How does auto insurance work? What does auto insurance cover?


Basically, auto insurance provides protection against damage to your car, medical expenses to you and other victims, as well as damages to other cars and property. These, of course, depend on the specific circumstances, like who was at fault in the car accident.

These instances are covered by various types of car insurance. These guard against financial loss with regards to untoward incidents related to your car - such as fender benders, instances of theft, damage due to a hailstorm and many other instances that may cause the car owner to incur a financial loss.

Here are the six types of coverages:

Collision Cover

This protects the car in the event that it is damaged due to an accident. This coverage will pay to either have your car repaired or to indemnify you of the actual value of the car at the time of the accident (in case your car is declared a total loss).

Medical Expenses Cover/Personal Injury Protection (PIP)

This coverage will reimburse you the cost of having yourself treated if you are injured during a car accident involving your car (and you are the driver). It will also provide similar reimbursement to passengers. This aspect of the insurance cover will pay not just for medical expenses, but also for rehabilitation and any lost earnings. The coverage may also pay for funeral costs when warranted.

Bodily Injury Liability

This will cover medical expenses for other people who are injured as a result of a car accident you are made liable for. This includes drivers and passengers of other cars, as well as pedestrians. Please note that in some cases, liability for bodily injury may be a big amount, as this may also cover compensation for lost wages, as well as indemnification for pain and suffering.

Property Damage Liability

This will cover any liability you incur as a result of your causing damage to another party's property. This does not just cover liability for damages to a car, but also to homes and buildings, walls and fences, utility poles and other structures.

Comprehensive Insurance

This provides expenses for losses due to other risks - such as theft, acts of God, fire, vandalism and so on.

Uninsured or Underinsured Motorist Insurance

This will cover for damages caused by a driver who is uninsured or underinsured. It may also pay for damage caused by a hit and run driver.

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