Understanding the Various Auto Insurance Policy Types

Auto insurance requirements vary from state to state based on the laws of each individual state. All states require some form of financial proof of responsibility (usually insurance) in order to legally operate a vehicle on public roads and highways. For most states, the minimum insurance requirement is limited to a liability insurance policy with minimum levels of coverage, but a handful expect more. Knowing what your state's minimums are is something that an insurance company can help you with, but if you already understand the various types of insurance before speaking with an agent, you may be able to save money.

Liability Insurance: Liability insurance usually refers to two types of insurance coverage: bodily injury liability and property liability. This insurance is sold as a package to cover these two areas that is expressed in three ways: the insurance to cover the medical expenses of one person you have an accident with, the insurance to cover the medical expenses of multiple persons you are involved in an accident with, and the insurance to cover any property damaged in an accident where you are found to be at fault. Thus, liability insurance coverage expressed as 25/50/15 would be $25,000 bodily injury for one person, $50,000 bodily injury for two or more persons, and $15,000 property damage insurance. These numbers are the maximum that will be covered by your policy.

Collision Insurance: Collision insurance is coverage for your own vehicle's repairs if you are involved in an accident that is either your fault or with an uninsured/underinsured motorist who cannot pay for the repairs.

Comprehensive Insurance: Comprehensive Insurance is coverage to pay for your vehicle if it is damaged in a way that does not involve a driving accident or if it is stolen. For example, if your car were to catch fire while you were driving it, your comprehensive insurance could help pay for repair or replacement.

Uninsured/Underinsured motorist: This insurance coverage protects you in the event you are involved in an accident with someone else who is at-fault, but does not have the required insurance or fiscal ability to pay for your damages. This insurance will also pay for medical expenses for you and/or your passengers.