Life is unpredictable – you can never anticipate when things will go wrong, and when they do, they often cost a lot of money. Insurance offers protection when things go wrong and shield people from financial hardships if they fall ill, encounter an accident, or suffer a loss.

There are various insurance policies, from homeowners and auto to pet insurance. Some, like auto insurance, are legally required in most states if you own a car. Lending companies need you to buy insurance if you borrow money to finance something, like a mortgage when you buy a home or car insurance if your car is financed. Other insurance types are optional, like health insurance.

Even though some insurance types are optional, many people still choose to purchase policies to cover them. Continue reading to learn about three common types of insurance.

1. Auto Insurance

Many folks can’t do without their car. Having car insurance not only protects your vehicle, but also protects your finances if you’re responsible for a car crash.

There are three main types of auto insurance.

Liability

In most states, you must have liability coverage as a minimum if you own a car. Car crashes are more common than you may think, and if you were the at-fault driver, you would be responsible for the expenses the other driver sustains from the accident.

Having liability cover protects you from this financial obligation. Your liability insurance will pay to repair the other party’s car when you’re responsible for a crash. Your insurance will also cover damage to the other party’s property and medical bills if they are injured and require medical attention.

Collision

Collision coverage is optional, but if you’ve purchased your car with a loan, the lender may require you to have it. You can claim from collision insurance to repair damages to your vehicle if you’ve driven into a stationary object like a wall or tree. Collision will also cover the costs to repair or replace your vehicle if you’ve been in a crash or if the car rolls or hits a pothole.

Comprehensive

Like collision, lending companies may require you to purchase comprehensive cover if your vehicle is financed. Comprehensive cover will pay to repair your car when it is damaged by something other than a crash. This can include theft, vandalism, natural disasters, and freak accidents, like a heavy object falling onto your car.