Insurance Details - About Auto Insurance

Understanding auto insurance—the basics

Auto insurance is a contract between you and the insurance company that protects you against financial loss in the event of an accident or theft. In exchange for your paying a premium, the insurance company agrees to pay your losses as outlined in your policy.

Auto insurance provides coverage for:

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

Basic personal auto insurance is mandated by most U.S. states, and laws vary. Auto insurance coverages are priced individually (a la carte) to let you customize coverage amounts to suit your exact needs and budget.

Policies are generally issued for six-month or one-year timeframes and are renewable. The insurance company sends a notice when it’s time to renew the policy and pay your premium.

Key Takeaways

Car accidents can be expensive, especially if your vehicle is badly damaged or anyone is injured. The role of car insurance is to help cover the bills and protect you from potentially devastating financial liability. Here is how car insurance works.

• A car insurance policy consists of several types of coverage, some of which will be mandatory or optional, depending on where you live.
• Virtually every state requires drivers to have some form of car insurance and also sets minimum amounts.
• The price of auto insurance will vary according to the types and amounts of coverage, the deductibles you choose, and other factors.

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