Whether it's your first time buying car insurance, your tenth time or you're considering switching companies, here's a step-by-step guide to how to buy car insurance.

1. Find out your state's requirements

Each state sets the minimum car insurance you must buy. In addition, if you have a car loan or lease, the lender or leasor likely requires you to buy collision and comprehensive coverage.

Here's a little-known secret: You don't have to have car insurance. Most states have "financial responsibility" laws that allow you to post a deposit or bond with the state as an alternative to liability insurance. However, the deposit can be rather hefty, ranging anywhere from $15,000 to $160,000, depending on your state. It's usually cheaper and easier to buy an insurance policy.

2. Consider more coverage

The state minimum might not be enough in case you cause an accident. You may want to buy full coverage car insurance.

Full coverage car insurance includes:

  • Liability car insurance pays for damages you cause to others, including property damage and injuries.
  • Collision insurance pays for damage to your own car if you crash into something, such as a pole or another car.
  • Comprehensive insurance pays for theft of your car, vandalism, accidents with animals, weather damage such as hail and wind, flood damage, fire and other random incidents such as falling trees and rocks.

When you're buying liability insurance, keep in mind you can be sued for medical bills and property damages that exceed what your insurance covers. If you have assets, like a house or savings account, it's a good idea to buy more than the state minimum for liability insurance.

3. Get quotes from a few auto insurance companies

Car insurance quotes can vary by several hundred dollars among insurance companies for the same coverage.

Here are a few tips on how to get the best car insurance rates.

  • Look for discounts. Insurers offer auto insurance discounts to attract and keep customers. Not all insurers offer the same discounts. It's a good idea to see if you qualify for any. While bundling home and auto insurance typically offers the biggest savings, there are other ways to save, including multi-car discounts, good driver discounts, student discounts and occupational discounts.
  • Review your driving history. Auto insurers will look at your driving history from the past three to five years, or more. If you caused any accidents or have traffic tickets, you may be eligible to take a defensive driving course that could qualify you for lower rates.
  • What type of car are you driving? Insurance companies also factor in what type of vehicle you have. If you're driving a sports car, for example, you can likely save insurance money by choosing a different car. Here's a list of the cheapest cars to insure.
  • Are you insuring a teen? There's no escaping a rate increase when you add a teen driver. But there are ways you can save on car insurance for teens.

4. Price isn't the only factor

While price might be the biggest factor when choosing a car insurance company, you'll also want to think about a company's customer satisfaction ratings and the products they sell. For example, accident forgiveness insurance or gap insurance might be important to you, though not all companies offer these products.

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5. Review the policy before finalizing it

  • Make sure you have all the coverage types you need. For example, if you're buying a new car, you probably don't want to drive it off the lot without having collision and comprehensive coverage.
  • Make sure all the drivers are listed. All licensed drivers in your household should be on the policy.
  • Make sure the information is accurate. If you've recently moved, make sure the "garaging" address and other information is accurate. When insurance companies set their rates, where you're keeping the car is a factor.

6. Cancel your old policy, but first . . .

Make sure your new policy is set to begin. If there's a gap in your coverage and you get into an accident, you'll be uninsured and liable for any damages out-of-pocket.

Additionally, if you're uninsured, you could face fines or penalties, depending on your state. For example, in California you could receive a citation and have your car impounded. In New York, you could face a fine up to $1,500 and have your license and vehicle registration revoked for at least one year if you are involved in an accident while driving uninsured.

You will likely face higher insurance premiums if there's a coverage gap in your insurance history.

7. Get proof of insurance

After your insurance purchase, expect one or more of these documents:

  • Insurance ID card – This will generally have your policy number, policy effective dates, vehicles and the policyholders. You'll want to keep it in your car as proof of insurance in case you're pulled over or in an accident.
  • Proof of coverage – A form that shows the vehicle, policy effective dates, vehicles and policyholders. This form can be used to show your lienholder or leasing company that your vehicle is covered.
  • SR-22 – This form is typically for drivers who have certain problems on their driving record, such as a DUI or driving without insurance.The insurance company sends the form to your state to show you have insurance that meets the state's requirements. In some states it's called an FR-44.