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Understand the basics of auto insurance
Choosing auto insurance that fits your needs and the needs of your family is important, so get to know the basics. Here you’ll find information about auto insurance and answers to some common questions.
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What is auto insurance?
Auto insurance is meant to protect you if you cause injuries to others or damage their property in an auto accident. It can also provide protection if your car is damaged in an accident or is stolen. What protection you have is spelled out in your auto insurance policy.An auto insurance policy is a contract between you and an insurance company. You, the customer, pay a certain amount (“premium”) to the insurance company in exchange for a set of coverages you selected. Your policy sets forth what the insurance company will or will not cover.
What does auto insurance cover?
At a high level, auto insurance typically provides four basic things—liability coverages (for injuries to others and damage to their property), coverage for damage to your car or cars, coverage for medical expenses and uninsured motorist coverages (for situations where someone without enough insurance injures you or a family member). There are a variety of coverage options available; they may vary by state and company.
What are the common auto insurance coverages?
Below are some simplified descriptions of common auto insurance coverages. All coverages are subject to the limits, terms and conditions of the actual policy you purchase.
Bodily injury liability coverage generally pays damages for bodily injuries to the driver and passengers of the other vehicle when you are responsible for an accident. It also provides coverage to defend you if you are sued because of an auto accident.
Property damage liability coverage generally pays for damages to another person’s property (e.g. their car) when you are responsible for an accident. It also provides coverage to defend you if you are sued because of an auto accident.
Medical payments coverage generally covers you, household relatives and your passengers for medical expenses that result from injuries sustained in an auto accident. It also covers you as a pedestrian if you are hit by a vehicle.
Some states have personal injury protection (PIP) in place of, or in addition to, medical payments coverage. This is also known as no-fault coverage. PIP can generally pay for medical expenses, funeral expenses, loss of income and other expenses for injuries or death due to bodily injury sustained as the result of a car accident.
Uninsured or underinsured motorist bodily injury coverage generally pays for damages for bodily injury to you and your passengers when caused by another in an auto accident and the person legally responsible either has inadequate or no insurance. This coverage varies greatly by state. In some states it may be a combined coverage, while other states may offer it as two separate coverages (e.g. one for uninsured motorists and one for underinsured motorists).
Collision coverage generally pays for damage to your car if it hits another car, object, or overturns. A deductible applies to this coverage.
Comprehensive coverage generally pays for damage to your car if it is stolen or damaged by certain causes other than collision, such as fire, theft, hail or vandalism. A deductible applies to this coverage.