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Auto insurance: What is auto insurance?

Auto insurance is essentially a contract between the owner of the automobile and the insurance company. Auto insurance protects the owner against any financial loss due to an accident. The coverage for the auto insurance generally includes property coverage, liability coverage and medical coverage. The property coverage pays for the damage to the car or theft of the car. The liability coverage pays for one’s legal responsibility to others for injuries caused or damage to property. Medical coverage pays for the cost of treating injuries, rehabilitation. Sometimes medical coverage includes lost wages and in an unfortunate accident, funeral expenses. The premium for the insurance is dependent on the extent of coverage one buys the insurance for.

An auto insurance policy consists of several different coverages. The most common coverages are the liability, collision, replacement cost, depreciation, actual cash value and comprehensive. Most states require one to buy an insurance policy that covers the 6 areas as above. The insurance broken will have more information on the types of coverage. One should get to know, in detail, before signing the contract for the auto insurance policy.

Auto insurance policies are generally issued for a period ranging from 6 months to a year. If one is financing the purchase of a new car, the financier would like some cover from his end also. The auto insurance policy may have to include this cover and the premium goes up.

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