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Auto insurance is a type of insurance coverage that provides financial protection against physical damage or bodily injury resulting from traffic collisions and against liability that could arise from incidents involving vehicles. It is a contract between the vehicle owner and the insurance company, wherein the owner pays a premium in exchange for the insurer's promise to pay for covered losses as specified in the policy.

Key components of auto insurance typically include:

1. Liability Coverage: This coverage pays for damages or injuries you cause to others in a covered accident. It includes bodily injury liability, which covers medical expenses, lost wages, and other damages due to injury or death of another person, and property damage liability, which covers damages to someone else's property, such as their vehicle or other structures.
2. Collision Coverage: Collision coverage pays for damages to your own vehicle resulting from a collision with another vehicle or object, regardless of fault. It typically covers repairs or replacement of your vehicle up to its actual cash value, minus the deductible.
3. Comprehensive Coverage: Comprehensive coverage provides protection against non-collision events, such as theft, vandalism, natural disasters, falling objects, and animal collisions. It covers repairs or replacement of your vehicle up to its actual cash value, minus the deductible.
4. Personal Injury Protection (PIP) or Medical Payments Coverage: PIP or medical payments coverage pays for medical expenses for you and your passengers in the event of injuries sustained in a covered accident, regardless of fault. It may also cover lost wages and other expenses related to the accident.
5. Uninsured/Underinsured Motorist Coverage: This coverage protects you if you are involved in an accident with a driver who doesn't have insurance (uninsured) or doesn't have enough insurance to cover your damages (underinsured). It typically covers bodily injury and, in some cases, property damage.

Auto insurance is mandatory in most jurisdictions, with minimum coverage requirements varying by state or country. Additional coverage options may be available, allowing policyholders to customize their insurance to suit their needs and budget. Premiums are determined based on factors such as the driver's age, driving record, location, type of vehicle, coverage options selected, and deductible chosen.