insurance

auto insurance

Insurance covering financial losses from vehicle accidents, theft, and liability for damage to others.

Example

“Dropping to minimum auto insurance coverage saved $80 a month but left her underinsured.”

Memory Tip

AUTO — legally required in most states. The minimums are often dangerously low.

Why It Matters

Auto insurance is legally required in most states and protects you from potentially devastating financial losses if you cause an accident. Without adequate coverage, a single serious accident could result in tens of thousands of dollars in personal liability, making auto insurance essential for protecting your personal assets and financial stability.

Common Misconception

Many people believe that auto insurance covers all damage to their own vehicle, but most policies only cover your own car damage if you have collision or comprehensive coverage, which are optional add-ons. Basic liability coverage, which is mandatory, only pays for damage you cause to other people and their property, not to your own vehicle.

In Practice

Suppose you cause an accident where you are at fault and damage another person's car worth 25000 dollars while also injuring them. With adequate liability coverage of 100000 dollars per person, your insurance would pay for the other driver's medical bills and vehicle repairs, potentially saving you from having to pay these costs out of pocket or face a lawsuit against your personal assets.

Etymology

From Greek 'autos' meaning self plus Latin 'securus' meaning safe — self-moving vehicle insurance.

Common Misspellings

auto-insuranceauto insurencecar insurance

More in insurance

Other insurance terms you should know

deductibleThe amount you pay out-of-pocket before your insurance begin…insurance premiumThe amount paid periodically to an insurance company in exch…deductibleThe amount a policyholder must pay out of pocket before insu…copayA fixed amount paid by an insured person at the time of a me…coinsuranceA cost-sharing arrangement where the insured pays a percenta…out-of-pocket maximumThe most an insured person will pay for covered healthcare s…