Automobile Insurance

Automobile insurance is the most widely purchased property and liability insurance. It is one of the most important kinds of insurance because of the serious injuries and extensive property damage that can result from auto accidents. Drivers are legally responsible for any costs arising from accidents they cause.

Automobile insurance protects a policyholder against financial losses from accidents. It also provides compensation if a policyholder's car is stolen, vandalized, or damaged in a collision or by storms or other natural perils.

Like homeowners' insurance, most auto insurance policies are package policies and so offer both property and liability coverage. Although benefits vary according to the type of policy, nearly all policies provide four kinds of coverage. They are (1) liability coverage, (2) collision and comprehensive coverage, (3) uninsured motorists coverage, and (4) medical payments coverage. In addition, some U.S. states and Canadian provinces have passed laws providing for a type of accident insurance called no-fault insurance.

1. Liability Coverage
Liability coverage protects policyholders if an auto accident for which they are responsible causes bodily injury to others or damage to property. Liability coverage is considered essential for all car owners. In fact, over 40 U.S. states and all the Canadian provinces require motorists to have such insurance before they may own or drive a car.

2. Collision and Comprehensive Coverage
Collision and comprehensive coverage pays for losses resulting from damage to a policyholder's auto. Collision insurance provides protection if the car hits another car or object or runs off the road. Comprehensive insurance covers losses from such perils as fire, theft, flood, and hail. Nearly all collision and comprehensive insurance has a deductible. The company thus does not compensate a policyholder for small losses.

3. Uninsured Motorists Coverage
Uninsured motorists coverage pays benefits to a policyholder injured by a driver who is judged to be responsible and who does not carry liability insurance. It also covers policyholders and their families who are injured by an uninsured driver while riding in another person's car or while walking. Injuries caused by a hit-and-run driver are also covered.

4. Medical payments coverage
Medical payments coverage provides a small sum for the medical expenses of policyholders and their passengers injured in an auto accident. It pays benefits even if the policyholder is not at fault.

5. No-fault Insurance
No-fault Insurance enables auto accident victims to collect damages automatically from their own insurance company, regardless of who caused an accident. These damages chiefly cover medical expenses and loss of income.