Car Insurance

Auto insurance, sometimes known as vehicle or motor insurance, provides financial protection against injury and damage to vehicles. Nearly all states in the United States require that drivers carry this coverage as protection for injuries to others and damage to their property, as well as protection for the driver’s own damaged or stolen car. The auto insurance policy specifies the level and type of protection, with minimum coverage and other regulations varying by state.

An auto insurance policy involves an insured, typically a driver, and an insurance company. As the customer, you pay an amount of money, called a premium, to the company in exchange for selected coverage. This coverage depends on your location, since different states maintain different requirements for type and amount of coverage, and it also depends on the auto insurance company. Auto insurance policies typically include liability, collision, comprehensive, and uninsured motorist coverage, to name a few.

Liability Insurance: Bodily Injury and Property Damage

Two kinds of liability coverage pay damages to others when an accident is your fault: bodily injury and property damage. Bodily injury liability coverage includes expenses related to the injury or death of a person or pedestrian and can include hospital bills, rehabilitation costs, and wages from missed work. Property damage expenses include costs to repair or replace another person’s damaged or destroyed property.

People, as well as their vehicles, are covered under liability insurance. The named insured is covered, and typically their spouse, even if they are not technically on the policy. Other relatives, by blood, marriage, or adoption, are also covered by liability insurance. Finally, individuals driving the car with permission from the insured are most often covered under the policy.

In terms of vehicles, the named vehicle on the policy is covered, as well as any additional vehicle the named insured uses to replace the original vehicle. A driver should notify their insurance company within 30 days of purchasing a new vehicle.

Collision and Comprehensive Insurance

Vehicle property damage is paid by collision insurance. Collision coverage does not provide payment for bodily injury resulting from an accident. Drivers of leased cars may be required by their lender to purchase collision coverage. And anything other than a collision, such as fire, vandalism, or a break in, would be covered by comprehensive coverage.

Fault and No-Fault Insurance

When you get into a car accident, traditional liability auto insurance has the “at-fault” driver pay for the costs of damage and injuries to the other driver. No-fault insurance, or personal injury protection (PIP), maintains that the insurance company for each driver pays for its own policyholder. Regardless of who caused the accident, your insurance company pays for your damages, and the same applies to the other driver, assuming he has insurance.

While medical bills and lost wages are usually promptly paid by no-fault insurance, the downside is that coverage is extremely limited. For example, emotional distress is not compensated, nor is inconvenience or lost opportunities. Vehicle damage would have to be paid through the at-fault driver’s liability insurance, or collision insurance.

Uninsured Motorist Coverage

Maintaining uninsured motorist coverage protects you, the policyholder, from damages caused by an uninsured driver or a hit-and-run incident. Underinsured drivers, those who do not have enough coverage to pay for your injuries, are covered by these policies as well. Typically, this coverage protects both the driver and passengers for bodily injury, not property damage. States differ in their requirements of uninsured motorist coverage.

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