Having basic auto insurance is mandatory in most states. Why, you ask? Cause it provides you with the basic level (in most cases) of financial protection in case your car meets with an accident. But what really is auto insurance and how does it work? What options do you have to choose from? What does auto insurance cover?

We’ve got the answer to all those questions! Read on to learn how car insurance works and the types of coverage insurance offered by insurance providers:

Auto insurance 101: Understanding the basics

When you sign up for auto insurance, you sign a contract with the insurance company to protect you against any financial loss in the case of vehicle theft or an accident. The insurance provider agrees to cover a set of outlined expenses in exchange for a monthly/annual premium.

Here Are the Costs that Get Coverage by Your Auto Insurance

Any damage to the vehicle or theft of the insured vehicle

Your legal liability to others in case of bodily injury or property/vehicle damage

The medical cost of treating injuries, rehabilitation caused by an accident

Auto insurance policies are issued for a tenure of six-months to one-year and are easily renewable. Your insurance provider will send you a renewal notice and will also notify you when it is time to pay the premium.

Who Is Covered Under an Auto Insurance Policy?

The auto insurance policy you choose covers you and other family members who are added to the policy, where the person in question is driving their own vehicle or someone else’s. Besides that, the policy also extends to someone (who isn’t on your policy) driving your car with your consent.]

What Are the Other Types of Auto Insurance Coverages?

The most basic form of legally mandated auto insurance policy covers the damages your car causes but doesn’t cover any damages that might be caused to it. To add that to your policy, you can opt-in for additional and optional coverages like:

Collision Coverage

This coverage reimburses you in case of any damages that happen to your car as a result of a collision with an object or another vehicle. It is important to know that collision coverage does not give out reimbursements for normal wear and tear of your vehicle or mechanical failure.

Comprehensive Coverage

This provides protection against any damages caused to your car (due to natural hazards or accidents) and theft.