Car insurance is a contract between the owner of a vehicle and an insurance company for the purpose of protecting the policyholder in case of an accident. In exchange for the payment of premiums, the insurance company consents to pay for the losses as determined in the policy.

A car insurance policy has six different types of coverage. The requirements may vary from place to place. For example, some countries require that vehicle owners purchase some, but not all, of the coverage types. Each type of coverage is priced by the insurance company separately. Most of these policies are put in effect for at least six months.

The most common type of coverage in car insurance is bodily injury liability. This applies to injuries sustained by the vehicle owner, the designated driver, or another person injured during an accident. The bodily injury liability is an important one because serious accidents may lead to large medical bills and this kind of coverage protects assets such as homes or savings.

Similarly, personal injury protection is another kind of coverage offered in car insurance. It refers to the treatment of injuries needed by the policyholder as well as the passengers. It can also be used to pay for lost wages while unable to work, cost of replacement while a worker has been injured, and even funeral costs after an accident.

The property damage liability pays for damage that the vehicle caused to somebody else’s property. In the usual case, this type of liability refers to the damage sustained by another car. However, it can also apply to damage to lampposts, buildings, or any other structure the vehicle has hit.

The property damage liability should not be confused with the collision coverage, which pays for the damage sustained by policyholder’s car, as a result of coming into contact with another vehicle or object. It also covers the cost of repairs from potholes or from the vehicle flipping over. Collision coverage pays for the costs of vehicle repair even if the driver was at fault. However, the deductible will be subtracted from the total amount paid out. If the driver was not at fault for the accident, the insurer might attempt to recover the sum paid out by the policyholder from the insurance company of the other driver. If successful, the policyholder is reimbursed for the deductible.

Comprehensive coverage in car insurance reimburses the policyholder for loss due to damage or theft caused by events other than the collision with another object or car. This may mean occurrences such as fire, explosions, earthquakes, and weather phenomenon. It can also cover acts of man such as riots and vandalism.

Finally, uninsured or underinsured coverage reimburses the policyholder and members of his or her family in the event there is an accident involving a driver who does not have an insurance or takes off after the accident. The underinsured motorist coverage is important when the driver at fault does not have enough coverage to pay for the total loss sustained.