Auto Insurance

Auto insurance protects you from financial loss by limiting your liability and paying for the repair or replacement of your car. Auto insurance is not simply about protecting your own vehicle. Even if you don’t drive an expensive car, auto insurance is still essential because your financial liability to other people involved in an accident may be substantial. That is why the liability coverage provided by an auto insurance policy is so important.

The coverage provided by an auto insurance policy is usually divided into separate categories based on the nature of the protection provided. A typical policy has seven categories of coverage:

1. Bodily Injury Liability
2. Property Damage Liability
3. Medical Payments
4. Personal Injury Protection
5. Uninsured Motorist
6. Comprehensive
7. Collision.

Each of the above categories is described below:

• Bodily Injury Liability

  If you are involved in an accident for which you are legally responsible, bodily injury liability coverage pays for medical expenses, pain and suffering, lost income, and, if necessary, the funeral expenses. It also covers your legal defense costs if you are faced with a lawsuit related to the accident.

• Property Damage Liability

  If you are involved in an accident for which you are at fault, property damage liability coverage pays for damage to property belonging to another person and your legal defense.

• Medical Payments

  If you are involved in an accident, regardless of who is at fault, personal injury/ medical payments coverage pays for the medical and funeral expenses of you and your passengers. This is an optional coverage and may not be available in all states.

• Personal Injury Protection

  This coverage is similar to medical payments coverage, but provides much broader protection. In addition to medical and funeral expenses, it may include payments for rehabilitation, lost wages or income, and certain replacement services such as child care. In some states, this coverage is required, but in others it is optional or may not be available.

• Uninsured Motorist

  If you are involved in an accident caused by an uninsured (or untraceable) driver, uninsured motorist coverage pays for damages, and may include property damage in some states. You may also receive underinsured motorist coverage for situations when the at-fault driver does not have enough insurance to cover your medical treatment and property damage costs.

• Comprehensive

  If your car is damaged due to an event other than a collision, such as theft, fire, vandalism, weather damage (hail, flood, etc.), and other insured perils, comprehensive coverage pays for the repair or replacement of your vehicle. This coverage is optional, although it may be required by your finance company if you finance or lease your vehicle.

• Collision

  If your car is damaged in a collision with another vehicle or object, collision coverage pays for the repair or replacement of your vehicle. This coverage is optional, although it may be required by your finance company if you finance or lease your vehicle.

Insurance companies also offer additional coverages, often at no additional cost, for related exposures and costs, such as towing and labor or reimbursement of rental car costs incurred while your vehicle is being repaired as a result of damage sustained in a covered accident.

Note that your coverage is limited to the maximums specified in your policy; therefore you should be sure to choose a sufficient level of protection when buying auto insurance.