Understanding Limited Damages In Auto Insurance Policies

In the event of a car accident, auto insurance helps to cover the costs of injuries and property damage. However, if the damage exceeds the limits of the at-fault driver's insurance policy, the victim may not receive full compensation for their losses. This is where the concept of limited damages comes into play. Limited damages refer to the maximum amount that an insurance company will pay out for a single accident or claim. Once the limit is reached, the insurance company will not pay any additional costs, and the at-fault driver may be held personally liable for the remaining damages.

Collision and comprehensive coverage

Collision Coverage

Collision coverage protects your vehicle in the event of a collision with another vehicle or object, including accidents with stationary objects like road signs and guardrails, and single-car rollovers. It covers the cost of repairs or a full replacement of your vehicle, depending on the extent of the damage. This type of coverage is particularly important if you drive frequently, especially in areas with high traffic volume, or in locations with a higher risk of accidents.

Comprehensive Coverage

Comprehensive coverage, on the other hand, protects your vehicle from damage caused by unexpected non-collision incidents such as fire, hail, vandalism, theft, falling trees, animal collisions, and natural disasters. It ensures that you are covered for a wide range of potential hazards that could cause significant damage to your vehicle. Comprehensive coverage is especially valuable if you live in an area with a higher risk of such incidents, such as fallen branches or animal collisions.

Choosing Coverage

When deciding whether to opt for collision and comprehensive coverage, it is essential to consider factors such as the value of your vehicle, your current savings, and the likelihood of accidents or non-collision incidents occurring. While these coverages are optional, they provide valuable protection against unexpected costs associated with vehicle damage. Additionally, if you finance or lease your vehicle, your lender may require you to carry both collision and comprehensive coverage to protect their investment.

No-fault states

In no-fault states, drivers are required to have a minimum amount of PIP coverage to help ensure they have financial protection in the event of an accident. This coverage is in addition to other types of auto insurance, such as bodily injury and property damage liability coverage. After an accident, drivers in a no-fault state must file a claim with their own insurance company to cover the costs of their injuries, regardless of who was at fault for the crash.

There are currently 12 no-fault states in the US: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah. In these states, the right of drivers to sue for their medical injuries is limited. Injured drivers may only be able to sue if their injuries are considered severe, and even then, they may need to meet certain thresholds in terms of the severity of their injuries or their medical bills.

It's important to note that no-fault insurance only applies to injury claims and not property damage. In a no-fault state, if your car is damaged in an accident, you would still make a claim with the at-fault driver's insurance company to cover the expenses. Additionally, no-fault insurance does not cover damage to your own vehicle if you are the at-fault party in an accident. For that, you would need comprehensive or collision coverage.

Underinsured motorist

If you are involved in an accident with an underinsured driver, your UIM coverage will pay you the same damages that the other driver would be legally required to pay. This includes money for medical expenses, lost wages, pain and suffering, disability, scarring, and loss of ability to enjoy life. For example, if the other driver only has the minimum coverage of $25,000, your UIM coverage will pay for any damages exceeding that amount.

In the event of an accident with an underinsured motorist, it is important to take the following steps:

• Call 911 and request medical assistance for anyone injured.
• Stay at the scene and wait for the police to arrive. The police report will be crucial for your insurance claim.
• Take photos of the accident scene, including all vehicles involved, road conditions, traffic signs, and any injuries sustained. Also, obtain contact information from any witnesses.
• Exchange contact and insurance information with the other driver.
• Review your car insurance policy to determine your coverage and limits.
• Contact your insurance company.
• Consider seeking a case review from an experienced personal injury attorney prior to filing an insurance claim, especially if you believe the expenses will exceed the insurer's settlement offer.

Uninsured motorist

In the United States, nearly 13% of drivers do not have auto insurance, and this number rises above 20% in some states. Uninsured motorist coverage ensures that you are not left footing the bill for medical expenses or vehicle repairs if you are in an accident with an uninsured driver. This coverage also typically includes underinsured motorist coverage, which protects you if you are hit by a driver whose insurance is insufficient to cover the damages or injuries they caused.

In summary, uninsured motorist coverage is a crucial form of protection for drivers, ensuring that they are not left financially vulnerable in the event of an accident with an uninsured or underinsured driver. By understanding the specifics of your policy, you can ensure that you have adequate coverage and peace of mind while on the road.

Deductibles and dollar limits

A deductible is the amount of a claim that you must pay yourself. For instance, if you have a $1,500 collision claim and your policy has a $500 collision deductible, the insurance company will deduct $500 from your claim amount and pay you the remaining $1,000. You don't have to pay a deductible for claims against another driver's insurance company.

Some coverages pay only up to the policy's dollar limits. Liability, personal injury protection, uninsured/underinsured motorist, towing and labour, and rental coverages have dollar limits. This is the most the company will pay, even if the cost is higher. If you don't have enough coverage, you'll have to pay the difference yourself. Collision and comprehensive coverages don't have dollar limits.

The first page of your policy is the declaration page. It has a summary of your policy, including your coverages, dollar limits, and deductibles.

Deductibles most commonly apply to comprehensive and collision coverage, but there may be a deductible for personal injury protection (PIP) coverage or uninsured/underinsured motorist property damage coverage as well.

You usually pay a lower premium if you choose a higher deductible. For example, if you have a $500 deductible but have $1,500 in covered damages, you must pay the first $500 and your insurance company is responsible for the remaining $1,000.

Frequently asked questions