Auto Insurance Coverage: What's Included And What's Not

Auto insurance is designed to protect your financial well-being in the event of car accidents, theft, or other incidents beyond your control. Depending on your policy, it can cover vehicle repairs, medical expenses, and damage or injuries you cause to others while driving. While basic car insurance typically doesn't cover maintenance or general wear and tear, there are a variety of additional coverage options available to suit your needs. These can include collision insurance, comprehensive insurance, medical payments coverage, and more. Understanding what is and isn't covered by your auto insurance is essential to ensure you have the protection you need when you're out on the road.

Bodily injury liability

It's important to note that bodily injury liability insurance is considered third-party insurance, meaning it only covers damage to other drivers and passengers, not the policyholder. It also does not cover any repairs or property damage to your vehicle or the other driver's.

The amount of bodily injury liability coverage you need will depend on the requirements of your state and the value of your assets. Most states set a minimum requirement for bodily injury coverage, such as $25,000 per person. However, it is recommended to purchase coverage that matches the value of your assets or the highest limits you can afford to protect yourself financially in the event of a lawsuit.

When purchasing auto insurance, it's important to understand the different types of coverage available and choose the options that best suit your needs and provide adequate protection.

Medical payments/personal injury protection

Personal injury protection (PIP) insurance, also known as "no-fault insurance," covers medical bills and lost wages resulting from a car accident, regardless of who is at fault. It is designed to help pay for medical costs and lost wages for both the policyholder and their passengers. PIP insurance may also cover the policyholder if they are injured as a pedestrian or cyclist.

PIP insurance covers necessary medical procedures and reasonable expenses related to rehabilitation, as well as lost income, childcare, and funeral expenses. The types of expenses covered and the amount covered vary by state. In some states, PIP coverage is required, while in others, it is optional. Even in states where it is not required, PIP insurance offers benefits that health insurance may not, such as coverage for lost wages and funeral costs.

Medical payments coverage, commonly known as Med Pay, is similar to PIP in that it covers medical expenses for both the policyholder and their passengers. However, Med Pay does not cover expenses like lost wages, childcare, or house cleaning that may be covered by PIP. Med Pay is not required by law but can be purchased as supplemental coverage to help with medical bills.

In summary, PIP insurance provides coverage for a range of expenses resulting from a car accident, while Med Pay is specifically intended to cover medical bills. The decision to purchase either or both types of coverage may depend on the specific needs and circumstances of the individual.

Property damage liability

It's important to note that property damage liability insurance does not cover damage to your own vehicle or your own medical expenses. To protect yourself financially in the event of an accident, you may need additional coverage, such as collision and comprehensive insurance.

When choosing your property damage liability insurance limit, consider paying a little more for a limit greater than your state's minimum requirement. This will provide you with more financial protection if you cause an accident.

If you're unsure how much property damage liability insurance you need, consider using a car insurance calculator or consulting with an insurance professional. They can help you determine the right amount of coverage based on your personal assets and the value of your property.

Uninsured/underinsured motorist coverage

Uninsured motorist coverage specifically applies when the other driver involved in the accident does not have any auto insurance. Underinsured motorist coverage, often offered alongside uninsured coverage, comes into effect when the other driver doesn't have sufficient insurance to cover the damages or injuries they caused. These coverages are particularly relevant given that nearly 13% of drivers countrywide don't have auto insurance, and in some states, this number exceeds 20%.

In the event of a hit-and-run accident, uninsured motorist coverage can also be beneficial. It can help cover your injuries and any damage to your vehicle, although in some states, uninsured motorist coverage for property damage (UMPD) may not apply in these situations.

• Medical expenses for you and your passengers.
• Lost wages if you are unable to work due to the accident.
• Compensation for pain and suffering.
• Car repairs and replacement of property in your vehicle.
• Rental car costs if needed.
• Diminished value of your vehicle after the accident.

It's important to note that you usually cannot purchase only uninsured motorist coverage. It is typically added to a basic auto insurance liability policy. When determining how much coverage you need, it's recommended to match your uninsured/underinsured coverage limits with your liability coverage limits. Additionally, consider the value of your vehicle and the potential costs of medical care.

In some states, uninsured motorist coverage is mandatory, while in others, you may have the option to reject it in writing. Understanding the specific requirements and options in your state is crucial before making any decisions about your auto insurance policy.

Collision and comprehensive insurance

Collision Insurance

Collision coverage pays for your vehicle's damage if you hit an object or another car. It covers damage to your vehicle from accidents involving other cars or objects, single-car rollovers, and accidents with stationary objects like road signs and guardrails.

Comprehensive Insurance

Comprehensive insurance covers non-collision damage to your vehicle, such as fire, hail, or vandalism. It also reimburses you for car theft and damage from collisions with animals. Comprehensive insurance covers damage from events such as fire, falling objects, missiles, explosions, earthquakes, windstorms, hail, floods, vandalism, riots, or contact with animals. It will also pay to repair your windshield if it is cracked or shattered.

The main difference between collision and comprehensive insurance is the type of incident they cover. Collision insurance covers damage to your vehicle from accidents, while comprehensive insurance covers non-accident-related damage or loss. Neither is required by state law, but both are typically required for a car loan or lease.

A deductible is the amount you pay before the insurance company starts paying for damages. For both collision and comprehensive insurance, you can choose your deductible amount, usually between $100 and $2,000. The higher the deductible, the lower your insurance cost.

If you have a car loan or lease, your lender or leasing company will likely require you to purchase both collision and comprehensive insurance. Once your car loan is paid off, collision and comprehensive insurance become optional. However, it's essential to consider whether you could easily pay for repairs or a new car if your vehicle is damaged or stolen.

Frequently asked questions