Auto Insurance Basics: Understanding Liabilities And Coverage

Basic auto insurance, also known as liability insurance, is a policy that includes liability coverage. It helps cover the cost of damage you may cause to other people and their property, including medical bills, repair or replacement of property, and legal fallout. Liability insurance is required by nearly every state in order to legally drive and register your vehicle. While different states mandate different types of insurance, most basic auto policies consist of six types of coverage: bodily injury liability, personal injury protection, property damage liability, collision, comprehensive, and uninsured/underinsured motorist.

Bodily injury liability coverage

Basic auto insurance policies typically consist of six types of coverage: bodily injury liability, personal injury protection, property damage liability, collision, comprehensive, and uninsured/underinsured motorist coverage. While the specific requirements vary across different states, bodily injury liability coverage is required by law in most states.

In the event that you are at fault for a car accident that injures passengers in another car, bodily injury liability coverage can help pay for their medical expenses, including emergency services, hospital care, recovery wheelchairs, and ongoing care. Additionally, this coverage can compensate for lost income by helping to pay the wages of the injured person during their time off work. It can also cover legal fees if the other driver files a claim against you and provide compensation for pain and suffering. In the unfortunate event of a fatality, this coverage can help pay for funeral expenses.

Property damage liability coverage

In the event of an accident, this coverage will pay for the repair or replacement of the damaged property. For example, if you rear-end a car, pushing it into two other vehicles, your property damage liability coverage will contribute to the repair costs of all three cars, up to your policy limits. It's important to note that if the cost of damages exceeds your coverage limit, you will be responsible for the remaining amount. Therefore, it's advisable to consider your surroundings and the potential value of property in your area when selecting your coverage limit.

The minimum property damage liability coverage required by law varies from state to state. For instance, Georgia mandates a minimum of $25,000 per incident, while Texas requires $25,000 in property damage coverage per accident. It's worth noting that these minimum requirements may not be sufficient for your level of protection, and it's generally recommended to opt for higher coverage limits if possible.

Uninsured and underinsured motorist coverage

Basic auto insurance is also known as liability insurance. It covers the damage you may cause to other people and their property, including medical bills, repair or replacement of property, and legal fallout. However, it does not cover your own injuries or damage to your own vehicle.

Uninsured motorist coverage comes into effect when you are in an accident with a driver who has no auto insurance. It covers your injuries, your passengers' injuries, and damage to your vehicle. If the at-fault driver's insurance company denies coverage, this type of insurance can also be applicable. For example, if a vehicle is stolen and involved in an accident, the insurance company may deny coverage, rendering the vehicle uninsured for that incident.

Underinsured motorist coverage is applicable when the at-fault driver does not have adequate insurance to cover all your damages. This coverage reimburses you, your family members, or a designated driver if one of you is hit by an underinsured driver. It also offers protection in hit-and-run incidents or if, as a pedestrian, you are struck by an uninsured or underinsured motorist.

In some states, uninsured and/or underinsured motorist coverage is mandatory, while others offer it as an option. This type of coverage is essential as it ensures that you are not left financially burdened by another driver's lack of insurance. Without it, you may have to pay for medical bills or vehicle repairs out of your own pocket.

Personal injury protection (PIP)

In a no-fault state, if a policyholder is injured in a car crash, their policy pays for their medical care, regardless of who caused the accident. PIP coverage can be beneficial even if the other driver doesn't have insurance or if your damages exceed their coverage limits.

PIP has minimum coverage amounts and per-person maximum coverage limits. If the cost of necessary medical care exceeds the auto insurance policy's PIP limits, health insurance may cover further expenses. It's important to note that PIP doesn't cover property damage or the other driver's injuries in a collision.

While PIP is not required in all states, it can provide valuable financial protection in the event of a car accident. It ensures that your medical expenses and other related costs will be covered, regardless of fault.

Medical payments coverage

Basic auto insurance, also known as liability insurance, is a policy that only includes liability coverage. It helps cover the damage you may cause to other people and their property, including medical bills, repair or replacement of property, and legal fallout. While different states mandate different types of insurance, most basic auto policies consist of six types of coverage: bodily injury liability, personal injury protection, property damage liability, collision, comprehensive, and uninsured/underinsured motorist.

MedPay limits typically range from $1,000 to $10,000, and it's a good idea to choose a limit that covers your health insurance deductible and any expected out-of-pocket expenses. This coverage applies to everyone in your car at the time of the collision, including yourself, family members, and passengers. It can also protect you if you are injured as a pedestrian by a vehicle.

It's important to note that medical payments coverage does not cover lost wages due to missing work, and it won't help if you cause injury to other drivers. Additionally, MedPay is not offered in every state, but similar protection may be available through personal injury protection (PIP) coverage.

Frequently asked questions