Auto Insurance policy protects you from financial damages and/or losses incurred involving the use of a car, in relation with you, your vehicle, and property. Auto Insurance is a bond that connects the insured and insurance company through a fool proof contract, wherein as per the contract the insurance company is liable to pay for the losses as defined in the insurance policy.

The basics of auto insurance coverages

Standard Coverages - The most important and basic policy of all. As a driver you are bound to possess it. It includes liability insurance, medical payments insurance and underinsured and uninsured motorist insurance.

Liability Insurance - Mandatory in all US states and most important type of car insurance, it has 2 parts - bodily injury (covers you and your family members financially up to the declared amount) and property damage liabilities (pays for property damage up to the stated amount caused by you or any person who drives your car).

Medical Payments Coverage - this coverage pays for immediate medical treatment expenses for you, your family members or other passengers injured or killed in an accident while riding or driving in your vehicle.

Uninsured Motorist Coverage (UM) & Underinsured Motorist Coverage (UIM) – it applies to bodily injury that you and your family may incur when hit by an uninsured motorist or hit-n-run driver. Uninsured motorist comes in when the other driver has no liability coverage and Underinsured motorist is when the cost of your injuries exceeds the other driver’s coverage.

Optional coverages - though not compulsory are additional coverages to protect your car. Comprehensive and collision insurance policies do just that. Collision pays for damage caused to your vehicle in an automobile accident when you are "at fault". Comprehensive covers damage caused to your vehicle by any unknown party or man made or natural disasters. If you’re automobile or any part of it such as battery, tires, etc are stolen; you are covered under comprehensive automobile insurance policy.

Auto Insurance Policy document basics

Understanding an auto insurance policy document is a different ballgame, even if you're well equipped with all the terms and jargons.

Automobile insurance policy is a binding legal contract. It's actually very important to read and understand each sections of the contract. There are a total of 5 distinct parts in your auto insurance policy

Declarations - Declaration lists all the relevant information such as year, make, and model of your car, VIN (vehicle identification number, name of the insured (you or you and your spouse), dates the policy is effective, the policy's coverage types and limits and the policy's cost (your premium).

Insuring Agreement - the centerpiece of the personal auto policy, it outlines exactly what the insurance company promises to provide in return (type and extent of each auto insurance coverage you've purchased will be described in detail here) for the payment of your premium.

Definitions - glossary of all insurance jargon will be clarified here.

Exclusions - Quite an important section as it lets you know what, when and who won't be covered by your policy. Make sure you understand the exclusions, because you don't want to be caught relying on some kind of auto insurance coverage that you don't actually have.

Conditions - A very important section should you ever be involved in an accident. It lists your duties and responsibilities as the insured in the event of a claim situation. In short, conditions are guidelines for contacting the insurance company, obtaining a police report, filing of the claim and cancellation of the auto insurance policy.