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.
The following are important definitions:
Property Coverage: this describes the amount of coverage available to a policy holder whose car was damaged in an accident, or through other means, such as vandalism. It also includes the theft of his car. Obviously this is an option every car owner should want to obtain.
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 defines the amount of coverage the insurance provider is willing to provide for the treatment of injuries and hospitalization sustained during an accident, as well as the costs of rehabilitation. In some cases, it also covers the wages lost by the injured person while he cannot not work.
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 simplest and cheapest policy, and the bare minimum, a car owner must possess if he owns a car. It financially protects an insured individual when he causes damage to someone or their property.
Fire and Theft: this type of policy offers more protection to the policy holder, and will cover the cost of a car that is burnt or is stolen. Note that it does not cover any damages incurred if involved in a car accident.
Collision: this type of policy covers the cost of repairs to a car when the policy holder is liable for the accident. Basically, if you cause the accident, you still get paid for repairs if covered by this type of insurance.
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 type of insurance offers the most protection to the policy holder, and covers everything from accidents, to auto theft, to fire damage, to act of god (vandalism, hurricane, flood). It can even cover the cost, at least partially, of medical expenses suffered during an accident and of items stolen from a car. Unsurprisingly, this is also the most expensive car insurance.
Specialized policies:
There are many types of special auto insurance plans, for special scenarios. Here are several examples.
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).
