An auto insurance policy is actually a package of different coverages. Most states require you to purchase a minimum amount of certain kinds of coverage. But if you are interested in protecting yourself from a lawsuit or from hefty repair bills, then it makes sense to buy more than what is required.

Liability coverage is the foundation of any auto insurance policy, and is required in most states. If you are at fault in an accident, your liability insurance will pay for the bodily injury and property damage expenses caused to third parties in the accident, including legal bills. Bodily injury expenses include medical bills and lost wages. Property damage expenses pay for the repair or replacement of things you wrecked. The third party may also decide to sue you in order to collect "pain and suffering" damages. Remember, if you cause a serious accident, minimum insurance may not cover you adequately. That is why it is a good idea to buy more than what your state requires. Insurance types usually refer to liability coverage limits as a series of three numbers. For example, your agent might say that your policy carries liability limits of 20/40/10. That stands for $20,000 in bodily injury coverage per person, $40,000 in bodily injury coverage per accident, and $10,000 in property damage coverage per accident.

If you cause an accident, collision coverage will pay to repair your vehicle. You usually cannot collect any more than the actual cash value of your car, which is not the same as the car s replacement cost. Collision coverage is normally the most expensive component of auto insurance. By choosing a higher deductible, say $250 or even $500, you can keep your premium costs down. However, keep in mind that you must pay the amount of your deductible before the insurance company kicks in any money after an accident. Insurance companies often will "total" your car if the repairs the company must pay exceed a certain percentage of the car s worth. The damage critical point is usually 70 percent of the car value.

Comprehensive coverage will pay for damages to your car that were not caused by an auto accident: Damages from theft, fire, vandalism, natural disasters, or hitting a deer all qualify. Comprehensive coverage also comes with a deductible and your insurer will only pay as much as the car was worth when it got wrecked.

Because insurance companies normally will not pay you more than your car book value, it is helpful if you have a rough idea of this amount. Check the Kelley Blue Book or the National Automobile Dealers Association. If your car is worth less than what you are paying for the coverage, you are better off not having it.

It is usually better to go with replacement cost coverage. Although the cost is higher, in most cases the extra protection may be worth it. Make sure to ask your agent which kind of coverage you have on your auto policy.

MedPay will pay for your and your passengers medical expenses after an accident. These expenses can arise from accidents while you are driving your car, someone else s car (with their permission), and injuries you or your family members incur when you are pedestrians. The coverage will pay regardless of who is at fault, but if someone else is liable, your insurer may seek to recoup the expenses from them.

Personal injury protection (PIP) and broader "no-fault" coverages are expanded forms of medical payments protection that may be required in your state. Some states have optional PIP or no-fault coverage. Expanded features include lost wages and payments for child care.

Uninsured motorists (UM) coverage pays for your injuries if you are struck by a hit-and-run driver or someone who does not have auto insurance. It is required in many states.

Underinsured motorists (UIM) coverage will pay out if the driver who hit you causes more damage than his or her liability coverage can cover. In some states, UM or UIM coverage will also pay for property damages.

Several supplemental auto coverages are available, either as separate premium items or included in augmented policies.

• Rental reimbursement, a common add-on, covers vehicle rentals required because your car is damaged or stolen.
• Coverage for towing and labor charges in case of a road breakdown is also common.
• Auto replacement coverage guarantees your car will be completely repaired or replaced, even if these costs exceed its depreciated value.