Legally, every car owner in United States must be covered under some type of auto insurance as stated by the Department of Motor Vehicles or DMV. This protects the owner of the car against damage to himself or his car, as well as protects other people from damages he may inadvertently cause.
Auto Insurance Coverage includes several definitions. These definitions determine the responsibilities and obligations of the policy holder, as a car owner, in case of damage to his car, the theft of his car, or an involvement in a car accident.
Here are some important definitions:
Property Coverage: this term generally covers the damage made to a policy holders car by whatever means, and also includes the theft of his car. Clearly this is a necessity when it comes to insuring ones car, and every car owner should be insured against property damage.
Liability Coverage: this term involves ones legal responsibility for bodily injuries and for property damage caused by him. This assures the policy holder that whatever happens, the insurance company will protect him - to some extent - from bodily or property damages he has caused.
Medical Coverage: this term applies to the amount of money paid for the hospitalization and treatment of injuries incurred during an accident, as well as the costs of rehabilitation, and wages lost by the injured person during this time of incapacitation.
The following are standard policies:
There are numerous types of auto insurance policies that exist to compensate for damage or loss sustained, and expenses incurred, by the car owner in cases of loss, injury or property damage. Here are several types of such policies:
Third Party: this is the bare minimum policy a car owner must possess in order legally comply with US laws. Unsurprisingly, it is also the cheapest car insurance available. Put simply, this plan protects the policy owner in case he accidentally damages someone or their property.
Fire and Theft: this type of policy covers the cost of a car that is either stolen or burnt, but it does not cover any other damages. For example, if involved in a car accident, based on this option alone, the insurance company is not financially responsible.
Collision: this type of policy covers the cost of repairs of the insured car even if the policy holder is responsible for the accident that caused the damage.
Personal Injury Protection (PIP) or Medical Payments (MedPay): this type of policy covers medical bills and lost wages of the driver and any passenger that were in his car during a car accident. This occurs even in the event that the driver was responsible for the accident.
Comprehensive: this is the most expensive car insurance, and unsurprisingly, the best one as well. It covers the policy holder from accidents, auto theft, medical bills resulting from bodily injures (at least partially), fire damage, and even "acts of god" (such natural disasters). On top of that, it even partially covers the cost of items stolen from a car.
Specialized policies:
The following are specialized policies that only some people may be interested in.
Classic car insurance: this policy targets owners of antique cars (cars that are older than 25 years), and is equivalent to a comprehensive car insurance. There are usually extra conditions in the policy, such as a limit on the number of miles the car owner may drive in a year's time.
Rental Reimbursement: this policy ensures a policy holder that he'll always have a car to drive in. If his car is damaged (no matter which way), he is entitled to receive a replacement rental car until it is fixed.
No matter which policy you may have, it is essential that you are intimately familiar with its details as this could have significant financial repercussions when the time comes. For instance, some auto insurance plans only reimburse 80% of the value of a stolen car - the reason being, to avoid fraud (car owners from staging theft of their own cars).
