Auto insurance protects you against financial loss if you have an auto accident. It is a contract between you and the auto insurance company. You agree to pay the premium and the auto insurance company agrees to pay your losses as defined in your policy. Auto insurance provides property, liability and medical coverage:
- Property coverage pays for damage to or theft of your car.
- Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
- Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.
An auto insurance policy should at the minumum cover third party liabililty e.g your auto insurance company will cover the cost of the third party in case of accident. Most countries require you to buy at least third party auto insurance. If you’re financing a car, your finance company may also have requirements that you fully insure your auto for retail value.