Traffic accidents have a negative financial effect on all of us, but for teenagers that effect can be catastrophic. To be saddled with a huge debt because of having to pay legal, medical and repair bills that could take years to pay off could blight a young person's life. Thankfully, having the correct auto insurance can prevent that from ever happening.

But first of all, what is insurance? Insurance is an agreement between you and your auto insurance company in which you pay the company a certain amount of money (the premium) and in return, the company will protect you from major financial losses due to an accident.

Your personal circumstances govern what type of auto insurance you should get.

Liability cover is a must. Not least because it is a legal requirement in most states. It covers you for claims (up to the policy limits) made by other people who are injured in an accident caused by you. Each state has differing minimum requirements. If we take Nevada, the minimum amount of liability coverage is 15/30/10. Ok, what does this mean? If you cause an accident, then the minimum amount you must have to cover injuries to each person is $15,000, up to a total of $30,000 for all people injured. The last figure of $10, is the least amount of cover you can have for property damage.

You will notice that the second figure is the first figure doubled. This means that if you caused an accident and people were injured, only two could claim for the maximum of $15,000. If more than two people were injured and claimed the maximum then you would have to find the shortfall out of your own pocket if the unsuccessful claimants decided to sue you.

Check out what the minimum requirements for your state are then do a bit of research into medical costs in your state. You will see that the minimum coverage is far too low. You should consider doubling them. Either that or run the risk of being sued.

To recap, liability insurance will cover you for claims by other people involved in an accident that is your fault. If you are at fault, then your own personal expenses, medical bills, repair costs etc., will not be covered. For those to be covered you need collision and medical payments auto insurance.

For your own medical expenses and repair bills you would need medical payments coverage and collision coverage respectively. Collision coverage would also protect you for damages sustained in an accident involving an object other than a car such as a tree, lamp post or fence.

Ok, that takes care of protection against anything resulting from an accident. But what if your car gets stolen or vandalized? For that you would need comprehensive coverage. If you bought your car on credit , your finance company would probably insist that you have this.

When it comes down to it, our financial security maybe the most important thing to look after and having the right teenage auto insurance should be an integral part of that security. The above coverages will give you the most protection for your money. There are others, but in general they cater for more specialized needs.