| What is auto insurance? Auto insurance (or car | | | | In the United States, liability insurance covers |
| insurance, motor insurance) is insurance | | | | claims against the policy holder and generally, any |
| consumers can purchase for cars, trucks, and | | | | other operator of the insured's vehicle, provided |
| other vehicles. Its primary use is to provide | | | | they do not live at the same address as the |
| protection against losses incurred. By buying auto | | | | policy holder and are not specifically excluded on |
| insurance, depending on the type of coverage | | | | the policy. In the case of those living at the same |
| purchased, the consumer may be protected | | | | address, they must specifically be covered on the |
| against: | | | | policy. Thus it is necessary for example, when a |
| * The cost of repairing the vehicle following an | | | | family member comes of driving age they must |
| accident | | | | be added on to the policy. Liability insurance |
| * The cost of purchasing a new vehicle if it is | | | | generally does not protect the policy holder if |
| stolen or damaged beyond economic repair | | | | they operate any vehicles other than their own. |
| * Legal liability claims against the driver or owner | | | | When you drive a vehicle owned by another |
| of the vehicle following the vehicle causing | | | | party, you are covered under that party's policy. |
| damage or injury to a third party. | | | | Non-owners policies may be offered that would |
| Liability insurance covers only the last point, while | | | | cover an insured on any vehicle they drive. This |
| comprehensive insurance covers all three. Even | | | | coverage is available only to those who do not |
| comprehensive insurance, however, doesn't fully | | | | own their own vehicle. |
| cover the risk associated with buying a new car. | | | | Generally, liability coverage does extend when you |
| Due to the sharp decline in value immediately | | | | rent a car. However, in most cases only liability |
| following purchase, there is generally a period in | | | | applies. Any additional coverage, such as |
| which the remaining car payments exceed the | | | | comprehensive policies, i.e. "full coverage" may not |
| compensation the insurer will pay for a "totaled" | | | | apply. Full coverage premiums are based on, |
| (destroyed, or written-off) vehicle. So-called GAP | | | | among other factors, the value of the insured's |
| insurance was established in the early 1980's to | | | | vehicle. This coverage may not apply to rental |
| provide protection to consumers based upon | | | | cars because the insurance company does not |
| buying and market trends. The escalating price of | | | | want to assume responsibility for a claim greater |
| cars, extended term auto loans, and the | | | | than the value of the insured's vehicle, assuming |
| increasing popularity of leasing gave birth to GAP | | | | that a rental car may be worth more than the |
| protection. GAP waivers provide protection for | | | | insured's vehicle. Some states, such as Minnesota, |
| consumers when a "gap" exists between the | | | | may require that it extend to rental cars. Most |
| actual value of their vehicle and the amount of | | | | rental car companies offer insurance to cover |
| money owed to the bank or leasing company. In | | | | damage to the rental vehicle. In some regions, the |
| some countries including New Zealand and | | | | costs associated with not having access to the |
| Australia market structures mean that people are | | | | vehicle ("Loss of Use") is also covered. |
| more likely to buy a nearly new car than a new | | | | What is auto insurance? |
| car so this is less of a problem. | | | | |