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What is 'Auto Insurance'. An auto insurance is a policy purchased by vehicle owners to mitigate costs associated with getting into an auto accident. Instead of paying out of pocket for auto accidents, people pay annual premiums to an auto insurance company; the company then pays all or most of the costs associated with an auto accident or other vehicle damage.

Understanding auto insurance—the basics. Auto insurance is a contract between you and the insurance company that protects you against financial loss in the event of an accident or theft. In exchange for your paying a premium, the insurance company agrees to pay your losses as outlined in your policy. Auto insurance provides coverage for:

Insurance Terms and Definitions. Passive devices require no action or activation and automatically arm themselves when the vehicle is turned off, the ignition key is removed or a door is shut. Active devices require some action or activation, such as pushing a button or placing a "lock" somewhere in your car.

Auto insurance terms and definitions. Car insurance is a contract between you and your insurance company. By applying for coverage, you’re agreeing to pay an auto insurance premium to the insurance company. In return, that company agrees to pay covered costs associated with an auto accident once the deductible has been met under the policy terms.

Liability insurance - Pays for injuries to the other party and damages to the other vehicle resulting from an accident you caused. It also pays if the accident was caused by someone covered by your policy, including a driver operating your car with your permission.

The term "auto" does not include "mobile equipment." This definition is important in determining whether liability coverage is afforded under an auto liability policy or a CGL policy (in the case of mobile equipment).

Auto liability insurance is a type of car insurance coverage that's required by law in most states. If you cause a car accident — in other words, if you are liable for the accident — liability coverage helps pay for the other person's expenses.

Collision insurance is a coverage that helps pay to repair or replace your car if it's damaged in an accident with another vehicle or object, such as a fence or a tree. If you're leasing or financing your car, collision coverage is typically required by the lender.

Is liability car insurance mandatory? Yes, in most states bodily injury liability and property damage liability are required as part of the minimum auto insurance coverages you must carry as a car owner. Each state has its own state car insurance requirements.

Vehicle insurance (also known as car insurance, motor insurance or auto insurance) is insurance for cars, trucks, motorcycles, and other road vehicles.

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