Understanding Auto Insurance Coverage Types

## What Is Auto Insurance? Auto insurance is a contract between you and an insurance company that protects you financially if you're in an accident or your car is damaged. In exchange for paying a premium, the insurance company agrees to cover your losses as outlined in your policy. ## Types of Coverage ### Liability Coverage Liability coverage pays for injuries and property damage you cause to others in an accident. Most states require minimum liability coverage. It comes in two parts: - **Bodily injury liability**: Covers medical expenses, lost wages, and legal fees for others - **Property damage liability**: Pays to repair or replace other people's property ### Collision Coverage Collision coverage pays to repair or replace your car after an accident, regardless of who's at fault. This is optional but often required by lenders if you have a car loan. ### Comprehensive Coverage Comprehensive coverage protects against non-collision events like theft, vandalism, natural disasters, and animal strikes. Like collision, it's optional but commonly required by lenders. ### Uninsured/Underinsured Motorist Coverage This coverage protects you if you're hit by a driver who doesn't have insurance or doesn't have enough to cover your expenses. ## How Much Coverage Do You Need? The right amount of coverage depends on your assets, driving habits, and state requirements. A good rule of thumb is to carry enough liability coverage to protect your total assets.