Auto insurance acts as a protection against accidents, damages and theft of the vehicle. Most of these incidences compel the owner of the car to shell out a huge amount to recover from the damages. The damage may be caused to the car or the driver or to both. In any case, owner of the car is the one who suffers a lot. All these hassles can be avoided or at least made less with the cover of auto insurance. Here are the basics of auto insurance like why one should buy auto insurance, what are the factors affecting its rates and many more things.

Why auto insurance is needed?

Auto insurance is as important as death insurance. While driving on the busy roads of the city, the driver can meet with an unforeseen accident. Such accidents can cause damage to the car, the driver or the person he collided with. Whatever may be the injury, the owner of the car has to pay for the damages, besides the mental trauma of an accident. Auto insurance protects the owner of the car from financial risks related with the unexpected damages.

Most of the countries and states have to buy auto insurance of at least minimum amounts. These insurances offer least liability coverage. The remaining types of auto insurance may be optional.

Various terms involved with auto insurance

When one goes for buying auto insurance, he comes across various terms. Some of these terms are explained below.

1) Liability coverage: The liability coverage is an insurance policy that offers compensation to the third party who gets hurt during accidents. There are three types of liability coverage. Liability for bodily injury, property damage and uninsured motorist coverage. 2) Collision coverage: This coverage pays for the replacement or repair of the owner's damaged car. 3) Comprehensive coverage: This coverage or policy ensures the damage of the car due to other incidences like flood, fire, theft and vandalism. 4) Medical payments: This policy covers the medical expenses that are not taken care by the personal health insurance. 5) Deductibles: While buying auto insurance, the buyer needs to pay for some additional charges, as these are not paid by the insurance company, these are known as deductibles. Deductible is the amount the buyer needs to pay before the insurance coverage is activated. 6) Exclusions: Not every insurance policy covers all the damages caused to the vehicle or its owner. These "excluded" events are known as exclusions. One must carefully read through the insurance papers for such exclusions.