Auto insurance is a necessity as it is mandated by law in every state. States vary only in terms of the amount of auto insurance one is required to get and/or the extent of coverage. Understanding your own state's laws regarding auto insurance should help you in choosing the most appropriate auto insurance coverage for you. From the minimum protection your state's laws require, you may opt for more coverage, depending on your needs and financial capability.

Auto Insurance Types

The following are the more popular types of auto insurance coverage. Understanding each one of them and the type of protection they provide, will help you decide on the best one for you.

Most states require every vehicle owner to have some form of liability insurance for bodily injury and property damage. This type of coverage pays for the injuries or damages you may cause to other people and their property. It is important that you have this minimum protection so that if you are at fault in a driving accident, your insurance company can shoulder a part or all of the expenses. Otherwise, you pay out-of-pocket, or if you can't, the victims might sue you and come after your properties instead.

Collision and comprehensive auto insurance coverage is the cost of repairs to your car. The difference between them is that, collision coverage takes care of repair costs due to accidents while comprehensive coverage includes non-accident damage such as theft, vandalism, bad weather, fire, and falling objects.

These types of auto insurance coverage are optional in some states, but car loan financiers usually require their clients to get this coverage for obvious reasons.

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