Auto insurance is designed to protect drivers and their passengers from financial hardship after an accident or other vehicle-related incident. Auto insurance, or other proof of financial responsibility, is mandated in every state. Insurance can be confusing, but it can help you to find the right coverage at the best price to understand more about how it works and why it's required.

The second part of auto insurance covers the car itself: comprehensive coverage reimburses losses from fire, theft or other perils; collision coverage pays to repair losses caused by an accident. Often this coverage is mandated by leasing companies or banks. There are also ancillary medical, car rental and other coverages which vary by state.

Utilizing high deductibles on the physical damage coverages can help reduce premiums. If you carry umbrella insurance, you must be sure that you carry the required amount of basic liability insurance to avoid a gap in coverage for a serious accident.