Auto insurance is a contract between a policyholder and an insurance company. The policyholder pays a premium to the insurance company, and in exchange, the insurance company agrees to cover certain losses or damages that may occur as a result of an accident, theft, or other covered event.
What is Auto insurance?
Auto insurance requirements vary from state to state. If you're financing a car, your lender may also have its own requirements. Nearly every state requires car owners to carry:
Bodily injury liability – a type of insurance that covers the costs associated with injuries or death that you or another driver causes while driving your car.
Property damage liability – type of insurance that pays for damages that you or another driver operating your car cause to another person's property., such as a fence, building or utility pole.
In addition, many states require that you carry:
Medical payments or personal injury protection (PIP), a type of auto insurance coverage that provides reimbursement for medical expenses for injuries to you or your passengers. It will also cover lost wages and other related expenses.
Uninsured motorist coverage a type of auto insurance that provides protection if you are involved in an accident with a driver who does not have insurance or does not have enough insurance to cover the damages. It can also provide coverage if you are the victim of a hit-and-run accident.
Is auto insurance coverage mandatory?
What other types of auto insurance coverage are typical?
While basic, legally mandated auto insurance typically includes liability coverage that covers the damage your car causes to others, it does not typically cover damage to your own car. To cover your own car, you may want to consider adding optional coverages to your policy. Some of the most common optional coverages for protecting your own car include:
Collision This coverage pays for damage to your car caused by a collision with another car or object, regardless of who was at fault.
Comprehensive This coverage pays for damage to your car caused by events other than a collision, such as theft, vandalism, weather-related damage, or hitting an animal.
Gap insurance: If you're financing or leasing your car, gap insurance can help cover the difference between what you owe on the car and its actual cash value in the event of a total loss.
Rental reimbursement coverage: This coverage pays for the cost of renting a car if your car is being repaired due to a covered loss.
Glass Coverage is an optional add-on to your auto insurance policy that specifically covers the cost of repairing or replacing your vehicle's glass, including the windshield, side windows, rear windows, and glass sunroof.
Standard homeowners insurance policies generally include six types of coverage:
