If you are owner of a car, you should buy auto insurance to protect yourself and your vehicle from any financial loss, incurred due to any auto accident.

What is auto insurance?

Auto insurance is a policy that will compensate for the financial losses if you meet with an accident. It is a contract between you and the auto insurance company. You need to pay a premium to the insurance company on a regular basis and they will compensate for your financial losses in the event of an accident.

What are the types of coverage?

The auto insurance companies offer different types of coverage plans as follows:

• Property damage liability: This will provide coverage against any loss incurred if you or the driver of your car causes injury to another car. The minimum liability limits for this type of coverage varies from one state to another.

• Collision coverage: You can get coverage against any loss if your car gets damaged due to collision with another car or your car gets damaged due to flipping over or colliding with a tree or any such object. The insurance company will provide the expenses for repair, after reducing the deductible. However, you need to pay for the deductible, before the insurance company gives you the money. The insurance policy will meet expenses for repairs upto your car’s fair market value.

• Bodily injury liability: This coverage will protect you against any bodily damage done by you to another driver. So, you should opt for sufficient coverage, which should be more than the minimum requirement level.

• PIP (Personal injury protection) or medical payments: This will provide coverage against any expenses incurred for treatment, if you or the people traveling in your car suffer from any injuries due to an accident.

• Comprehensive coverage: This type will give you coverage if your vehicle suffers damage due to :

• Windstorm
• Earthquake
• Windstorm
• Flood
• Hail
• Explosions
• Rioting
• Fire
• Vandalism

• Uninsured/Underinsured motorist coverage: This will cover your expenses for medical bills if you are struck down by an individual who is not insured. It will also pay for the medical bills for you, if you are a victim of a hit and run case.

Underinsured motorist coverage will come into effect if you cause an accident but you are not equipped with the required coverage to pay for all the medical bills. The UIM coverage is mandatory in the following states-

• • Connecticut
  • Vermont
  • Maine
  • Minnesota

To get coverage you need to file a claim with the insurance company. After you file the claim, the insurer will start the process of evaluation and will decide the extent of damage that has resulted due to the accident. The claim amount is directly proportional to the insurance cost. So, the more you will pay towards the premium amount, more you can claim for reimbursement. However, filing too many claims will have an adverse effect on the resale value of the car. So, if the loss incurred by accident can be borne by you, it is not advisable to file a claim in the first place.