When Does Your Auto Insurance Go Into Effect?

Auto insurance is required by law to drive a car in the U.S. Auto insurance protects you, your passengers and people in other cars in case of injury from an auto accident. It also protects your car and possessions in your car. If an accident occurs, you can file a claim with your auto insurance company, which pays for all repairs or medical bills if they qualify under your plan after you pay your deductible.

Your auto insurance policy takes effect as soon as you open the policy and make your initial payment to the auto insurance company. Insurance companies may track policies by the minute: If you open and pay for the policy at 2:30 p.m. on one day, you often can't file a claim for an accident that occurred at 2:15 p.m. that same day because you weren't yet covered. This means that as soon as you open a policy and make your payment, you're legally insured.

The minimum coverage required for auto insurance varies by state (see Resources). States usually require you to have liability coverage, which covers all expenses to other people involved in an accident except you when you're at fault. States may also require you to have no-fault coverage, which pays the medical bills for you and your passengers, regardless of who caused an accident. Uninsured motorist coverage is sometimes required, which pays for expenses if the other driver caused the accident but wasn't insured. See References for coverage requirements for each state.

All you need is the minimum coverage for your state to be legally insured. However, minimum requirements usually don't provide adequate coverage; if you cause an accident and have just the minimum coverage, you'll likely pay for car repairs and possibly even medical bills out of your pocket, which could cost tens of thousands of dollars.

Auto insurance policies usually carry six-month terms. After the six months, the policy is reevaluated by the company. Typically, the price of the next six-month term is reduced if you've had a clean driving record, though your rates may increase if you have filed a claim during the previous six-month term. Companies usually allow you to pay either one payment for the six-month term or divide the payments into smaller monthly payments. If you miss payments, your policy may be canceled. You're uninsured the moment the policy cancels, and you become covered again the moment you pay your past-due balance and become current on your policy payments. You don't have to reapply for insurance: Every six months the policy automatically renews in most cases, so your coverage remains constant as long as you make your scheduled payments.

When you open an auto insurance policy, you're covered to drive your car. Other people might be covered, too, but double-check with your specific insurance policy. If a spouse or friend isn't covered and gets in an accident driving your car, you might not be able to file a claim. Spouses and kids are usually covered, though if you know that someone will be driving your car, you should call your insurance company to verify that he's covered before handing over the keys. Also during the application process, you may be prompted to include other drivers, such as family members, on your policy. Anyone covered on your policy is covered the moment the policy is enabled.