Let’s face it, there’s a lot of financial risk involved when you drive a car. You could cause an accident or be the victim of an accident. You could veer off the road and hit a utility pole or strike a large animal. Or you could be hit by a driver who doesn’t have insurance.

Auto insurance protects you from the financial risks you could face from a variety of circumstances. An auto insurance policy is comprised of a number of different coverages, and it’s important to understand how each of them works to protect your interests.

Here are some basic coverage terms everyone should understand when purchasing auto insurance:

• Bodily injury liability coverage protects your assets if you are held responsible for an accident where other people are injured or killed.

• Property damage liability coverage covers the costs of repairing or replacing the autos or other property of others, again for an accident in which you are determined to be liable. Liability coverage will also pay for legal costs associated with defending you against lawsuits related to accidents. Remember, the liability coverage limits you are required to carry under state law most likely fall far short of your assets, so be sure to have adequate coverage.

• Collision coverage will pay to repair or replace your vehicle if you hit something else and no one else is at fault.

• Comprehensive coverage protects your car from damage caused by a number of causes other than an auto accident, including vandalism, fire, theft, flood, falling tree limbs, hail and collision with animals.

• Uninsured/underinsured motorist coverage insures you against losses caused by other drivers with little (underinsured) or no (uninsured) auto insurance. It protects you if you’re the victim of a hit-and-run driver or are struck by a vehicle as a pedestrian. It also provides coverage to your passengers, and those listed on your policy while riding in other cars or as pedestrians. (If you live in a “no-fault” state, your own insurance will cover your losses).

• Medical payments coverage or personal injury protection (PIP) covers various medical and/or funeral expenses for you and your passengers, as well as those listed on your policy while riding in other cars or as pedestrians.

Other variables to consider include gap coverage (the difference between the actual cash value of your car and the amount you owe if your car is totaled in an accident), towing/roadside assistance coverage, and rental car reimbursement (if you need a rental car while your car is being repaired after an accident).

Talk to your insurance agent about requirements for the state you live in, all the coverages available to you, as well as possible exclusions, deductibles and other potential costs. Together you can figure out a policy that best fits your needs and your budget.

• Jay Gandee has been an agent for American Family Insurance since 2011. His office is located at 4730 E. Warner Road, Suite 12, in Ahwatukee. Contact him at (480) 785-7777.

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