What Is Auto Insurance And Why Do I Need It?

Auto insurance provides financial protection in case you are involved in an auto accident. If an accident occurs, an auto insurance policy provides financial coverage to pay any resulting vehicle damages, property damages, and/or medical costs. The amount of money the policy provides versus the amount of money you pay out of pocket will depend on the type of coverage purchased, the financial limits of each coverage, and your deductible.

Because, all states have financial responsibility laws you must have at least auto liability insurance, or you must have sufficient funds and/or assets, based in you states requirements, to pay any damages you cause in an auto accident. In addition, many financial lenders require a certain amount of auto insurance until the car loan is repaid.

What type of auto coverage is available?

There are basically six types of coverages available through reputable insurance companies. Each coverage provides financial protection for different types of losses and damages, and is priced separately.

1. Bodily Injury Liability Mandatory in most states

Pays up to the coverage limits for damages due to injury or death of others you cause, and for legal costs.

2. Medical Payments or Personal Injury Protection (PIP) Optional in most states without no-fault coverage

Pays up to the coverage limits for physician, hospital and funeral expenses for you and/or your passengers injured or killed in an accident.

3. Property Damage Liability Mandatory in all states

Pays up to the coverage limits for someone else s damaged vehicle or property for which you or the operator of your vehicle is legally responsible.

4. Collision Required for vehicle loans

Pays for damage to your vehicle caused by a collision or rollover. Depending on your deductible, you will need to pay some of the expense out of pocket. Deductibles range from $250 to $1,000.

5. Comprehensive Required for vehicle loans

Pays damage to your vehicle caused by theft, fire, vandalism, flooding, hail, or collision with something other another car such as an animal. Deductibles range from $100 to $300.

6. Uninsured and Underinsured Motorist Coverage

Pays up to the coverage limits for injuries and damages an uninsured or an underinsured motorist causes to you, your family and your vehicle.

How much coverage do I need?

Most states only require the minimum amount of liability coverage. However, you should consult with your insurance company to discuss the best type and amount of insurance coverage you will need based you your driving habits. The minimum coverage may not be enough to pay for all the damages caused by you. The Insurance Information Institute (I.I.I.) recommends that you have $100,000 of bodily injury protection per person and $300,000 per accident.