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Automobile Insurance - Explained

What is Auto Insurance?

Written by Jason Gordon

Updated at September 27th, 2021

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Table of Contents

What are the common types of Automobile Insurance coverage?What is Automobile Insurance? What is Liability Coverage?What is Collision Coverage?What is Comprehensive Coverage?What is Uninsured (& Underinsured) Motorist Coverage? Other CoverageDiscussion QuestionPractice QuestionAcademic Research

What are the common types of Automobile Insurance coverage?

Individuals may purchase insurance coverage for nearly any foreseeable risk. The following are common types of insurance policies.

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What is Automobile Insurance? 

Vehicle insurance covers damages suffered by either the individual or automobile pursuant to any number of risks. Common risks covered in vehicle insurance policies include the following:

What is Liability Coverage?

This type of policy covers, up to the policy amount, the costs and damages suffered by third parties as a result of operating the insured vehicle.

Note: This type of vehicle insurance coverage is mandatory in every state.

What is Collision Coverage?

This is a form of property insurance that will pay the value of the damages suffered to a vehicle in a crash, up to a stated amount or up to the total value of the vehicle.

Note: This type of insurance is generally required by a lender when purchase of a vehicle is financed?

What is Comprehensive Coverage?

This type of insurance coverage insures the vehicle against forms of damage other than collision, such as vandalism, theft, hazardous weather, etc.

What is Uninsured (& Underinsured) Motorist Coverage? 

This type of insurance coverage provides indemnification for injuries suffered by the driver and passengers of the covered automobile when another party without insurance causes personal injury in a crash.

Note: It also covers situations where a third party causing the damage or harm is unidentifiable. This type of coverage is mandated in many states.

Other Coverage

Other insurance coverage in a vehicle policy may include towing and rental car expenses, additional medical payment coverage, and accidental death coverage.

Related Topics

  • Vehicle insurance
  • Health insurance
  • Disability Insurance?
  • Life Insurance?
  • Hazard Insurance 
  • Vehicle insurance
  • Private Passenger Auto Insurance Risk Profile
  • Underinsured Motorist Coverage
  • Uninsured Motorist Coverage
  • Omnibus Clause

Discussion Question

Why do you think there are so many special types of coverage applicable to ownership and operation of a vehicle? How does the cost-benefit vary with each type of vehicle insurance?

Practice Question

Donald is purchasing a new car. He is financing the car through his bank. What types of insurance will Donald likely have to purchase?

Academic Research


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