Home > Auto Insurance Overview Auto insurance policies consist of financial coverage for a policyholder's vehicle damages, as well as liability coverage for damages to other people and vehicles. Most states in the U.S., if not all, require mandatory levels of bodily injury or property damage liability insurance for all drivers, but an exception to this case may be when a driver has been granted a permit for an uninsured motor vehicle. Many states are considered "no-fault" states, which means that they mandate drivers to carry no-fault insurance coverage and they utilize no-fault laws to settle smaller accidents. A person with no-fault insurance can be compensated by their own insurance company for damages to themselves or their vehicle, regardless of another party's fault in an accident. In this case, the faulty driver does not have to be proved, and therefore this type of insurance provides for the easy resolution of smaller claims as well as reduces the occurence of personal injury lawsuits stemming from less severe accidents. When there is an accident which creates damages that exceed the given state's no fault limits, then the right to sue for the excess damages is granted to the injured person. When an auto insurance policy is purchased, a specific vehicle or vehicles are being covered, in addition to specific people. Several classes of insured people can be covered under a typical policy. There are "named insureds", which includes those who buy the policy, their spouse, and other family members. Also there are "permissive users" who are covered when they have been given permission to be driving in the specified car. This means that the insurance coverage travels with the car, regardless of who's driving, as long as the driver has permission. Structure of an Automobile Insurance Policy Liability Coverage - This is the most expensive part of an auto insurance policy to purchase. This portion serves to protect the policyholder against the costs of a lawsuit in the event that the policyholder or other insured person causes injury or damages due to negligent driving. Negligent driving has different applicable laws in each state, but can generally be considered as driving beyond reasonable standards required for the safe operation of a vehicle. The liability portion of a vehicle insurance policy financially protects the insured person against legal claims of bodily injury, property damage, and cost of legal defense. When a policy holder is covered for bodily injury, and their negligent driving causes injury, death, or damages to another person, they may be financially protected in the case that they get sued for the damages. Typical damages might include medical bills, lost work income, and monetary compensation for the pain and suffering of the victim. This type of coverage might also serve to compensate the family of the injured or deceased person as well. Property damage coverage pays for damages to another person's property due to negligent driving. The damage must normally be caused to another vehicle in order to be subject to this type of coverage, but is not limited to this. The cost of coverage is typically far less than that of bodily injury, due to the relative degree of risk. Also part of an auto insurance policy is coverage for the insured's legal defense if they get sued as a result of an accident covered by the policy. People who require pay in this case are lawyers, accident reconstruction specialists, and doctors who provide defense testimony. When a person purchases auto liability insurance, they have the option of determining the financial limit of their coverage. The liability coverage can be purchased in terms of a split-limit amount or a single-limit amount. A split-limit plan defines the maximum amount that is to be paid per injured person, and also per accident. For instance, $100,000 per person and $300,000 per accident. A single-limit plan will only limit the amount payable by accident, for example $400,000 per accident. Medical Payments - This portion of a policy is designed to pay for any medical costs resulting from an accident. The covered people normally include insured persons and family members who reside in the same household. The passengers of the insured person are also covered. Beneficiaries can also gain medical compensation when injured as a pedestrian, regardless of fault. Medical payments coverage ensures the lack of a long wait for resolution of the matter in court before benefits may be received. Despite such sufficient medical payments insurance, many people are already well covered by health insurance and choose not to purchase large amounts of medical coverage. Collision and Comprehensive - Collision coverage protects the value of your vehicle, and usually composes about a third of the total cost of the policy. There must be physical contact between the insured vehicle and another vehicle causing damage to the insured vehicle. Damages to the other vehicle would be covered by the insured's liability protection, if they are at fault in an accident. The insured can make a claim for collision benefits from their company even if they were at fault in an accident. Comprehensive offers protection against flying objects, wind, theft, flood, fire, riot, animals, hail, and anything other than what is covered by collision. Uninsured and Underinsured Motorist - This portion of a policy protects the insured in the case that they sustain damages as a result of someone who does not have adequate liability insurance. This protection is optional, but strongly suggested. It covers the bearer specifically for damages in the form of bodily injury. In order to collect payments for this type of claim, the other driver involved must be determined as liable for the accident. The policy holder can be compensated for damages which would normally be paid by the other driver. Deductibles - Deductibles apply to a collision, and these are an amount of money that must be paid by the policy holder before the insurance benefits will be applied to the damage costs. A normal deductible is in the range of several hundred dollars, and can be negotiated with your insurance company or provider. A lower deductible means higher premiums, but a higher deductible means lower premiums. The insurance company pays for the damages of an accident, minus the deductible.