The Meaning of Auto Insurance Coverage & Limits
By Darryl James, eHow Contributor updated: August 23, 2010
Every vehicle must be covered by some type of auto insurance.
Auto insurance is an agreement between an insurance company and a policyholder to cover financial loss in exchange for premium payments. The insurance policy can be as simple as basic liability or contain broad protection against a variety of loss.
Types
Auto insurance coverage is determined by the legal requirements of the state (typically basic liability) and/or the requirements of a finance company (typically full coverage) when leasing or financing a vehicle.
Legal Limits
State mandated basic liability includes property damage and personal injury protection, but only covers third parties. The minimum legal limit is different in each state, expressed as 15,000/30,000/15,000, which refers to bodily injury, the limit per incident and the property damage limit of the policy.
Contractual Limits
Contractually mandated full coverage includes comprehensive, collision and sometimes uninsured motorist protection, covering damage to the driver's own vehicle and must have a limit high enough to protect the finance company's interest in the vehicle.
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