Auto insurance is used to protect you or someone else from loss resulting from an accident or theft. Depending on the type of coverage, the loss may be suffered by you or by another party. Property damage is primarily thought to be the vehicles involved, but it can also be a utility pole, building, or home. Medical expenses may be doctors and hospitals, but may also involve lost wages or rehabilitation from injuries. Each state has established which coverages and in what amounts a driver must purchase to legally register or operate a vehicle. Banks and finance companies also include mandatory car insurance limits as part of the financing agreement.

Liability insurance amounts are determined by each state and are stated as 3 numbers. The first number is the maximum your policy will pay for medical expenses incurred by one person. The second amount is the maximum to be paid for medical expenses when two or more people are involved in the same accident. The last amount is the maximum coverage for property damages in an accident. Liability covers damage or injury to others when you are at fault. It does not cover you or your property.

Collision and comprehensive are typically required by your lender when you finance a car. These categories of insurance pay for repairs or replacement of your vehicle if it is stolen, vandalized or wrecked. While you still owe on your car, this type of coverage is primarily protection for the lender. After your note is paid, you have the option of keeping the coverage or dropping it. If your car still has substantial value, you might consider keeping the coverage. You will have to balance the worth of the car against the cost of the insurance.

Uninsured motorists are those that do not have any insurance. Underinsured motorists have a policy with limits that are not high enough to meet actual costs. The limits mandated by most states are quite low, so a driver can meet legal requirements and still not be able to pay for a serious accident. Uninsured and underinsured motorist insurance protects you from damages you incur from either type of driver. Requirements vary, with some states making such coverage mandatory if liability is purchased. Other states make it totally voluntary or merely require the company to offer it to you. You may be asked to sign a waiver to prove you declined the coverage.

Personal injury protection covers the medical expenses for you and your passengers in the event of an accident. In some states, this is required as a modified type of no-fault insurance. Not all companies in all states sell personal injury clauses, however.

A deductible represents your out-of-pocket costs, or the amount you will need to contribute to the repair. The deductible amount is most important for collision and comprehensive coverage. Policies with lower deductibles are more expensive. Your loan documents, however, may specify the amount of deductible you are to maintain.

There are supplemental coverages you may wish to consider. If you financed a car with little or nothing down, you might want to opt for new car replacement coverage. Under traditional policies, the insurance company will use the depreciated value of the car when determining payment. This can leave you owing a substantial balance to your lender even after the insurance company pays. You might also want to consider towing, which would pay wrecker fees to transport your disabled car. You can also choose coverage for a rental car if your vehicle is stolen or being repaired.

Before buying a policy, it is a good idea to get an auto insurance quote from more than one company. Each company evaluates its risk and history of payments when setting its rates, so they vary widely. Compare identical coverage, using the same deductible and limits. It is often worthwhile to get a car insurance quote from the agent who wrote your homeowner's policy. While it is not always true, you can sometimes save money by "bundling" all of your insurance needs.