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To the uninitiated, there's a lot of numbers, strange terminology and alphabet soup in typical auto insurance declarations. Understanding it all can be a daunting task, but it can be done with a little of studying.

In a nutshell, assuming that the auto insurance required by law in your state is a good policy can be very dangerous. A good liability only policy will include adequate liability limits, uninsured and underinsured motorist coverage (UM/UIM), and medical payments or PIP depending on your state. Good full coverage policies will include all of those items as well as collision and comprehensive coverages with suitable deductibles, as well as extras specific to your needs such as loss of use and towing.

To truly understand how good your coverage is, one needs to have a basic understanding of the main coverages offered. If you purchase insurance online without the guidance of an agent, understanding these coverages is particularly important. The following is a discussion of major auto insurance coverages.

LIABILITY

Auto liability insurance, or insurance to pay for expenses that you are found at fault for, is required throughout the United States and Canada. The most common form of auto liability insurance is known as "split limit" insurance. Split limit is often expressed by insurance agents in numbers such as 100/300/50 which represents the three main liability limits in thousands of dollars. In other words, 100/300/50 which would mean a limit of $100,000 for bodily injury (BI) per person, $300,000 in BI per occurrence, and $50,000 in property damage (PD) per occurrence. If a number such as 100/300 is expressed, it generally refers to the BI portion of liability only.

Auto liability insurance also exists in a less common form known combined single limit, or CSL. This means that a single limit of usually $100,000 or more applies to the three main types of liability regardless of how they're accounted for in a claim.

Required liability insurance minimums vary from state to state, ranging from 10/20/10 in Florida and Louisiana to 50/100/25 in Alaska and Maine. Many other states require 25/50 in BI coverage with varying levels of PD coverage. Minimum liability requirements in Canada tend to be significantly higher than in the United States.

But how does this work in the real world? If one considers that many new vehicles cost in excess of $15,000, and that medical bills incurred as the direct result of accidents often exceed $25,000 per person, one can see how a

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