Auto insurance is purchased as a “package” of several coverage types. Each is priced separately and protects you in specific circumstances. Available coverage and minimum requirements vary by state.

Basic Coverage	Description
Bodily injury liability (BI)	Pays up to coverage limits for an injured individual’s accident-related medical expenses, lost wages or pain and suffering if you or the driver of your vehicle are held legally liable. Pays your legal defense costs. Covers when you and family members are driving someone else’s vehicle with their permission. All states have minimum liability coverage limits set by state law. Higher coverage limits may be purchased at an additional cost and the increased cost is relatively small.
Collision	Pays to repair accident-related or rollover damages to your vehicle. Pays your vehicle’s actual cash value (ACV) if it is totaled. Subject to a deductible, which is a specific amount of money you pay before your insurance company begins to pay on a claim. Required by most lenders.
Comprehensive	Pays to repair damages to your vehicle caused by events other than collision, including vandalism, glass breakage, fire, flood and may also include collision with a bird or animal. Pays your vehicle’s ACV if it is totaled. Pays for loss if your vehicle is stolen. Subject to a deductible, which is a specific amount of money you pay before your insurance company begins to pay on a claim. Required by most lenders.
Medical expense	This typically pays for accident-related medical expenses for you and your passengers, regardless of who is legally liable. In some states, this coverage is termed Medical Payments. In states having no-fault laws, which generally restrict the right to sue, this coverage may be called Personal Injury Protection (PIP). In addition to medical expenses, PIP may pay for lost wages, as well as personal services such as housekeeping, if you or another covered individual are incapacitated after an accident.
Property damage (PD) liability	Pays up to coverage limits for another individual’s accident-related vehicle or property damages if you or the driver of your vehicle are legally liable. Required in all states. Minimum liability coverage limits vary.
Uninsured (UM) / Underinsured (UIM) motorist	UM coverage pays what the uninsured individual’s insurance would have paid if the individual had liability coverage. It covers you, your family and your passengers for medical expenses, lost wages, pain and suffering and other injury-related losses, but it pays only up to the UM limits you purchase. UIM coverage pays for bodily injury to you, your family and your passengers resulting from the negligence of someone whose liability coverage limits are insufficient to cover your damages resulting from the accident. The coverages for damage caused by an underinsured motorist vary significantly from state to state, and is subject to your coverage limit.
Optional Coverage	Description
Rental reimbursement	Pays up to a specified amount for rental vehicle charges while your vehicle is repaired for damages covered by your policy.
Towing and labor	Pays for service at the location of a breakdown or for towing to a repair shop. Pays for locksmith and tire-change services.
Umbrella liability (a separate policy)	Provides an additional $1 million or more liability coverage beyond your basic liability insurance. Pays after basic liability coverage is exhausted. Applies to auto, homeowners, renters or boat liability coverage. Provides primary liability coverage for personal injuries such as libel and slander.

Note: Auto insurance does not cover personal possessions that may be stolen from your vehicle. For that, you need property insurance (renters or homeowners policy).

About Premiums

Auto premiums vary by state. They are based on how likely you are to have a loss and how much those losses will cost. The factors below also may affect your rates. For family vehicles, rates will reflect the ages, genders and driving records of all licensed drivers in your household. Some states do not allow insurers to consider certain factors.

Gender	Males generally pay more than females. Male drivers tend to be involved in more accidents than female drivers.
Age and marital status	Generally, premiums decline as young drivers age. After age 65, rates may begin rising again. Also, married drivers usually pay lower rates than single drivers.
Where you live	Drivers living in metropolitan areas typically pay more than drivers in rural areas.
Type of vehicle you drive	Expensive and high-performance vehicles tend to be more costly to insure. The vehicle’s likelihood of theft, repair costs and safety record may also affect premiums.
Driving record	The better your driving record (avoiding accidents and tickets), the lower your premiums.

To Lower Costs

Discounts may be available to lower your premiums. When comparing insurers, ask about discounts they offer in your state.

Provide your insurer with accurate, complete information about your address, age, vehicle and its use.
Ask for higher deductibles. Make sure you have the deductible amount available if needed.
Look for safety features when purchasing a vehicle. Insurers may offer discounts for vehicles equipped with airbags, antitheft devices and daytime running lights. Vehicle alarms and locator devices may reduce comprehensive coverage costs.
Reduce or eliminate collision and comprehensive coverages on older cars.
Drive safely.
Take a state-approved defensive driving or drug and alcohol awareness class.

Next: Renters Insurance

Updated Thursday, February 07, 2008

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