Top 5 reasons why you may need auto insurance protection

Auto insurance protection is meant to cover you in case you get involved in an accident. The basic coverage that is available with different insurers is designed such that it offers compensation under different circumstances. You may damage someone else's property or may be liable for causing bodily injury in an auto accident. Your insurance will pay if you have the right coverage.

Find below the top 5 reasons for why you need the basic types of auto insurance protection:

1. Injury caused to a third party

Liability Coverage - Injury caused to a third party in an accident that is your fault will be covered under Liability coverage. This is a very basic form of coverage. It is clearly divided into:

• Bodily injury liability -In an accident, there is a high chance of causing bodily injury to the other person involved. If you don't have bodily injury liability coverage you could end up paying for the cost of treatment all out-of-pocket. With the growing cost of health care, this could be very expensive. With this policy you can protect yourself from paying a huge upfront amount. Besides, this is a very important coverage especially when you are at fault or if the other party turns his claim to your insurance company. It covers medical bills and any lost wages of the other party and also lawsuits that may surface from the accident.

• Property Damage Liability - This coverage is also essential because, you could be liable for damage to a third party's property in an accident. Not only would you be liable to pay for the damage to the other person's car but also any other property that you destroy. There is usually a deductible for such coverage.

2. Bodily injury caused to you (policyholder) in an accident

Personal Injury Protection (PIP) - For example, you were involved in an accident which was your fault, and caused massive damage to the other person's car. You have liability protection and feel relieved that it will cover the cost of repairing damage. Now, if you have suffered injuries, you may need to be hospitalized. Who will bear the cost of treating your own injuries? This is when your Personal Injury Protection (PIP) comes into play.

If you had passengers in your car at the time of the accident, PIP will cover them too. If your state laws do not require you to carry PIP coverage, than you can rely on your health policy to kick in. Otherwise you must have PIP to pay for hospital fees and any other medical bills. It also covers lost wages, funeral costs and any other common expense.

3. Damage caused to you car in an accident that is your fault

Collision Coverage - Your PIP will cover for bodily injury to you and your passengers, liability will take care of the third party injured and damage to his property, but what about damage to your car? Collision coverage takes care of compensating for the damage caused to your car when an accident is your fault unless you car is declared a total loss by the insurer. If it is not your fault then the other driver's liability policy should cover. Of course there are limits to such coverage and when you get a policy, you must find out about such limits.

4. Damage caused to your car from conditions except an accident

Comprehensive Coverage - Accidents are not the only times your car might suffer a loss. It may also be damaged due to a bad weather condition, fire or even theft and conditions other than an accident with another vehicle. You will need comprehensive auto insurance protection to compensate for a loss that occurs for such conditions. This coverage does not work if there is a loss due to ill maintenance. There are other conditions too that apply to such a coverage.

5. Damage caused to you/your car by third party with no/limited coverage

Uninsured/Underinsured Motorist Coverage (UI/UIM) - You get involved in an accident that is not your fault, hurt yourself and want to turn the claim to the 'at-fault' party's insurance. You find out that he/she has no insurance at all or has so little insurance that your losses cannot be fully covered. In such a case, if you have UI/UIM coverage, you can be covered for your losses.

In other case, you may have to pay out-of-pocket or turn the claim over to your PIP and collision coverage respectively. However, one thing to remember here is that PIP and Collision coverage requires you to pay higher premiums compared to UI/UIM. Hence, keep in mind that your premiums will increase after you file a claim.