Definition

• Auto insurance provides consumers varying levels of protection from financial loss as a result of damage and/or injury caused by the consumer when operating a motor vehicle. Auto insurance is paid in premiums to an insurance company, which assumes the financial liability of property damage and bodily injury.
  
  

Types

• In general, auto insurance for consumers covers financial responsibility stemming from property damage and personal injury. Consumers can purchase liability, comprehensive, collision and uninsured motorist insurance. In general, most states require basic liability coverage, or personal proof of financial responsibility. If the consumer is financing or leasing the vehicle, the financing company will typically require full coverage.
  
  

Liability

• Consumers purchase basic liability insurance to cover financial loss from any damage a driver may cause with his or her vehicle, which includes any property damage, bodily injury or death. However, this coverage is only extended to damage to others and does not cover any damage to the driver’s vehicle.
  
  

Comprehensive and Collision

• To cover damage consumers may sustain to their own vehicles, comprehensive insurance can be added to an insurance policy. This coverage is also extended to borrowed or rented vehicles and covers other types of loss, including theft and natural disaster damage.
  
  Comprehensive insurance is typically packaged with collision insurance coverage, which covers damage caused in collisions with another vehicle or object, even if the other driver involved in a collision does not have insurance.
  
  

Uninsured Motorists

• Consumers who operate motor vehicles are required to carry insurance coverage, but in many cases, collisions occur and a responsible party fails to carry insurance. In such cases, uninsured motorist insurance will pay for damage to the policyholder’s vehicle, even if the other driver flees and leaves no identifying information.
  
  

Deductibles

• On consumer’s insurance policies, the deductible is the amount that must be paid before the insurance coverage becomes effective. A consumer selects the amount of the deductible, generally ranging from $50 to $1,000.