between 661 and 780. VantageScores are an alternative to FICO Scores that are used by some lenders to inform their lending decisions.

What They Offer

Alongside credit scoring and credit reports, both of these credit agencies have unique offerings to help consumers understand their credit better and to provide protection against fraud.

TransUnion Offerings

TransUnion members ($29.95 per month) gain access to:

•   Unlimited access to credit score and reports that are updated daily

•   Recommendations to help improve credit score

•   Their product, Credit Lock Plus, which allows individuals to lock their TransUnion & Equifax reports

•   Up to $1 million in identity theft insurance

Equifax Offerings

Signing up for Equifax Complete ($9.95 per month) gives members access to:

•   Equifax credit report monitoring

•   Daily access to VantageScore credit score and Equifax credit report

•   Dedicated ID restoration specialists to help members recover from identity theft

•   Up to $500,000 in identity theft insurance

TransUnion vs Equifax: Which Is Most Accurate?

So, which credit report is most accurate? When it comes to accuracy, all three credit reporting agencies are responsible for ensuring that credit reports are accurate. No one agency is more accurate than the other. That being said, mistakes can happen.

Consumers may want to keep a close eye on their credit report to make sure that mistakes haven’t occurred — especially as these mistakes can negatively impact credit scores. To report errors found on a credit report, consumers can follow this process:

1.    After finding errors on a credit report, write a letter that disputes these errors and include any supporting documentation that can strengthen the case against the error. You can find a sample letter here .

2.    Send the letter and documentation to the credit reporting agency and the information provider (like a bank or credit card company) that reported the inaccurate information to the credit reporting agency in question. Both the credit reporting agency and the information provider will be responsible for fixing credit report inaccuracies or incomplete information.

3.    If the written dispute does not result in the mistake being resolved, the next step would be to file a complaint with the Consumer Financial Protection Bureau.

TransUnion Disputes

TransUnion disputes can be filed on their website or by mail. After the documentation has been received, it can take up to 30 days to resolve the dispute.

Try to include as much of the following information as possible in the communication:

•   Name

•   Partial account number of the disputed item (from credit report)

•   Current address

•   TransUnion file number (if applicable)

•   Social Security number

•   Date of birth

•   Name of the company that reported the item that needs disputing

•   Reason for the dispute

•   Any corrections to personal information that needs to be made

Disputes can also be made by phone.

Equifax Disputes

Equifax disputes can be made online, by phone, or by mail. Consumers will generally want to provide as much of the following information and documentation as possible or applicable:

•   Valid driver’s license

•   Birth certificate

•   Copy of a utility bill

•   Current bank statements with account information

•   Letters from a lender showing the account in question has been corrected

•   Proof that an account error was the result of identity theft

•   Bankruptcy schedules and other court documents

•   Student loan disability letters

•   Canceled checks

Results are generally completed within 30 days.

No matter which agency you use, it helps to have a holistic view of your finances. Using a money tracker app is one way to help you manage your spending and saving.

Recommended: What Credit Score Is Needed to Buy a Car?

The Takeaway

TransUnion and Equifax are two of the major credit bureaus in the U.S. They collect information about a consumer’s financial life, such as their payment history, applications for new credit, and existing credit. This information is recorded in the form of a credit report. Based on information in the credit report, each bureau determines credit scores based on their own scoring model. However, TransUnion and Equifax calculate credit scores differently, and both have unique offerings that help consumers better understand their credit and protect themselves in the event of fraud.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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.

SORL-Q225-002

Most states require licensed drivers to carry auto liability insurance — and for good reason. Liability coverage helps pay for the damages to other people involved in a car accident if it’s determined you were responsible.

State law may leave it up to the individual to decide if they want to carry the kind of insurance that will help pay to repair their own wrecked car or injured body. But in most cases, drivers won’t have an option when it comes to liability coverage.

Since your automobile could cause physical or material harm to others, you’ll generally be expected to carry enough insurance to cover those potential costs or, in some states, provide proof of financial responsibility.

What Is Liability Car Insurance?

If you’re found at fault — or “liable” — for an accident, liability insurance helps pay the other driver’s expenses.

There are several other types of car insurance coverage available to drivers, so it’s easy to get them confused. Collision coverage, for example, pays to repair damage to your own car after an accident. And comprehensive coverage helps pay for damage to your car that’s caused by other factors, such as hail, a fire, or theft.

Auto liability insurance is all about the other guy. It’s not there to cover your costs or the costs of anyone who was riding in your car when the accident occurred.

Recommended: How Much Auto Insurance Do I Really Need?

What Does Liability Insurance Cover?

In general, there are two types of liability insurance offered on most standard policies:

Bodily Injury

This type of liability coverage protects the at-fault driver by paying for the other person’s emergency and continuing medical expenses related to the accident. It also might cover loss of income or funeral costs, or legal fees if there’s a lawsuit.

Property Damage

Property damage liability coverage helps pay for repairs to the other person’s car or other property (their home, a business, a fence, a bicycle, etc.) when the policyholder causes an accident.

Are There Limits on What an Insurer Will Pay?

Yes. The amount an insurer will pay for a claim depends on the coverage limits a policyholder chooses. Note that the amount of coverage you’re required to carry varies from state to state, and you might choose to purchase a higher level of coverage than your state mandates.

Coverage caps are usually broken down into three categories:

Bodily Injury Liability Limit Per Person

This is the maximum amount an insurer will pay out for each individual who is injured in a car accident (other than the at-fault driver who is the policyholder).

Bodily Injury Liability Limit Per Accident

This is the maximum amount an insurer will pay overall for medical expenses if multiple people are hurt in an accident. Again, it does not include medical costs for the at-fault policyholder.

Property Damage Liability Limit

This is the maximum amount an insurer will pay to repair any damage a policyholder caused to another person’s property. Any amount over that limit will likely be the responsibility of the policyholder.

How Much Liability Insurance Should a Driver Have?

You cannot buy less than the minimum amount of liability insurance your state legally requires. But some states require significantly less coverage than others.

For example, the minimum liability insurance requirements in California are $30,000 for injury/death to one person, $60,000 for injury/death to more than one person, and $15,000 for damage to property.

But the minimum requirements in Maine are more than twice those amounts: $50,000 per person for bodily injury, $100,000 per accident for bodily injury, and $25,000 for property damage. (A combined single limit of $125,000 will also satisfy the minimum limit requirement in Maine.)

General recommendations from the insurance industry suggest consumers purchase at least $100,000 of bodily injury liability per person and $300,000 per accident.

Keep in mind that when you’re shopping, you may not be able to choose standalone limits for each category of liability coverage. Most insurers set their coverage limits as part of a package, and you may have to make your purchase from those pre-established plans.

For example, a 25/50/10 policy would set the bodily injury limit per person at $25,000, the bodily injury limit per accident at $50,000, and the property damage limit at $10,000. Any costs that exceed those set amounts would be the responsibility of the policyholder.

Some people also consider purchasing an “umbrella” policy that would cover any excess costs if liability limits are exhausted. This type of policy can help protect you from large liability claims or judgments if you’re sued. And your umbrella policy may cover you as well as other members of your family or household.

According to the Insurance Information Institute, the average cost of a claim after a private passenger car accident in 2022 was $26,501 for bodily injury and $6,551 in property damage. But a claim could go much higher, if there are multiple victims, for example, or if there are serious injuries or someone is killed.

Recommended: How to Lower Car Insurance

What’s the Difference Between Full Coverage and Liability Only?

An auto insurance policy that includes liability, collision, and comprehensive coverage is sometimes called “full coverage,” because it covers both your costs and the costs of others involved in an accident.

Most states require liability coverage. But if your car is paid off, your state may not require collision (which helps to repair or replace a car that’s damaged in an accident) or comprehensive (which pays if the car is stolen or damaged by fire, vandalism or some other non-collision scenario).

And if your car isn’t worth much, you might decide to forgo one or both when purchasing car insurance. If your car is financed, however, the lender could require full coverage even if the state doesn’t.

Some states also may require other types of coverage:

•   Uninsured motorist and underinsured motorist coverage can help cover your medical expenses if you’re in an accident with a driver who has little or no insurance.

•   Uninsured motorist property damage coverage can help repair damage to your car if you are hit by an uninsured motorist.

•   Personal Injury Protection (PIP) and/or Medical Payments (MedPay) can offer protection if you or your passengers are hurt or killed in an accident.

Do You Need Liability Coverage If You Live in a No-Fault State?

A dozen states have instituted “no-fault” laws for drivers. Coverage rules and limits may vary from state to state, so you should be clear on the specifics of what your state requires.

Generally, when you live in a no-fault state and you’re in a car accident, everyone involved files a bodily injury claim with their own insurance company, regardless of who was at fault. Still, every no-fault state requires some level of liability coverage.

Drivers in no-fault states also typically must have Personal Injury Protection (PIP) insurance included in their car insurance policy to cover their own potential medical bills and expenses. PIP plans cover medical expenses for the car’s driver and passengers, which can include hospital bills, medication, rehabilitation, and other injury-related costs.

PIP insurance doesn’t replace bodily liability coverage in every state, and it doesn’t cover property damages. Your insurance company pays for repairs to your car if you have collision coverage. Or you may have to make a property damage claim against the at-fault driver’s insurance.

What If You Have an Accident in Another State?

Ready for a road trip? If you have an accident, your liability insurance may increase to match the minimum limits in whatever state you’re in, and in Canada. But you may want to check with your insurance company if you like to travel, especially if you have a bare-bones policy.

What’s Covered If Someone Else Is Driving Your Car?

The short answer is that the auto insurance covering the vehicle, not the person driving, is usually considered the primary insurance. So if you let someone else drive your car and that person causes an accident, your insurance company probably would be responsible for paying the claim.

Your liability coverage wouldn’t pay the medical bills of the person driving your car or the repairs to your car, although those costs may be covered by other parts of your policy. But it likely would be your liability insurance that pays for the driver of the other car’s medical bills and property damage.

Again, state laws may affect who is responsible in this situation, so it can help to know the rules before letting someone else drive your car.

How Much Does Liability Coverage Cost?

The price you’ll pay for liability coverage could be based on several factors, including how much you buy and where you live. Your age may also play a factor — younger drivers may pay more for coverage, for instance. You can do a little online shopping to search the best rates for your area.

But a better question might be, “How much will it cost to bump up my liability insurance beyond the state-mandated minimums?” Getting twice as much coverage won’t necessarily cost twice as much. If the price fits your budget, you may want to consider carrying more coverage than the law requires.

Upping coverage might increase your comfort level, considering the expenses that might be involved in a major accident, even if you have insurance. The extra coverage may cost more, but if you’re a safe driver you may qualify for better rates. You can research car insurance online and compare quotes to find one that fits your budget.

The extra coverage may cost more, but if you’re a safe driver you may qualify for better rates.

The Takeaway

If you’re held responsible for a car accident, liability insurance will help pay the expenses of the others involved. Most states mandate this coverage, including “no-fault” states. But the amount of coverage you must carry may vary from state to state, so when you’re researching automobile insurance, it can be useful to know your state’s rules. Shopping around for insurance in your area can help you figure out how much coverage you really need and what your premium might be.

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.

Auto Insurance: Must have a valid driver’s license. Not available in all states.
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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.

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