A policy purchased by vehicle owners to mitigate costs associated with getting into an auto accident. Instead of paying out of pocket for auto accidents, people pay annual premiums; the insurance provider then pays all or most of the costs associated with an auto accident or other vehicle damage.
Auto insurance premiums, or the amount policyholders pay to be insured, vary depending on: age, gender, years of driving experience, accident and moving violation history, and other factors. Most states mandate that all vehicle owners purchase a minimum amount of auto insurance, but many people purchase additional insurance to further protect themselves.
Auto insurance provides property, liability and medical coverage:
• Property coverage pays for damage to or theft of your car.
• Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
• Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.
An auto insurance policy is comprised of six different kinds of coverage. Most states require you to buy some, but not all, of these coverages. If you’re financing a car, your lender may also have specific requirements.
A poor driving record or the desire for more complete coverage will lead to higher premiums. However, you can reduce your premiums by agreeing to take on more risk, which means increasing your deductible.