If you are like most Americans, you may be somewhat mystified by the coverages available to you in your auto insurance policy. This guide should help demystify those coverages, and provide you with a better overall knowledge of auto insurance in general..

Protect Others & Their Property 

Bodily Injury Liability Coverage covers you for accidental Bodily Injury which you or the driver of your car causes to someone else. If you are found to be at fault for an accident and legally responsible for the injuries caused to the other party, this coverage will compensate that person for their injuries, up to a limit of coverage which you have chosen. If you are sued because of a covered automobile loss, the cost of your legal defense is also covered. 

Property Damage Liability Coverage covers you for accidental Property Damage which you or the driver of your car causes to someone else. If you are found to be at fault for an accident and legally responsible for the damage to someone else's car, this coverage will pay for the repairs to that car, up to a limit of coverage which you have chosen. If you are sued because of the accident, this coverage also covers the cost of your legal defense. 

Various coverage limits can be selected to provide you with the right amount of protection. In most states, these coverages are mandatory. 

Protect You & Your Passengers

Personal Injury Protection (PIP) or "No-Fault" Benefits cover you, your family members and sometimes your passengers for medical expenses related to injuries sustained in an auto accident, regardless of who is at fault. It may also provide coverage for your Lost Wages, Essential Services, Rehabilitation and other costs associated with an auto related injury. 

This coverage is usually mandatory in states which have no-fault laws. Limits and restrictions vary by state.

Medical Payments Coverage covers you for medical expenses related to injuries sustained in an auto accident. 

This coverage is mandatory in most states. Limits vary by state.

Uninsured Motorists Coverage covers you for bodily injury you sustain in an auto accident due to the negligence of an uninsured driver, up to the limit of coverage you have chosen. In some states, there may also be Uninsured Motorists Coverage available for property damage to your vehicle.

This coverage is mandatory in most states. 

Underinsured Motorists Coverage covers you for bodily injury you sustain in an auto accident due to the negligence of an underinsured driver (someone who has auto insurance, but not enough coverage to pay for all of your damages), up to the limit of coverage you have chosen. In some states there may also be Underinsured Motorists Coverage available for property damage to your vehicle.

This coverage is mandatory in most states.

Protect Your Vehicle

Collision Coverage covers you for damages to your vehicle when it collides with another object, such as a car, truck or tree. A variety of deductibles are available. (In most cases, a deductible must be met before this coverage applies. A deductible is the amount of money you must pay out of your pocket after a loss before you can tap into your auto insurance coverage.) 

Comprehensive Coverage covers you for damages to your vehicle due to fire, hail, flood, theft or impact with a bird or animal. A variety of deductibles are available.

Collision and Comprehensive Coverages are optional. However, most auto lease and finance agreements require you to purchase these coverages to ensure the car will be repaired or replaced after a loss. 

Rental Reimbursement Coverage helps cover the cost you incur for renting a car when your vehicle is disabled due to an auto accident.

This coverage is optional and is available in most states for a nominal amount.

Towing helps pay the cost you incur for having your vehicle towed from the scene of a breakdown or accident. 

This coverage is optional and is available in most states at a nominal amount.

Cover Rental Cars 

You've been there before....You're standing at the rental car counter, filling out the necessary paperwork, and the associate there asks you: "Would you like to purchase insurance on your rental?" 

The question is, "Do you need that additional coverage if you already own automobile insurance on your own?" 

In most cases, if the car is a vacation rental, your auto policy provides the best coverage that you have on any of your own cars. This means that if you have collision and comprehensive coverage on any one of your own cars, the rental car receives this coverage.

However, if you rent a car to temporarily replace one of your own vehicles (because it is in the shop for repairs, for example) this vehicle is considered a substitute vehicle, and has the same coverage as the vehicle it is temporarily replacing. So, if the car in the shop does not have collision and comprehensive coverage, the rental vehicle does not either. In a case like this, you should probably consider purchasing the collision and comprehensive coverage from the rental agency.

Note: When renting a car, you will usually be asked to provide insurance by either purchasing temporary car insurance or designating your car policy as the primary insurance. Before making that decision, you should review your policy and make sure your coverages are adequate to satisfy the rental agreement (e.g., liability limits, rental time limits, etc.) and to cover the risk (e.g., comprehensive and collision, etc.) Often, you can avoid the expense of purchasing high-priced rental insurance by relying on your current policy to provide the coverage.