Function

Depending on the type of car insurance you have, it can cover the cost to repair or replace a damaged automobile and cover any medical costs that are a result of a car accident.

Third-Party Liability Insurance

Liability coverage is the minimum required in some states. It covers expenses for the other vehicle if you are at fault. This can include car repair or replacement, medical costs for injuries sustained by other people, and financial help if the person at fault is uninsured.

First-Party Insurance

First-party insurance types include collision, comprehensive, uninsured/under-insured motorists, and personal injury protection for the policyholder and the occupants of his vehicle. These cover expenses if the policy owner is not at fault, the person at fault cannot be found, or does not have the financial means or insurance to cover the expenses.

Considerations

When choosing car insurance, you need to find out the minimum liability coverage that is required in your state. If your automobile is financed, the finance company may require you to maintain a specific level of coverage and type of car insurance policy.

Benefits

Auto insurance reduces your financial liability in the event of an accident. The insurance company will be responsible for taking care of the expenses that are covered by your policy.

Source:

Investorguide.com: Car Insurance and the Different Types of Policies

Plentycar.com: Main Types Of Car Insurance