If you have an accident, auto insurance protects you against financial loss. It is a contract between you and the insurance company. You pay a premium and the insurance company agrees to pay your losses as defined in your policy.
There are generally six different kinds of coverage with auto insurance and these do differ dependent on each state. An insurance company will notify you by mail when it is time to renew.
Here are six different coverages for auto insurance:
- Bodily Injury Liability – for injuries the policyholder causes to someone else.
- Property Damage Liability – for damage the policyholder caused to someone else’s property.
- Medical Payments or Personal Injury Protection (PIP) – for treatment of injuries to the driver and passengers of the policyholder’s car. At its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident.
- Collision – for damage to the policyholder’s car from a collision. The collision could be with another car, a light post, fire hydrant, etc…
- Comprehensive – for damage to the policyholder’s car that doesn’t involve a collision with another car. Covered risks typically include fire, theft, falling objects, missiles, explosion, earthquake, flood, riot and civil commotion.
- Uninsured Motorist – for treatment of policyholder’s injuries as a result of a collision with an uninsured driver. Underinsured motorist coverage can also be included in an auto policy. Underinsured motorist coverage comes into play when an at-fault driver has auto liability insurance, but the limit of insurance is inadequate to pay for your damages.