It also includes losses arising due to natural calamities. To have your car insured is mandatory by law. When you insure you get a "policy" which is based on a variety of factors including the type of car you drive, as well as what kind of insurance you want, as these policies are actually a package of different types of insurance coverage. They can be classified as:

Liability - This coverage pays for accidental physical injury of the body and damage to others' property. Injury damages include medical expenses, pain or suffering and lost wages. Property damage includes damages to the automobile. This coverage also pays for defense and court costs. State laws fix how much liability coverage you must purchase, but you can also get more coverage if you wish.

Collision - This insurance pays for damages to your vehicle caused by collision with another vehicle or object.

Comprehensive - This coverage pays for losses or damages to the insured vehicle that doesn't occur in an auto accident. The possible types of damages comprehensive insurance covers include loss caused by fire, wind, hail, flood, vandalism or theft.

Medical Coverage - Pays medical expenses regardless of whose fault it was as long as the expenses are caused by an auto accident.

PIP - Personal Injury Protection (PIP) - This coverage pays medical expenses for the insured driver, regardless of whose fault it was, for treatment due to injuries arising in an auto accident.

Uninsured Motorist - Pays for your car's damages when an auto accident is caused by another driver who doesn't have liability insurance.

Underinsured Motorist Pays for your car's damages when an auto accident is caused by someone who has insufficient liability insurance to settle all your claims.

Rental Reimbursement - This type of insurance will pay for a rental car if your rented car is damaged due to an auto accident. Often this coverage has a daily allowance to be paid for at the time of renting a car.

Certain insurance policies club together a number of these types of coverage. Depending on the laws that exist in your state you have to choose the insurance you want for your car.

Even though the state may not require extensive insurance, extra coverage may be worth the expense as it is possible that you may be straddled with thousands of dollars because of an auto accident.