Understanding S Coverage: Auto Insurance Basics Explained

Auto insurance provides financial protection in the event of an accident or damage to your vehicle. It covers damage to your car, another driver's vehicle, property damage, bodily injuries, and medical bills. Most states require drivers to have a minimum amount of liability insurance, and some mandate additional coverage, such as uninsured motorist protection. Auto insurance policies consist of multiple coverages, including liability, vehicle, and personal coverages, as well as optional add-ons. Understanding the different types of coverages is essential to finding the right policy for your needs and budget.

Bodily injury liability

The liability limits on your insurance policy will typically be represented by three numbers, such as "100/300/100." The first number refers to the per-person bodily injury liability coverage, the second number refers to the per-accident bodily injury liability coverage, and the third number refers to the per-accident property damage liability coverage.

For example, if you have bodily injury insurance limits of 100/300, and you cause an accident that results in 180,000 dollars in medical expenses for the three people in the other car, your insurance company will pay out a maximum of 100,000 dollars per person and 300,000 dollars total. In this case, you would have to pay the remaining 10,000 dollars out of pocket.

It is important to note that bodily injury liability insurance does not cover repairs or property damage. To cover these costs, you would need to purchase additional insurance, such as collision coverage or property damage liability coverage.

Medical payments or personal injury protection (PIP)

PIP insurance covers a range of expenses, including medical bills, rehabilitation costs, lost wages, and funeral expenses. It can also provide payments for lost income, child care, and other related costs. The goal of PIP is to provide prompt payment for car accident injuries, ensuring that injury claims are paid regardless of who caused the accident. This can be especially valuable as it removes the need to wait for a liability lawsuit to be resolved.

In some states, PIP is required by law as part of "no-fault auto insurance" regulations, while in others it is optional. Currently, PIP auto insurance is required in 15 states and Puerto Rico, with minimum coverage requirements set by state governments. These states include Delaware, Florida, Hawaii, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania, Utah, and Puerto Rico. Even in states where PIP is not mandatory, it can still be a valuable addition to a car insurance policy, providing financial protection for expenses that may not be covered by health insurance.

It is important to note that PIP has coverage limits, and the amount covered will depend on the specific plan and state regulations. Additionally, PIP does not cover all injury-related expenses. For instance, if the policyholder causes an accident that results in injuries to others, they will need to rely on the bodily injury portion of their liability car insurance.

Property damage liability

It's important to note that the state-required minimum coverage may not be sufficient in the event of a serious accident. Therefore, it's recommended to consider purchasing higher levels of coverage to protect yourself financially. When choosing how much property damage liability coverage you need, consider whether you own a home or other expensive items, if you travel in high-traffic areas, and if there are many expensive vehicles in your area.

Uninsured and underinsured motorist coverage

Uninsured motorist (UM) coverage provides financial protection if you, a member of your family, or a designated driver is hit by a driver with no auto insurance. This coverage also extends to hit-and-run incidents, where the at-fault driver flees the scene and cannot be identified. In such cases, you can file a claim against your uninsured motorist coverage to seek compensation for any injuries or damages sustained.

Underinsured motorist (UIM) coverage, on the other hand, comes into effect when you are involved in an accident with a driver whose insurance coverage is insufficient to pay for the total loss or injuries resulting from the accident. This coverage ensures that you are not left bearing the financial burden when the at-fault driver's policy limits are inadequate.

The specifics of uninsured and underinsured motorist coverage can vary depending on your state. In some states, this coverage is mandatory, while in others it is optional but highly recommended. The coverage may be structured differently, with some states offering separate coverages for bodily injury and property damage, while others combine them. It's important to understand the requirements and options in your state to ensure you have the necessary protection.

Collision and comprehensive insurance

Collision Insurance

Collision insurance covers damage to your vehicle caused by a collision with another vehicle or object, such as a fence, guardrail, or tree. It also covers single-car rollovers and accidents involving uninsured drivers. Collision insurance will pay for repairs or a full replacement of your covered vehicle. It does not cover damage caused to someone else's property or injuries to you or your passengers.

Comprehensive Insurance

Comprehensive insurance covers damage to your vehicle caused by non-collision incidents, such as theft, vandalism, fire, natural disasters, and accidents with animals. It also covers damage caused by falling objects, civil disturbances, and weather events like hail and floods. Comprehensive insurance will pay for repairs or the cost of replacing your vehicle if it is stolen or damaged in a covered event.

Choosing Coverage

When deciding whether to purchase collision and comprehensive coverage, consider the value of your car, the likelihood of an accident, your current savings, and the hazards of your location. If you have a high-value car, drive frequently, have low savings, or live in an area with high reports of vehicle damage, you may want to opt for both collision and comprehensive coverage.

Deductibles and Costs

Both collision and comprehensive insurance have deductibles, which are the amounts you pay toward repairs before your insurance begins paying. You can choose your deductible when purchasing coverage, with collision deductibles typically ranging from $200 to $1,000 or more, and comprehensive deductibles starting at $100. Comprehensive coverage is generally less expensive than collision insurance. The cost of both types of coverage can depend on factors such as your location, the value of your vehicle, repair costs, and the rate of auto thefts in your area.

Frequently asked questions