What is Automobile Insurance?
Auto insurance protects you against financial loss if you have an accident. It is a
contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy.
An auto insurance policy is comprised of six different kinds of coverage. Most states require you to buy some, but not all, of these coverages. If you’re financing a car, your lender may also have requirements.
Most auto policies are for six months to a year. Your insurance company should notify you by mail when it’s time to renew the policy and to pay your premium.
Your basic auto policy provides protection to you and others, including:
- Liability Coverage – for damages incurred by others if you cause an accident.
- Personal Injury Protection/Medical Coverage – for assistance if you or your passengers are injured.
- Uninsured Motorist Protection – for covering your costs if hit by either a driver without liability insurance or a hit-and-run driver.
- Underinsured Motorist Protection – for covering your costs if they are not paid by the other driver’s liability insurance.
Most people also choose some or all of these additional protections:
- Physical Damage Protection – for repairing your car after an accident.
- Comprehensive Coverage – pays for damage done to your car in some way
other than a collision, such as if it were stolen or vandalized.
- Rental Car (“Loss of Use”) – for covering the expenses of renting a car while yours is being repaired after a claim.
- Towing – for paying reasonable towing charges if your car is disabled.
Many people may choose to add individual coverages that are important, such as:
- Electronic Equipment – for covering certain permanently installed electronic equipment in your vehicle at limits you select up to certain limits.
- Special Equipment – for covering certain permanently installed electronic equipment in your vehicle and customization at limits you select up to certain limits.
- Loan and Lease Coverage – for paying the total amount due on loans or leases
for your car if there is a total loss.