How Auto Insurance Protects You

If you have an accident, auto insurance can help protect you against financial loss. Very simply, it is a contract between you and the insurance company. You agree to pay a premium and the insurance company agrees to pay for your losses, due to an accident, as defined in your policy.

Auto insurance protects you on three fronts:

• Property coverage pays for damage to or theft of your car.
• Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
• Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.

Most states require you to buy some vehicle coverage. If you're financing a car, your lender may also require that you buy car insurance.

The six primary sections of an auto insurance policy
Your auto policy may include these six areas of coverage or a combination of them. Each is priced separately.

1. Bodily Injury Liability: For injuries the policyholder causes to someone else.
2. Medical Payments or Personal Injury Protection (PIP): For treatment of injuries to the driver and passengers of the policyholder's car.
3. Property Damage Liability: For damage the policyholder caused to someone else's property.
4. Collision: For damage to the policyholder's car from a collision. The collision could be with another car, a fence, a light post, a wall, etc.
5. Comprehensive: For damage to the policyholder's car that doesn't involve a collision. Coverage includes fire, theft, falling objects, explosion, earthquake, flood, etc.
6. Uninsured Motorist Coverage: For treatment of the policyholder's injuries as a result of collision with an uninsured driver. Additionally, underinsured motorist coverage can also be included in the policy. Underinsured motorist coverage is for when an at-fault driver has auto liability insurance, but the limit of insurance is insufficient to pay your damages.

Each state requires that you have certain types of coverage combination with minimum liability limits. Talk to your agent about the type of coverage at a premium you can afford.

Footnote: This is a brief overview of how automobile insurance works. You should read a policy thoroughly before purchasing any insurance policy.