Orlando Harmon
Auto insurance is a contract between you and your insurance company that provides financial protection in the event of an accident or theft. It covers property damage, liability, and medical costs. While auto insurance requirements vary from state to state, there are several types of coverage that are typically included in auto insurance policies. These include bodily injury liability, property damage liability, personal injury protection, collision coverage, comprehensive coverage, and uninsured/underinsured motorist coverage. Understanding what is included in auto insurance is essential for ensuring adequate protection in the event of an accident or theft.
| Characteristics | Values |
|---|---|
| Bodily Injury Liability | Covers costs associated with injuries and death caused by the policyholder or another driver while driving the insured car. |
| Property Damage Liability | Reimbursement for damage caused by the policyholder or another driver operating the insured car to another vehicle or property. |
| Medical Payments or Personal Injury Protection (PIP) | Reimbursement for medical expenses for injuries to the policyholder or their passengers. It may also cover lost wages and other related expenses. |
| Uninsured Motorist Coverage | Reimbursement when an accident is caused by an uninsured motorist or in the case of a hit-and-run. |
| Underinsured Motorist Coverage | Covers costs when another driver lacks adequate coverage to pay for the costs of a serious accident. |
| Collision Coverage | Reimbursement for damage to the insured car resulting from a collision with another vehicle or object when the policyholder is at fault. |
| Comprehensive Coverage | Coverage against theft and damage caused by an incident other than a collision, such as fire, flood, vandalism, and hail. |
| Glass Coverage | Coverage for windshield damage, which is common. Some policies include no-deductible glass coverage for side windows, rear windows, and glass sunroofs. |
What You'll Learn
Bodily injury liability
Another critical aspect of bodily injury liability insurance is its coverage of legal expenses. If a person affected by the accident sues you, this insurance can cover the cost of a defence attorney and court fees, provided your policy includes sufficient liability coverage.
When purchasing auto insurance, it is important to review the liability limits outlined in your policy. These limits are typically presented as a series of three numbers, such as "100/300/100." The first number represents the maximum coverage per person for bodily injury, the second number denotes the maximum coverage per accident for bodily injury, and the third number indicates the coverage for property damage.
It is worth noting that the minimum coverage requirements vary by state. While most states mandate bodily injury liability insurance, a few states, such as New Jersey and Florida, have different requirements. It is essential to understand the specific regulations in your state to ensure you have adequate coverage.
To summarise, bodily injury liability insurance is a crucial component of auto insurance, protecting you from financial burden and legal repercussions in the event of an accident where you are at fault. By understanding the coverage limits and customising your policy accordingly, you can ensure that you have sufficient protection.
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Property damage liability
Most states require car owners to purchase property damage liability insurance, with minimum coverage limits ranging from $5,000 to $25,000. However, these minimum requirements might not be sufficient, especially in serious accidents. It is recommended to buy more coverage if you have substantial assets to protect. The cost of property damage liability insurance varies depending on factors such as your location, age, gender, and driving record.
When choosing a policy, consider the total value of your personal assets and select a coverage amount that will adequately protect your financial well-being in the event of an at-fault accident. You can also add other types of liability coverage to your policy, such as uninsured motorist property damage insurance, to further enhance your protection.
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Medical payments or personal injury protection (PIP)
In some states, PIP is mandatory, particularly in "no-fault" states, where drivers must obtain either PIP or medical payments coverage. These no-fault states include Florida, Michigan, New Jersey, New York, and Pennsylvania. On the other hand, MedPay is optional in all but two states, Maine and New Hampshire, where it is required.
The key distinction between PIP and MedPay lies in their scope of coverage. PIP offers a broader range of benefits and tends to be available immediately after an accident. It covers medical expenses and may also include funeral costs, lost wages, and household expenses. PIP policies can vary significantly across states, so it's important to review the limits and exclusions with your insurance provider.
MedPay, on the other hand, is more limited in its coverage. It typically covers medical, surgical, dental, and chiropractic treatments deemed 'reasonable' after an accident. Unlike PIP, MedPay does not include compensation for lost wages or survivor's loss benefits. However, MedPay has its advantages, including the ability to pay costs quickly and the lack of a deductible or copay.
When deciding between PIP and MedPay, consider your state's requirements, your existing health insurance coverage, and your specific needs. If you reside in a no-fault state, you will likely need to obtain PIP. Additionally, if your health insurance policy has a high deductible, MedPay could be a beneficial supplement.
By understanding the differences between Medical Payments and Personal Injury Protection, you can make an informed decision about your auto insurance coverage, ensuring you have the necessary protection in the event of an accident.
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Uninsured/underinsured motorist coverage
Underinsured motorist coverage also consists of two parts: underinsured motorist bodily injury (UIMBI) and underinsured motorist property damage (UIMPD). UIMBI covers medical bills for you and your passengers if you are in an accident with a driver who does not have sufficient insurance to cover the costs. UIMPD, meanwhile, covers damage to your vehicle if you are hit by a driver with inadequate insurance coverage. It is important to note that some states may require a deductible for UIMPD, but UIMBI generally does not include a deductible.
In the unfortunate event of a hit-and-run accident, you can file a claim against your uninsured motorist coverage. However, it is worth noting that in some states, uninsured motorist coverage for property damage (UMPD) will not cover hit-and-run incidents, and you would need collision coverage for your insurance to cover the damage to your vehicle.
When deciding whether to opt for uninsured/underinsured motorist coverage, it is essential to consider your health insurance coverage. If you have private health insurance, check with your insurer to understand how medical expenses resulting from a car accident are covered. Additionally, evaluate whether your health insurance has a deductible, as UMBI and UIMBI typically do not include a deductible.
The amount of uninsured/underinsured motorist coverage you need depends on your specific circumstances. For the bodily injury portion, it is advisable to match the amount with your liability coverage limits. Some states mandate identical limits for these coverages. Regarding property damage coverage, you can select a limit that aligns with the value of your vehicle.
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Collision and comprehensive coverage
Both collision and comprehensive coverage are optional and not required by state law. However, they are typically required if you have a car loan or lease. The cost of collision and comprehensive coverage depends on factors such as the insurer, your location, the value of your vehicle, and the deductible you choose. The deductible is the amount you pay out of pocket before the insurance company covers the rest. You can usually choose a deductible between $100 and $2,000 for both collision and comprehensive coverage.
When deciding whether to purchase collision and comprehensive coverage, consider the value of your car, how often you drive, your current savings, and the hazards of your location. If your car is worth more, you drive frequently, or live in an area with a high risk of damage, then collision and comprehensive coverage may be a wise investment. These coverages can protect you from having to pay expensive repair or replacement costs out of pocket.
It's important to note that collision and comprehensive coverage provide compensation based on the market value of your car. They do not pay off your loan if your car is damaged and its market value is less than what you owe. For that, you may need Guaranteed Auto Protection (GAP) insurance.
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Frequently asked questions
Auto insurance is a contract between you and your insurance company that protects you against financial loss in the event of an accident or theft. In exchange for your premium, the insurance company agrees to pay your losses as outlined in your policy.
Auto insurance provides coverage for property (damage to or theft of your car), liability (your legal responsibility to others for bodily injury or property damage), and medical costs (the cost of treating injuries, rehabilitation, and sometimes lost wages and funeral expenses).
A basic auto insurance policy typically includes bodily injury liability, personal injury protection, property damage liability, collision, comprehensive, and uninsured/underinsured motorist coverage.
Collision coverage reimburses you for damage to your car that occurs as a result of a collision with another vehicle or object, such as a tree or guardrail. Comprehensive coverage, on the other hand, provides protection against theft and damage caused by incidents other than a collision, such as fire, flood, vandalism, or falling objects.
Gap insurance covers the difference between the market value of your car and what you still owe on a lease or loan if your car is totaled or stolen. While it is not required, it may be worth considering if you lease or finance your vehicle, as collision and comprehensive insurance only cover the market value of your car, which may be less than what you owe.
