Understanding Component Auto Insurance: What You Need To Know

Auto insurance is a contract between the policyholder and the insurance company. It is mandatory in nearly all US states and covers property, liability, and medical expenses. There are six types of auto insurance coverage, including bodily injury liability, property damage liability, collision coverage, comprehensive coverage, uninsured and underinsured motorist coverage, and medical payments coverage. Each type of coverage has its own premium, and policyholders can choose to add on supplemental coverage for custom vehicle parts. Understanding the different types of auto insurance policies is critical in choosing the right cover.

Bodily Injury Liability

Auto insurance is a contract between the policyholder and the insurance company. The policyholder agrees to pay the premium, and the insurance company agrees to pay for losses as defined in the policy. Auto insurance provides property, liability, and medical coverage.

• Medical expenses, such as emergency care, hospital fees, follow-up visits, and medical equipment like crutches.
• Lost income if the injured person can't work as a result of the accident.
• Funeral costs if the injuries from the accident are fatal.
• Pain and suffering if the injured driver or passengers experience long-lasting emotional trauma or pain.
• Legal fees if someone affected by the accident sues you and your policy includes enough liability coverage.

The liability limits on your insurance policy will typically show three numbers, such as "100/300/100." The first number is your bodily injury limit per person, the second is your bodily injury limit per accident, and the third is your property damage liability coverage. For example, a policy with limits of 100/300 will cover up to $100,000 per person and $300,000 total per accident.

While most states require bodily injury liability coverage, some states such as Florida, New Hampshire, Virginia, and New Jersey do not. However, these states have other insurance mandates that drivers must meet. It's important to know your state's requirements and consider purchasing more coverage than the minimum to protect yourself financially in the event of an accident.

Property Damage Liability

You can also add an umbrella insurance policy on top of your standard car insurance to increase your coverage. When choosing a policy, it is important to understand the different types of coverage included and their limits. Property Damage Liability insurance is typically listed as the third number in the coverage limits, indicating the maximum that will be paid for damages to property. For example, a policy listed as 100/300/100 includes $100,000 of Property Damage Liability coverage.

In addition to Property Damage Liability insurance, there are other types of coverage that can protect you in the event of an accident, such as Bodily Injury Liability insurance and Collision Coverage. It is important to carefully review your insurance policy and consider your specific needs to ensure you have adequate coverage.

Uninsured and Underinsured Motorist Coverage

Uninsured Motorist (UM) coverage is an additional coverage that can be added to your car insurance policy. It is mandatory in many states and highly recommended for all drivers. UM coverage protects you and your passengers in the event of an accident involving an uninsured driver, i.e. a driver with no car insurance. In such a scenario, UM coverage can help pay for your medical expenses and repairs to your car. Without UM coverage, you could be forced to pay for medical bills or vehicle repairs out of your own pocket.

Underinsured Motorist (UIM) coverage is similar to UM coverage but applies when the other driver doesn't have sufficient insurance to cover the injuries or damages you or your passengers sustain. UIM coverage is usually offered alongside UM coverage and is also mandatory in many states.

There are two types of UM and UIM coverage:

• Bodily Injury Coverage: This covers medical bills for you and your passengers.
• Property Damage Coverage: This covers repairs to your vehicle.

It's important to note that UM/UIM coverage may not be necessary if you have comprehensive health insurance or collision coverage. Additionally, UM/UIM coverage only applies if the uninsured or underinsured driver is at fault. In the case of a hit-and-run accident, UM coverage can be filed, but in some states, property damage resulting from such incidents may not be covered.

Comprehensive Coverage

Comprehensive auto insurance coverage is an optional form of insurance that protects your vehicle from damage caused by events outside of your control, which are not caused by a vehicle collision. This includes theft, vandalism, hail, and hitting an animal. For example, if you hit a deer while driving, the damage would be covered by comprehensive insurance. However, if you swerve to miss the deer and hit a tree, this type of accident is considered a collision with an object and would not be covered. Comprehensive insurance can also cover windshield and glass damage, as well as damage from falling trees, rocks, storms, floods, lightning, earthquakes, and other acts of nature.

Comprehensive insurance is typically based on the actual cash value of your vehicle. You will be responsible for paying your selected deductible, and the insurance will cover the remaining cost of repairs. The amount of the deductible is chosen by the policyholder, and typically, the higher the deductible, the lower the insurance cost. For example, if your vehicle sustains $1,000 in damage and you have a $100 deductible, you will pay $100, and the insurance company will pay the remaining $900.

Comprehensive insurance is not required by law in any state, but it is usually required by lenders if you are leasing or financing your vehicle. If you own your vehicle outright, the decision to purchase comprehensive insurance depends on factors such as the value of your car, your financial circumstances, and personal preferences. While comprehensive insurance provides peace of mind and protection against unforeseen events, it may not be worthwhile for older, lower-value vehicles.

Medical Payments Coverage

The availability and limits of MedPay vary by state and insurer. MedPay limits typically range from $1,000 to $10,000, and it is recommended to carry coverage equal to your health insurance deductible. It's important to note that MedPay does not cover wage reimbursement for time lost due to injuries. Additionally, it does not cover injuries caused to other drivers.

When choosing a MedPay coverage limit, it's crucial to consider your current health insurance plan. Many health insurance providers require you to pay a deductible or co-insurance payment for emergency care. By selecting a MedPay coverage limit higher than your health insurance deductible, you can ensure that MedPay covers your deductible and any remaining medical costs.

While MedPay is optional in most states, some states that do not offer MedPay may require Personal Injury Protection (PIP) coverage instead. PIP is similar to MedPay but also covers lost wages, resulting in higher limits and costs.

Frequently asked questions