Understanding Auto Insurance Basics

Rather than being a single coverage, auto insurance is actually a compilation of several different types of coverage. Some of these types of coverage are optional while others are required. Coverage that is required by law varies from state to state, as does the dollar amount of coverage required. The most common type of auto insurance that is required by law in some states is liability auto insurance. Many of the optional types of coverage are still very important for a car owner to have, even though they are not required by law. Some of these coverage types are designed to protect the insured including uninsured and underinsured motorist coverage and comprehensive and collision coverage.

Liability Insurance

Liability insurance can be for bodily injury and property damage. Generally, both types of coverage are required in most states. Most auto insurance policies will list liability coverage in the following format: $25,000/$50,000/$25,000 or simply as 25/50/25. Translated, this means that if the person with this policy were to get in an accident that was deemed that person's fault in which the other people involved were injured, they would have twenty-five thousand dollars of bodily injury liability coverage per person and fifty thousand dollars of bodily injury coverage per accident total - no matter how many people were involved.

The last number indicates that this person would have twenty-five thousand dollars worth of coverage for property damage in that accident. This would likely go toward paying for the damages or replacement of the other person's car. This amount of coverage may or may not be sufficient, depending on the injuries and vehicles involved. If a person does not have sufficient liability coverage, that person may be held financially responsible for the remainder of the costs associated with the accident. With the costs associated with medical coverage and the price of newer-model cars, most state minimums do not offer the level of protection most people require.

Uninsured and Underinsured Motorist Car Insurance

Uninsured and underinsured motorist car insurance coverage is designed to protect car owners from drivers that either do not have the legally required liability coverage or do not have enough. For example, if a person with a car valued at 30,000 is rear-ended by someone that has only 15,000 dollars of property damage liability coverage, the person who was rear-ended will be covered for the additional amount by the underinsured motorist policy.

Comprehensive and Collision Coverage Car Insurance

Comprehensive and collision car insurance are also optional coverage types that can be very helpful. Although generally optional, if a person has a car that is financed, the financing bank will likely require that the person keep comprehensive and collision coverage on the vehicle for the duration of the loan. Collision coverage essentially covers the car in the event it is involved in a collision with nearly anything other than a deer, which falls under comprehensive auto insurance coverage.

Comprehensive coverage will cover most events that collision coverage does not. This includes things like vandalism, flooding and theft. In most states and with most insurers, this also includes collision with an animal like a deer.