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Buying auto insurance for your car can be a confusing, time consuming, and expensive ordeal if you approach it with no knowledge of the products and services that you will be paying so much of your hard-earned cash for.

This article will de-mystify and define some of the industry jargon related to auto insurance. After reading this article, and then, How to Buy Auto Insurance, you should feel well-equipped to go ahead and choose the best insurance company with the policy that will suit your needs, and maybe even save you some money.

Keep in mind that as a consumer, you have the responsibility to choose the best insurance company and policy for your current circumstances. Devoting a little time for research up front, and reviewing your policy annually or as your situation changes, will help ensure that you are getting the best deal possible for auto insurance. And while loyalty to a particular company can benefit you financially down the road, don't be shy to investigate other options if it could save you a significant amount of money.

First here's an overview of how auto insurance works: When you purchase auto insurance, the company that issues your policy agrees to assume certain risks and cover your financial losses. Most states require that you purchase and be able to provide proof of auto insurance in order to legally drive your vehicle in that state.

There are two systems that govern the legal and financial responsibility system within the United States at this time: tort-based and no-fault. Depending on the system that your state uses, you will be required to purchase either liability or no-fault auto insurance.

Let's begin with a quick glossary of some of the terms that you'll hear being tossed around by insurance agents.

Property damage liability: This coverage pays for any damage that you cause to other people's property. Your insurance will cover this damage whether you are the driver, or if someone else was operating your vehicle with your permission.

Bodily injury liability: This insurance coverage protects you against the claims for damages in an accident in which other people are injured. Most states have minimum dollar amounts for bodily injury coverage, but this limit might be fairly low. You might want to consider purchasing additional coverage.

Uninsured motorist: This coverage takes the place of the insurance coverage that the uninsured motorist should have had in effect. This may also cover you in the event that you are involved in a hit-and-run accident caused by a fleeing motorist. Uninsured motorist coverage does not protect the other driver and may not cover damage to your vehicle, depending on your state. It will compensate you for medical expenses and other losses related to your injuries if you're involved in an accident with a motorist who does not have insurance.

Personal injury protection (PIP): Under the no-fault system, this coverage will pay a minimum benefit amount per person for you and your passengers for injuries sustained in an accident regardless of who is at fault. Typical personal injury protection coverage can include things like lost wages, medical expenses, funeral expenses and survivors loss benefits.

Collision and comprehensive: Collision coverage, as the name implies, covers damage to your car. It pays the cost of repairing or replacing your car after it has been involved in an accident regardless of who was at fault. The insurance company will pay you the actual cash market value of your vehicle less the amount of your deductible.

Comprehensive covers damage caused by something other than a collision, such as theft, fire, vandalism or a natural or weather-related event. Comprehensive coverage will also pay for a rental car while your car is being repaired or if it has been stolen.

Medical payments coverage: This is usually an optional product, which pays for the medical or funeral expenses for you and for the other parties who might have been injured or killed in an accident while riding in your vehicle. This coverage will also cover these expenses if you are struck by another motor vehicle while you are a pedestrian or even riding in another motor vehicle as a passenger.

Cancellation or Non-renewal of Your Policy

Cancellation normally refers to cancellation during the coverage term, while non-renewals happen between renewal periods. An insurance company may cancel or not renew your policy for several different reasons which vary by state. Usually the company can cancel a policy for things like non-payment of the premium, or if your vehicle's registration has been suspended or revoked.

An insurance company must notify you in writing at least 30 days before the date of the policy's cancellation or non-renewal, with the specifics on why they are cancelling or not renewing your policy.

Filing a Claim

If you are involved in an accident you should get the driver's name, address, telephone number, license plate number, and driver's license number. Also get the name of the other driver's insurance company, policy number and insurance company telephone number from their proof-of-insurance card. Give the other driver the same information about you. If there are any witnesses, be sure to get their names and contact information.

Next, call your insurance company's 800 number to report your claim, or call your agent. Be sure to also give your insurance company the names and contact information for the accident witnesses.

Finally, follow up your claim with a copy of the police accident report.

Getting Help

If you are having a problem with your insurance company, you can contact the company's policyholder services office to answer your questions. Your state's department of insurance is another resource that you can turn to if you are not satisfied with the results from your insurer. They have complaint specialists who can investigate potential violations of the insurance laws in your state.

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