To properly protect your home and your car, you need two basic insurance policies:

Auto insurance, which covers damage to your own vehicle and damage you may cause to the property of other people. It may also protect you against other liability claims for injuries you are found to have caused other people.

What is auto insurance?

An auto insurance policy is a contract between you and an insurance company. You pay a premium. In exchange, the insurance company promises to pay for specific car-related financial losses that you may have during the term of the agreement.

Do you need it?

You need auto insurance because it’s a legal requirement. State laws typically say that as a driver, you either must have insurance, or be able to provide evidence that you have the financial resources to pay a judgment against you, if you should cause injury or damage to another person. An insurance policy is the easiest way to document that you can pay damages if you must.

You also need auto insurance to protect yourself financially. If you or anyone for whom you’re responsible seriously injures another person, you can be held liable for the injured person’s medical expenses, rehabilitative therapy, and long term nursing care, as well as for his or her lost earnings.

As an example, if you or anyone in your household should happen to injure a bright, young medical student to such an extent that the medical student is prevented from practicing medicine for the rest of his life, you could find yourself the object of a judgment that could force you into personal bankruptcy. However, even personal bankruptcy would not relieve you of the obligation of paying the judgment as a result of injuries to that young student. That judgment could follow you - - and you could have to pay - - for the rest of your life. That’s why adequate insurance is essential to your economic health.

Legal separation may affect your auto policy

If you and your former spouse were covered under a packaged personal automobile policy, you may no longer qualify for coverage. Check your auto policy language; it may stipulate the husband and wife must be residents of the same household.