Auto insurance protects against financial loss in the event of an accident. It is a contract between the policyholder and the insurance company. The policyholder agrees to pay the premium, and the insurance company agrees to pay losses as defined in the policy.

Auto insurance provides property, liability, and medical coverage:

1. • 1. • • • Property coverage pays for damage to, and/or theft of, the car.
            • Liability coverage pays for the policyholder’s legal responsibility to others for bodily injury, or property damage.
            • Medical coverage pays for the cost of treating injuries for the passengers in your vehicle.

All states require drivers to have auto liability insurance before they can legally drive a car. (Liability insurance pays the third party medical, car repair, and other costs when the policyholder is at fault in an auto accident.) All states have laws that set the minimum amounts of insurance or other financial security drivers have to pay for the harm caused by their negligence behind the wheel, if an accident occurs. Most auto policies are for period of six months to a year. A basic auto insurance policy is comprised of six different kinds of coverage, each of which is priced separately:

1. • 1. • • Bodily Injury Liability
          • Medical Payments or Personal Injury Protection (PIP)
          • Property Damage Liability
          • Collision
          • Comprehensive
          • Uninsured and Underinsured Motorist Coverage