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What is Personal Auto Insurance?

By Celeste Stewart

Personal auto insurance policies typically include three major components: liability, occupant protection and vehicle protection. After meeting the minimum liability coverage that all states require by law, the personal auto insurance policy can contain additional insurance components, adding further financial protection.

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Types of Personal Auto Insurance

Liability insurance covers a driver"s legal liability for injuries or damages caused to others. It is usually represented by three numbers like this: 15/30/5. The first two numbers show liability amounts for bodily injury while the third number represents the liability amount covering property damage.

In this example, a policy with the liability coverage 15/30/5 would offer the following liability protections for a single accident:

Minimum liability coverage can be increased to provide better financial protection, especially when $5,000 would barely make a dent in the collision bill of a Mercedes Benz.

Occupant protection personal auto insurance coverage focuses on the occupants of the vehicle and includes these options: medical payments, uninsured/underinsured motorist bodily injury, extended benefits, wage earner disability benefits and death benefits.

Vehicle protection insurance coverage that pays for damage to the insured's car falls into two categories: collision and comprehensive. Collision insurance covers damages to the vehicle from a collision with another car or object. Comprehensive insurance covers damages to the vehicle due to non-collision events such as theft, vandalism, flood, fire or storms. Neither type covers normal wear and tear or mechanical breakdowns.

Who Does It Cover?

A personal auto insurance policy covers the named insured along with additional drivers named on the policy, such as a spouse or family member. An auto policy can also cover multiple cars in the household, which could translate into a multi-car discount. In most states, a personal auto insurance policy covers the named driver, subject to policy limits, regardless of whose car gets used.

Personal auto insurance policies must meet specific state minimums as well as any lender requirements imposed on the car's borrower. Once those requirements are met, additional coverage can get added to provide better protection.

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