Frequently, State law requires the maintence of certain types of auto insurance, such as certain levels of liability coverage. In other contexts, contracts require that coverage be maintained. An example of this is when money is loaned and the car serves as collateral, the lender will usually require physical damage coverage so as protect the value of the collateral.
Car insurance provides financial protection in case you are involved in an auto accident. If an accident occurs, an auto insurance policy provides financial coverage to pay resulting vehicle damages, property damages, and/or medical costs. The amount of money the policy provides versus the amount of money you pay as premium will depend on the type of coverage purchased, the policy limits of each coverage, and the deductible (in the case of non-liability coverage, this is the amount that you pay out of pocket before the insurer's duty to pay is triggered).
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