What are the characteristics of an auto insurance policy?

An auto insurance policy financially covers the cost of injury and property damage after an accident. Average national auto insurance rates are around $79.58/mo.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Nov 2, 2021

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Things to Remember...

  • An auto insurance policy is intended to cover any bodily injury or property damage that occurs as a result of an automobile accident
  • Another key element of auto insurance policies is to protect you from liability when an accident is caused by you
  • Auto insurance policies offer a variety of options including rental car and towing reimbursement coverage

Most states have a minimum auto insurance requirement to protect all motorists in the event of an automobile accident.

All insurance policies for your autos should include bodily injury liability insurance. 

In the event of a car accident, you are protected from the liability in covering medical expenses that occur as a result of injury to the other party.

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What else is included in auto insurance policies?


Many types of auto insurance coverage may be included in a policy.

Personal injury protection covers injuries sustained by you or your passengers in the event of an accident and is included in most policies to ensure medical treatment happens if an injury occurs during an automobile accident.

In terms of damage to your vehicle, there are two primary options to choose from for auto insurance:

  • Collision insurance – will cover damage expenses up to a specified amount determined by your policy if an accident occurs that is deemed to be your fault
  • Comprehensive insurance – will cover damages that occur to your vehicle for anything other than a collision such as fire, theft, vandalism or natural disasters

Part of this policy is usually the uninsured or underinsured motorist insurance which covers damages and bodily injury that occur as a result of an accident caused by somebody else.

If the person who caused the accident does not have insurance or insufficient coverage, then your uninsured or underinsured motorist policy will cover your damages.

Other optional coverage includes towing and rental car reimbursement.

If you apply for this coverage, you will need to save your receipt from the towing or rental car to send to your insurance company.

The rental car coverage only applies if you have an outstanding insurance claim involving your covered vehicle and the car is currently un-drivable.


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What is PLPD and is it enough?

Another option is referred to as PLPD that stands for personal liability and property damage. This is the most basic car insurance possible to meet the minimum requirements set by state law.

PLPD covers you from liability in the situation that injury or automobile damage is caused to the other party in an accident that is your fault.

However, this may not be an option in all states, depending on the laws and regulations that are in place.

Many people are not comfortable driving around with PLPD insurance because it leaves the driver vulnerable to any situation that causes damage to his or her vehicle.

Anybody that operates a leased vehicle or an automobile with a lien is required to have full coverage insurance to protect the lienholder in the event of an accident.

If you total your automobile and don’t have additional insurance that covers the damages, the bank would be left with an undrivable vehicle if you decide not to finish paying your loan.

If you own your car free and clear, this is an option to save money on your insurance premium. The major downside is that in the event of an accident you may lose your available transportation.

What are the payment options and terms?

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Most auto insurance policies are set on a six-month cycle. The auto insurance companies may have options for you to make your payments.

Discounts are often offered for making a lump sum payment for the six-month premium or having the payment deducted directly from your bank account.

Generally, a monthly payment option is available but will require you to pay more over the course of the six-month period.

How do I decide which insurance policy is right for me?

It is best to consult with several insurance companies to find the best rates.

You will want to decide what options are necessary for you, and consider how many people ride with you in your vehicle.

If you have a large family, you may want to increase the amount of personal injury protection to make sure your family is covered.

Look over all of the coverage options, consult with your insurance agent and make the best decision for you and your family.

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