Your car has two unique qualities. First, it is probably one of the most expensive things you own. Insurance protects your investment and guarantees you a way of coping with the expense of accidents, vandalism or theft, as well as securing your financial responsibility to the bank or other institution lending the money to buy your vehicle.

Second, when you drive, you are operating a powerful machine, weighing one ton or more and capable of moving at over 100 miles per hour. You are responsible for the safety of your passengers, your fellow drivers, other people’s property, pedestrians and yourself. Insurance helps you live up to that responsibility by ensuring your ability to cover the costs of potential damages or injuries.

You are also required to be financially responsible by state laws, which are best satisfied through your insurance coverage. In fact, in most states insurance is a prerequisite to registering your car. So if you want to drive your own vehicle, you must be insured.

DIFFERENT TYPES OF POLICIES & WHAT THEY COVER?

Auto insurance is divided into several different types of coverage:

General liability covers damage you may cause to other people’s property and injuries to the people themselves.

Collision covers damage to your own vehicle in an accident.

Comprehensive (i.e., fire, theft and other non-collision damage) covers fire damage to your vehicle, break-ins, vandalism or theft, as well as natural disasters (earthquake, hail, hurricane, flood, etc.-unless the vehicle is overturned, then it is considered a collision).

Medical payments insurance, usually in the range of $5,000 to $10,000, covers medical expenses for injuries. This “good-faith” coverage guarantees immediate medical payments for you, your passengers and other parties, regardless of who is at fault. It also covers you and members of your household in any accident involving an automobile, whether you are on foot, on a bicycle, in a friend’s car, etc.

Uninsured motorist (UM) and underinsured motorist (UIM) coverage protects you if you are injured in an accident with others who themselves carry insufficient or no liability insurance.

Extra coverages include expenses for towing, labor, temporary replacement vehicles, etc. These are generally defined as add-ons or endorsements to your policy.

Source: http://www.insurancesguide.org/car/guide/