You know you have to have auto insurance, but do you know exactly what it covers?

Auto insurance protects you against financial loss if you have an accident and is a contract between you and your insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy.

Auto insurance provides property, liability and medical coverage:

• Property coverage pays for damage to or theft of your car.
• Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
• Medical coverage pays for the cost of treating injuries, rehabilitation, and sometimes lost wages and funeral expenses.

An auto insurance policy is made up of six different kinds of coverage. Most states require you to buy some, but not all, of them. If you’re financing a car, your lender may also have its own requirements.

Most auto policies are for six months to a year. Your insurance company should notify you by mail when it’s time to renew the policy and to pay your premium.

This article was submitted by the Insurance Information Institute, an organization that provides facts and assistance free of charge to the media, individuals and organizations. Submission of this article does not imply an endorsement or recommendation of the Financial Resource Center site.