Auto Insurance Coverage Explained

No one said that any type of insurance was an easy business to understand and auto insurance certainly does not get the distinction of being the only one. Auto insurance is the only insurance in the nation that is mandated by law for private individuals in the course of leading a normal life. This means that auto insurance - unless you live in a place where driving is not common, such as New York City, is a fact of life that needs to be budgeted for and planned out as part of your finances. Being well-prepared to manage your insurance means that you should understand, at least in part, what auto insurance is, the types of coverage provided, and what you should be looking for when shopping for online auto insurance.

Liability Insurance

Liability insurance is mandated by every state in order to operate a motor vehicle on public roads and highways. State laws set the minimum levels that are required and these minimums can vary widely from state to state. The reason why liability insurance is required is as an effort to reduce the number of lawsuits that would arise from drivers or passengers injured in an accident not their fault or having their car damaged and needing to have their bills or repairs taken care of. Liability insurance's prime design is to take care of the medical expenses of the driver or passengers in a car or pedestrians that you are involved in an accident that is ruled to be your fault. Liability insurance also provides protection for property damage. Note, however, that the minimum insurance levels required by state law do not always (and sometimes almost never do) provide enough protection to cover the expenses of someone you are involved in an accident with. For example, some states mandate as little as $15,000 personal injury liability - an amount that can be easily overwhelmed by doctor and hospital expenses after even a mild accident. You will be financially liable out of your own pocket to pay any expenses that your auto insurance does not cover.

Collision Insurance

Collision insurance is for repairing your automobile after an accident, particularly one where you are ruled to be at fault. Collision insurance only kicks in to repair damage to your car in certain circumstances: the accident is your fault , so your own insurance has to pay for your repairs (in addition to your liability paying for repairs to the other car), or if you are in an accident where the other party does not have any insurance at all. If you are involved in an accident that is not your fault, their liability insurance should cover repairs for your car. Note that collision insurance is not mandatory in most states, but if you lease a vehicle or are paying off your car on a loan you may be required by the lending/leasing institution to carry collision insurance (to protect their investment).

Comprehensive Insurance

Comprehensive Insurance is designed to cover incidentals that don't necessarily arise from auto accidents. Theft of your vehicle or windshield glass replacement or repair would fall under this category. This is also an insurance that is not required by state law, but may be required by your leasing company or the lender that provided the loan to buy your auto.