Associate Level Material
Type of Insurance Functions Example of Company Coverage Characteristics
Auto The primary function of auto insurance is to make sure every driver on the road is financially responsible for their actions. In some states you may use other means to meet financially responsible guidelines, such as putting up a cash deposit with the Department of Motor Vehicles (DMV) or using a surety bond. With the small amount of cash needed auto insurance is the most common way to meet financial responsibility requirements to drive on the road. A clearer definition of the function of auto insurance can be viewed by looking at the regulations in place in the state you live. This is due to car
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In tort law states, if you're found to be at fault, all of these expenses -- including medical expenses, funeral costs, pain and suffering, lost wages, repair costs and legal costs -- could otherwise come out of your pocket. Most states require a specific level of liability insurance. Collision coverage, as the name implies, pays for repairs to your vehicle caused by collision with another vehicle or object. If the damage is severe enough, it may also shell out for a replacement vehicle. Although not legally required, a lender will usually oblige you to carry collision insurance for the duration of your car loan. Underinsured/Uninsured Motorist coverage helps pay your medical and repair/replacement costs when another party is at fault for the accident but lacks adequate insurance coverage. It's generally cheaper than other types of coverage with the same payout value. Medical helps cover medical treatment for accident-related injuries, regardless of fault. In some cases, it also covers other family members when they drive the insured car. Personal Injury Protection (PIP) pays you back for a certain amount of lost income, child care expenses and medical expenses if you're hurt in an accident. PIP provides coverage for items that you might not generally budget for and that might not be covered by medical insurance. In no-fault states, people often buy PIP to pay for medical bills.