Insurance is designed to reduce most of the financial liability or loss of property resulting from unforeseen events. Auto insurance is no different, shielding automobile owners from the risk of financial harm or loss resulting from a vehicular collision or other vehicular damage. While the type of auto insurance can vary based on the purpose of the vehicle, most auto insurance policies fall under personal or commercial auto insurance.
Auto insurance in some form is required in nearly every state in the United States except Virginia, where a $500 annual fee is required if liability insurance is not purchased and New Hampshire, where personal responsibility can be proven by meeting certain standards. Other states require by law some form of auto liability insurance to cover injury or property damage caused. However, the minimum insurance rarely covers damages to the person at fault, so choosing the right auto insurance policy is very important.
Full coverage auto insurance covers both the operator and the other parties involved in a collision and includes collision insurance, comprehensive insurance, and liability insurance. Collision insurance will cover repair costs of a vehicle or the cash value of the vehicle if it is totaled. Comprehensive insurance covers vehicles in situations other than collisions, such as fire, damage from theft, vandalism, or other damage. Most comprehensive auto insurance policies will also cover "Acts of God" beyond human control, such as floods, tornadoes, or other similar events.
There are several other forms of auto insurance that fit special needs, including uninsured or underinsured motorist coverage, loss of use, GAP coverage, towing, and personal property insurance. Uninsured/underinsured motorist coverage (UM/UIM) ensures the party that is not at fault is not stuck with a bill due to the at fault party's inability to pay. While often overlooked, the number of uninsured drivers can be over 30% in some parts of the country, so UM/UIM coverage is very important. Loss of use coverage reimburses the policy holder for the cost of a rental vehicle while an insured vehicle is repaired due to a loss that is covered under the existing insurance policy. GAP coverage protects a new car is damaged beyond repair; however the loan is valued higher in the car. GAP coverage was established as car price increased, auto loans ran longer, and vehicles were leased more frequently. Towing insurance covers the use of a tow truck when used for non-accident reasons, such as a flat tire or mechanical breakdown. Personal property auto insurance covers personal items in the vehicle not attached to the vehicle, such as a laptop that was damaged in a car accident.
To cover business property and absorb the financial risk from damage, commercial insurance policies are available. To cover work vehicles, commercial auto insurance policies can be created. For most vehicles, commercial auto insurance is not needed, however a vehicle owned by the business and used for more business than personal use, a policy can be advantageous. Generally, employees using work vehicles are less likely to treat them as their own, and work vehicles are more likely to be put under more stress and in more hazardous situations, so commercial auto insurance could be a very helpful solution, especially in heavier industries.
