Auto Insurance

Example

“Lisa's auto insurance covered the $15,000 in medical bills and car repairs after she was hit by an uninsured driver on the highway.”

Memory Tip

AUTO = 'Always Understand The Options' - auto insurance has multiple coverage types you need to understand.

Why It Matters

Auto insurance is legally required in most states and protects you from financial ruin due to accident costs that can easily exceed $100,000. Without proper coverage, a single accident could result in wage garnishment, property seizure, and decades of debt from medical bills and liability judgments.

Common Misconception

Many drivers think minimum state-required coverage is adequate protection, but these minimums are often far below what's needed for serious accidents. For example, a state might require only $25,000 in liability coverage, but a single serious injury could cost $200,000 or more in medical expenses.

In Practice

Mike carries $100,000/$300,000 liability coverage, $50,000 comprehensive, and $50,000 collision coverage with a $1,000 deductible. He causes an accident injuring two people: one with $80,000 in medical bills, another with $150,000. His insurance pays the full $230,000 in medical costs (within his per-occurrence limit), plus $25,000 for the other driver's totaled car, and $8,000 for his own vehicle repairs after his $1,000 deductible. Without insurance, Mike would face $263,000 in out-of-pocket costs.

Etymology

From Greek 'autos' meaning 'self' and Latin 'securus' meaning 'free from care,' reflecting the self-propelled nature of automobiles and the security insurance provides against automotive risks.

Common Misspellings

Related Terms

More in insurance

Other insurance terms you should know

See Also