Auto insurance is a type of insurance policy that provides financial protection for damages caused by a car, whether the damage is to the vehicle or to another person or property.
It includes property damage liability coverage, which pays for repairs or replacements to another person’s property as a result of an accident, as well as bodily injury liability coverage, which pays for medical costs and other expenses for people injured in the accident for which you are at fault.
Additionally, it covers medical and other expenses for passengers in your vehicle. In summary, auto insurance protects both property and people by providing financial protection for damages caused by a car.
Understanding auto insurance—the basics
Auto insurance is a mutually beneficial contract between you and the insurance company in which the company agrees to protect you against potential financial loss from accidents or thefts in exchange for you paying a premium. Furthermore, the company will agree to pay any losses that are specified in your policy. Overall, auto insurance provides you and your family with security and peace of mind.
Auto insurance provides coverage for a variety of needs
Property – such as damage to or theft of your car
Liability – your legal responsibility to others for bodily injury or property damage
Medical – the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses
Auto insurance is a mutually beneficial contract between you and the insurance company in which the company agrees to protect you against potential financial loss from accidents or thefts in exchange for you paying a premium. Furthermore, the company will agree to pay any losses that are specified in your policy. Overall, auto insurance provides you and your family with security and peace of mind.
What people/vehicles are included in my auto insurance policy and what conditions apply?
When driving your own or another person’s car, your auto policy protects you and other family members listed on the policy (with their permission). Furthermore, the policy covers you when someone who is not on the policy is driving with your permission.
While the policy will cover normal travel, such as commuting to work, running errands, or going on vacation, it will not cover you if you use your car for professional purposes, such as delivering pizzas.
Furthermore, car insurance will not cover use of a vehicle while providing transportation services through a platform such as Uber or Lyft. However, some insurers now offer additional insurance products (for a fee) that include protection for those who provide ride-sharing services.
Is auto insurance coverage mandatory?
Required auto insurance is determined by state regulations. Owners of financed vehicles may be required to meet additional criteria set by the lender. The majority of states require:
Bodily injury liability – this covers the costs of injuries or death caused by you or another driver while driving your car.
Property damage liability – compensates others for damage caused by you or another driver operating your vehicle to another vehicle or other property, such as a fence, building, or utility pole.
In addition, many states require that you carry:
Medical payments or personal injury protection (PIP), which reimburses medical expenses for injuries to you or your passengers. It will also cover lost wages and other related expenses.
Uninsured motorist coverage compensates you in the event of an accident caused by a driver who does not have auto insurance or in the event of a hit-and-run. You can also purchase under insured motorist coverage, which will cover costs if another driver does not have enough coverage to cover the costs of a serious accident.
Liability, collision, comprehensive, medical payments, and uninsured motorist coverage are common types of auto insurance coverage.
Medical payments or personal injury protection (PIP), which reimburses medical expenses for injuries to you or your passengers. It will also cover lost wages and other related expenses.
Uninsured motorist coverage compensates you in the event of an accident caused by a driver who does not have auto insurance or in the event of a hit-and-run. You can also purchase under insured motorist coverage, which will cover costs if another driver does not have enough coverage to cover the costs of a serious accident.
Liability, collision, comprehensive, medical payments, and uninsured motorist coverage are common types of auto insurance coverage.
What is gap insurance and do I need it?
Collision and comprehensive insurance only cover the market value of your vehicle, not the price you paid for it—and new vehicles depreciate quickly. This could result in a “gap” between what you owe on the car and what your insurance will cover if it is totaled or stolen. To make up the difference, you may want to consider purchasing gap insurance. For leased vehicles, gap coverage is frequently already included in your lease payments.
