What Exactly Is Auto Insurance and How Does It Work?

What Exactly Is Auto Insurance and How Does It Work?

What Exactly Is Auto Insurance and How Does It Work?

Here’s a brief overview of auto insurance:

  • It’s a package of coverages for you and your vehicle.
  • Liability coverage covers damage that you cause others.
  • Comprehensive and collision cover your own car.
  • You can add “convenience” coverage for towing, car rental and more.


Q: I see I have a lot of options when it comes to auto insurance. What are the main types of coverage and how do they benefit me?


Michelle Early, a Farmers Insurance® agent in Edmond, Oklahoma, discusses the types of auto insurance coverage and how they can benefit you.

A: Auto insurance is a package of coverages designed to help you protect yourself financially if you are at fault in an automobile accident. All policies start out with liability coverage — it’s required in most states. Liability covers the cost of damage you cause to others, such as injuries resulting in doctor’s visits or hospital stays, as well as damage to their car or property.

In most states, insurance companies must also offer uninsured/underinsured motorist coverage (“UM/UIM”) that pays for your medical expenses resulting from an accident caused by the negligence of another driver who does not have any liability insurance to pay for your bodily injuries (UM) or enough liability insurance to pay for those injuries (UIM). It’s optional in most states, where you can waive this coverage in writing if you do not want it — though some states require it.

You also can purchase uninsured motorist property damage coverage in some states — or UMPD for short. Although it’s not usually required by law, some choose to carry this coverage to pay for damages to their car caused by an uninsured driver.

Next are two types of optional coverages for your vehicle: collision and comprehensive. Collision coverage pays for damage to your car when you collide with another vehicle or object. Comprehensive coverage pays for damage to your car caused by something other than a collision, like hail, flooding, fire or theft.

Finally, we offer several types of “convenience” coverages, like towing and roadside assistance, rental car coverage and new car replacement. Your Farmers agent can help you put together a package of coverage that you’ll feel is right for you.

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