An auto insurance policy is a contract between an insurance company and a policyholder in which the insurance company agrees to provide financial protection against losses or damages resulting from traffic accidents or other covered events. Auto insurance policies typically cover a specific period of time, such as six months or a year, and can be renewed or extended as needed.
There are several types of auto insurance coverage, including:
- Liability coverage: Liability coverage protects the policyholder against financial losses if they are found to be at fault in an accident and are sued by the other party. This coverage typically includes bodily injury liability and property damage liability.
- Collision coverage: Collision coverage pays for damages to the policyholder’s vehicle if it is involved in a collision with another vehicle or object.
- Comprehensive coverage: Comprehensive coverage pays for damages to the policyholder’s vehicle that are not caused by a collision, such as damages from a fire, theft, or natural disaster.
- Medical coverage: Medical coverage pays for medical expenses incurred by the policyholder and passengers as a result of an accident.
- Uninsured/under-insured motorist coverage: Uninsured/under-insured motorist coverage provides protection if the policyholder is involved in an accident with a driver who does not have sufficient insurance coverage.
Auto insurance policies typically have limits on the amount of coverage provided, as well as deductibles that the policyholder must pay before the insurance company will cover the remaining costs. Policyholders can choose the types and levels of coverage that best meet their needs and budget.