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The functions of any insurance policy is to indemnify (bring back to whole) yourself in case of loss.

In that regard, there are several different kinds of coverage. Some are required by law (depending upon the state in which you live, some are required by contract (for example, the contract with the party who loaned money to buy the car), and some are just smart to have.

Many states require that you have "no-fault" coverage. It pays a portion of your own, or certain household member's medical expenses and lost wages that are incurred as a result of a motor vehicle collision irrespective of who caused the collision.

Many states also require a certain level of liability coverage. Depending upon whether it is "property damage" or "bodily injury" liability coverage, it will pay damages to a third party whose property was damages or who was injured as a result of your carelessness (negligence) in operating an insured car. While states that require this mandate a minimum amount, you are best advised to get as much as you can afford. Not only does it pay the damages for which you may be found legally liable, but will pay for an attorney to defend you in a lawsuit that the damages or injured party may bring against you.

Usually, you will be offered uninsured motorist coverage in the same amount of your liability coverage. It is designed to compensate you or certain other persons in your household or riding in the car at the time of the collision if they were injured by the negligence of a third person who did not have liability coverage (otherwise, you/they would have the right to make a claim against the at-fault party).

Collision and comprehensive coverage are types of physical damage insurance that you can maintain on your own car. They pay for the repair of your car if it is damaged in a collision, or, in the case of comprehensive, certain other specified risks. If you borrowed and owe money on your vehicle, the lender may require that you maintain such insurance so that there are finds available to repair the car and thereby maintain the value of the collateral securing the loan.

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Q: What are the functions of auto insurance?
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