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Auto Insurance – What Is It and What Are the Types

Buying auto insurance is mandatory in most states, but how much should you get? What are the options that you should consider? These are the types of questions that most first-time car insurance shoppers wonder about when starting the process. Here, we explain to you what exactly car insurance is and the common types of coverage options that are available. 

Understanding Auto Insurance

Auto insurance is a contract between an insurance provider and you. The policy protects you against financial loss in case of theft or an accident in exchange for you paying a premium. Auto insurance offers coverage for the property (theft or damage to your car), medical expenses (cost of treating injuries, rehabilitation, funeral expenses, and lost wages in case of an accident), and liability (your responsibility to a third-party for damaging their property or causing bodily injury). 

Auto insurance policies are typically issued for a one-year period and are renewable. Some providers offer these policies for six months. 

Auto Insurance Coverage Options

The common types of coverage options are:

  • Bodily injury liability: This covers the expenses associated with bodily injuries or death that you may cause while driving your car. 
  • Property damage liability: This reimburses other parties for damages that you may cause to their property while driving your car. 

The two above-mentioned coverage options are mandatory in most states. 

  • Medical payments or personal injury protection: This covers the medical expenses resulting from injuries caused to you or your co-passengers. It could also cover lost wages (if the accident prevents you from working).
  • Uninsured motorist coverage: This reimburses you if the accident was caused by an individual who doesn’t have auto insurance. It also covers hit-and-run cases. 
  • Collision coverage: Provides coverage if the car gets damaged as a result of colliding with another object or vehicle. 
  • Comprehensive coverage: Provides coverage against damage caused by incidents other than a collision and theft. 
  • Glass coverage: Offers coverage for windshield damage. 
  • Gap insurance: Gap insurance can be added to your collision and comprehensive insurance. It helps you pay off your loan if your vehicle is stolen or totaled and you owe more than what the car’s depreciated value is. 

Make sure to check what the coverage requirements are in the state you reside in and get adequate coverage accordingly.