Auto Insurance – Some Basic Definitions

Every car owner in the United States must have auto insurance. This is as per the Department of Motor Vehicles (DMV). This covers the owner of the vehicle against any damage to his or her car as well as other people from any damages that he might inadvertently cause.

Auto insurance coverage includes many definitions. These definitions define the responsibilities and obligations of policy holders as car owners in the event of damage to their car, theft, or involvement in an accident.


Property Coverage this term generally covers the damage made to a policy holder’s car by whatever means, and also includes the theft of his car. It is obvious that this is an important requirement for car insurance. All car owners should be covered against property damage.

Insurance coverage: this term involves one’s legal responsibility for bodily injuries and for property damage caused by him. This guarantees the policy holder that the insurance company will cover him, to a certain extent, from any bodily or property damage he may have caused.

Medical coverage: this term applies to the amount of money paid for the hospitalization and treatment of injuries incurred during an accident, as well as the costs of rehabilitation, and wages lost by the injured person during this time of incapacitation.

Standard policies:

A wide range of auto insurance policies are available to cover the cost of car owners in the event of damage, loss or injury. You can also classify them into different types.

Third Party this is the most basic insurance policy available and protects a policy holder in the event he accidentally damages someone or their property. This is also the most affordable car insurance.

Fire and Theft this type of policy offers more protection to the policy holder, and will cover the cost of a car that is burnt or is stolen. It does not cover damages that may be incurred in the event of a car accident.

Collision: this type of policy covers the cost of repairs to a car when the policy holder is liable for the accident. If you are the one who caused the accident, this type of insurance will still pay for your repairs.

Personal Injury Protection (PIP), and Medical Payments (MedPay). this type of policy reimburses medical bills of the driver and his passenger regardless of who’s at fault for causing the accident. It protects the injured person from losing their wages.

Comprehensive: this type of insurance offers the most protection to the policy holder, and covers everything from accidents, to auto theft, to fire damage, to “act of god” (vandalism, hurricane, flood). This type of insurance can also cover medical expenses and items that are stolen from a car, at least partially. It is also the most costly type of car insurance.

Specialized policies:

You may also find specialized policies that are suitable for certain situations.

Car insurance: covers a car that is older than 25 years. Although it is similar to standard comprehensive auto insurance, there might be limitations on how much the owner can drive in a given year.

Rental reimbursement this type of policy simply insures a policy holder in case his car is unavailable – he is given a replacement rental car for this period.

No matter which policy a car owner may have, it is vital that he understands his policy. Some auto insurance providers won’t reimburse 100% of the car’s value if it is stolen or damaged. Instead, they will return only 80%. This prevents frauds, accidents, or thefts that are initiated by car owners who don’t want them anymore.