Perhaps the most compelling reason to have auto insurance is simply the fact that all states require at least basic liability coverage in order to legally drive. The amounts of required coverage vary from state to state, but the goal is that every driver carries insurance to cover medical bills and property damage she might cause while behind the wheel. In addition, financial institutions often require a minimum level of insurance for cars that are being financed or leased, in order to protect their investment.
Liability insurance is typically divided into two categories, bodily injury and property damage. Bodily injury coverage pays for the medical bills of anyone injured by a covered driver, with maximum amounts defined per person and per accident. Property damage coverage pays for replacement or repair of vehicles or other property damaged in an accident. Note that these basic liability policies only pay for damage and harm to others; if someone with basic liability coverage only causes an accident, they might find themselves paying their own repair and medical bills. In addition, many states require underinsured motorist coverage, which is designed to protect you if you’re in an accident caused by a motorist without liability coverage of their own.
In addition to basic liability insurance, many drivers opt for collision insurance. Collision insurance covers your vehicle, no matter who is at fault in an accident. This coverage can come in handy, because if an accident happens under uncertain circumstances with no impartial witnesses, there might not be any way to determine who caused the accident. If you are determined to be at fault, collision insurance still will cover your own vehicle.
Another policy option that many drivers opt for is medical coverage. Adding medical coverage ensures that doctor and hospital bills will be paid if you’re in an accident. As with collision coverage, this policy pays out regardless of fault, so some level of coverage can be a valuable protection for yourself and your passengers, no matter the circumstances of the accident.
A final option for auto insurance is comprehensive coverage, which covers damage to your vehicle caused by anything other than a traffic accident. Vandalism and accidental damage from non-motorists or natural causes such as hail fall under this category. Comprehensive insurance can be a fairly expensive option, however, and many motorists with older cars pass up this type of policy.
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