The example car insurance coverage above covers a maximum of $150k in medical bill payments per person you injure with a total of $300k per accident you cause. What is Auto Insurance? For example, gap insurance provides coverage for people who have auto loans. The auto liability coverage definition may sound simple enough, but here’s a real life example: you’re at a four-way stop a few blocks from your house. Car Insurance is a legal requirement. As a responsible driver you will no doubt be aware that having insurance for your vehicle is mandatory, but, due to the terminology used by insurers, you may not have a complete understanding as to what exactly it is and why you need it. This is an optional type of auto insurance, so it will add to your premium, and usually has a deductible. But it means paying less out of pocket when you cause an accident and need repairs to your own car. Car insurance is a type of coverage that protects you financially if you're in an accident. Auto insurance provides coverage for property, medical expenses, and liability. What is car insurance? Most car insurance companies offer additional coverage that you can add to your policy, too. It is a contract that you have with an insurance company in which you agree to pay a premium, and in the event of an accident, the company agrees to pay for your covered damages, as outlined in your specific insurance auto policy. their home or business) if you cause an accident. Your policy will define what losses are covered, and the coverage limits. Auto insurance is protection. If your car is totaled in an accident or stolen, most car insurance policies will pay you the actual cash value of the car, which could be less than what you still owe on the loan. Car insurance protects you against financial loss in case of an accident or theft. Similarly, your liability insurance won’t cover injuries you sustain in an accident you caused. 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