Do you dream of driving a Tesla or cruising around in a new Ferrari?

Uh, you might change your mind once you find out how much you'll have to pay in insurance.

The money you spend to buy a car is just the beginning. We're guessing you've heard of, say, gas, oil changes, maintenance…you get the point. But on top of all that, you'll need to pay car insurance.

It's the law. And it's a law you really don't want to break.

Car insurance is pretty simple:

1. You pay a monthly premium (translation: you give the insurance company money every month).
2. If your car is stolen, rear-ended, or blown up during an exciting high-speed chase, you call your insurance company.
3. They check on what damage was done, and then they pay for medical bills, car repairs, and whatever amount you're sued for tying jet engines onto your car.
4. Your premium goes up.
5. Lather, rinse, and repeat.

Take a peek here for even more details.

Of course, what the company pays for and how much of it they pay will depend on your insurance policy, the specific agreement that you have with the insurance company. One specific thing to keep your eye out for: the deductible. That's the amount of money you have to put toward repairing your vehicle (or paying your medical bills) before the insurance company steps in. The simple version: if you have a high deductible, your monthly premiums will be low; if you have a low deductible, your monthly premiums will be high.

What's Covered?

When you get into a car accident, a lot of really crappy stuff can happen. Your car might get banged up; someone else's car might get banged up. You or someone else involved in the accident might need medical attention. In the worst case scenario, someone could die, and if you're at fault, their family could sue you.

We're not trying to scare you—it's just the cold, hard truth.

To make sure all of this is dealt with on a financial level, there are different types of coverage on a car insurance policy:

• Personal injury protection (PIP). This part covers the medical bills you and your passengers might get after a bad accident. Ambulance? Hospital stay? That stuff ain't cheap.
• Underinsured or uninsured motorist coverage. When you're in an accident cause by someone else, their insurance will take care of the costs. But what if that someone else doesn't have insurance? Or what if it's a hit and run? This type of coverage will allow your own insurance company to cover it.
• Collision coverage. If no one's at fault but your car still hits something (hello, New England winters!), this type of coverage will pay for car repairs.
• Liability coverage. If you cause an accident that results in property damage or medical bills for someone else, this coverage will pay for that. (Liability coverage is an umbrella for property damage liability coverage and bodily injury liability coverage.)
• Comprehensive coverage. If your car is stolen or set on fire or tossed into a ravine by your favorite neighborhood stalker, this coverage pays you to replace or repair the car.

You can sometimes pick and choose the type of coverage you want, but some coverage—like liability stuff—might be required by law. Regardless of the law, Shmoop's take is the more coverage the better. We'd rather pay a few extra bucks a month than owe someone millions of dollars later.