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What is Auto Insurance . . .?

We have four auto insurance FAQ pages, for your browsing pleasure.

The answers on this page deal with the most basic definitions for auto insurance terms.


1. What is liability coverage?
2. What is bodily injury coverage?
3. What is property damage coverage?
4. What is medical payments coverage?
5. What is personal injury protection?
6. What is uninsured motorist coverage?
7. What is underinsured motorist coverage?
8. What is collision coverage?
9. What is comprehensive coverage?
10. What is a deductible?
11. What is rental car reimbursement coverage?
12. What is roadside assistance coverage?
13. What is SR-22 insurance?
14. What are split limits and combined single limits of liability?
15. What is an umbrella policy?
16. What is gap insurance?
17. What is no fault insurance?


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1. What is liability coverage?
Liability coverage insures you against the cost of injury and damage you cause to another in an automobile accident. It's made up of two policies, bodily injury liability, and property damage liability. Auto liability insurance is required in virtually every state.
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2. What is bodily injury coverage?
It's the part of liability coverage that insures you against the injury you cause to others in an auto accident. It consists of two figures. One limits the cost of injury coverage per person injured, and the second limits the total dollar amount of injury coverage (for everyone injured.) This is a very important policy.
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3. What is property damage coverage?
It's the part of liability coverage that insures you against the cost of damage to another's property caused by you in an automobile accident. "Property" includes other cars, houses, fences, telephone poles, etc.
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4. What is medical payments coverage?
This policy pays the medical bills of the covered driver, family members, and passengers when injured in an accident, regardless of who was at fault. This coverage is required in some states, but not in others.
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5. What is personal injury protection (PIP)?
PIP is similar to medical payments coverage, only it usually covers a broader range of events, including medical bills, lost wages, loss of services, etc. It is required in most no fault states.
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6. What is uninsured motorist coverage
This policy covers the cost of injury or damage caused by another driver who is not insured. It covers the policy holder, authorized drivers, and any passengers. It usually consists of separate limits for bodily injury and property damage. This policy is required in some states.
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7. What is underinsured motorists coverage?
This policy pays for injuries and damage caused to the policy holder by a driver with inadequate insurance. It typically pays the difference between the at-fault driver's liability limit and the holder's policy limit. There are separate limits for property damage and bodily injury liability. This coverage is sometimes combined with uninsured motorist coverage under one policy, and may be required in some states.
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8. What is collision coverage?
This policy helps pay for repairs or fair market replacement cost if your car is damaged in an accident caused by you or an authorized driver. This policy is always optional.
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9. What is comprehensive coverage?
This policy covers the cost of repairs to or replacement of your vehicle should it be stolen, vandalized, struck in a hit-and-run, or damaged by an "act of God." Covered events vary from policy to policy but usually include fire, flood, and falling objects. This policy is always optional.
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10. What is a deductible?
It's the amount of money that you agree to pay before a certain auto insurance policy kicks in. Deductibles are designed to cut down on insurance costs by eliminating small or frivolous claims. The higher the deductible you're willing to pay, the lower the premium you earn. Collision and comprehensive policies almost always carry deductibles, and sometimes PIP and medical payments policies do too.
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11. What is rental car reimbursement coverage?
It's an optional policy endorsement that helps pay the cost of renting a car while your auto is being repaired for a covered event. (This means you usually need to carry collision and comprehensive to qualify.) Your premium is decided by the amount of reimbursement you want per day.
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12. What is emergency roadside assistance insurance?
It's an optional policy that covers the cost of towing or immediate roadside repair (like fixing a flat or jump-starting the battery). It does not cover the costs of any repairs done at a garage or service station, however.
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13. What is SR-22 insurance?
The SR-22 is actually a form that high-risk drivers may be required to file with the state before they purchase car insurance. It requires the provider to notify the state should the policy be terminated or canceled. DUIs, multiple speeding tickets, and driving without insurance or valid license are all reasons a SR-22 may need to be filed. The requirement usually lasts for three years after the initial event.
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14. What are split limits and combined single limits of liability?
Split limits of liability provide for separate coverage limits for bodily injury and property damage. A combined single limit policy has one coverage limit for the total cost of injuries and damage. Split limits of liability are much more common.

15. What is an umbrella policy?
It is additional liability coverage that goes "over" your auto liability limits. An umbrella policy may also increases other coverages, like homeowners's liability or boat liability. Carrying an umbrella policy is a good idea for drivers with considerable assets to protect.
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16. What is gap insurance?
This optional policy insures the driver of a new car for the difference between the car's financed value and its fair market value. Should the car be "totalled" during the first few years after purchase, the owner will be covered for the amount still owed on the car, rather than it's market value (which is often much lower). Because it covers only the difference in value, this is a relatively inexpensive policy. Learn more about auto gap insurance.
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17. What is no fault insurance?
No fault insurance covers the injury-related expenses of the policy holder in the event of an accident, regardless of who was at fault. Thirteen states currently impose no fault insurance laws.
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This wrebsite provides general information for educational purposes only and is not intended to be legal advice. We make no guarantees as to the validity of the information presented. Your particular facts and circumstances, and changes in the law, must be considered when applying insurance law. You should always consult with a competent auto insurance professional licensed in your state with respect to your particular situation.