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