Auto Insurance: Understanding The Different Types Of Covered Risks

Auto insurance offers financial protection in the event of an accident, covering damage to your vehicle, medical expenses, and damage to another person's property. There are two primary categories of auto insurance: required and optional coverages. Required coverages include those mandated by state law and any insurance required by a lender or lessor, such as liability insurance, which covers expenses like personal injury to others when you are at fault, or damage to a vehicle. Optional coverages include collision and comprehensive insurance, which covers repairing a car you fully own, among other costs.

Bodily injury liability

• Medical expenses, such as emergency care, hospital fees, follow-up visits, and medical equipment.
• Lost income if the injured person is unable to 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 be shown as three numbers, such as "100/300/100." The first number represents the per-person bodily injury liability coverage, the second number is the per-accident bodily injury liability coverage, and the third number is the per-accident property damage liability coverage.

When purchasing auto insurance, it is important to consider the state minimum requirements and your own financial situation to determine the appropriate amount of bodily injury liability coverage. While the minimum coverage may be sufficient in some cases, experts generally recommend purchasing higher limits to ensure adequate protection in the event of an accident.

Property damage liability

It's important to note that property damage liability insurance does not cover damage to your own vehicle. If you want insurance for damage to or theft of your own car, you would need to purchase comprehensive and collision coverage. Additionally, there may be minimum liability requirements for property damage insurance that vary by state. Therefore, it's a good idea to check your state's requirements to ensure you have the appropriate coverage.

The cost of property damage liability insurance can vary depending on factors such as your location, age, gender, driving record, and credit history. On average, the annual cost for liability car insurance, including both property damage and bodily injury liability, is around $650. However, rates can differ significantly by state, with the cheapest liability insurance in North Dakota at $312.30 per year and the most expensive in Louisiana at $1,023.91 per year.

When determining how much property damage liability insurance you need, it's recommended to consider your total assets. You should aim to have enough coverage to protect your financial well-being if you are at fault in an accident. For example, car owners with a high net worth should consider a higher level of property damage liability insurance. It's generally advised to have at least $100,000 in property damage liability coverage to ensure you're adequately protected.

Personal injury protection

PIP coverage includes reasonable medical costs such as surgeries, medications, diagnostics (X-rays, CT scans), prosthetics, nursing care, physical therapy, and medical devices. It also covers 80% of lost wages due to injury and recovery, as well as replacement of necessary services normally provided by the injured party, such as childcare or household maintenance.

In Texas, insurance companies are required by law to offer a minimum of $2,500 in PIP coverage to drivers obtaining auto liability insurance. While drivers can opt out of PIP coverage to reduce their insurance premiums, doing so could leave them financially vulnerable in the event of an accident. Without PIP coverage, individuals may struggle to cover the high costs of medical bills and lost income resulting from a car crash.

It is worth noting that PIP has a time limit for filing a claim, which is typically within three years of the accident in Texas. Additionally, PIP does not cover property or vehicle damage, theft, or medical expenses and lost wages beyond the specified coverage limits.

Overall, PIP can provide valuable financial protection and peace of mind for individuals involved in car accidents, ensuring that they can focus on their recovery without the added stress of financial burdens.

Uninsured/underinsured motorist coverage

Uninsured motorist coverage comes into effect when you are hit by a driver who does not have auto insurance. Underinsured motorist coverage, which often accompanies uninsured motorist coverage, applies when the other driver doesn't have sufficient insurance to cover the damages or injuries caused by the accident.

If you are in an accident with an uninsured or underinsured driver, uninsured/underinsured motorist coverage can help pay for your injuries, your passengers' injuries, and damage to your vehicle. This coverage is designed to protect you from financial hardship in the event of an accident involving a driver with inadequate insurance.

The specifics of uninsured/underinsured motorist coverage can vary depending on your state. In some states, this coverage is divided into uninsured motorist bodily injury (UMBI) and uninsured motorist property damage (UMPD). UMBI helps pay medical bills for you and your passengers, while UMPD covers damage to your vehicle. Similar distinctions exist for underinsured motorist coverage, with UIMBI and UIMPD covering injuries and property damage, respectively.

It's worth noting that uninsured/underinsured motorist coverage typically includes a deductible, which is the amount you must pay out of pocket before the insurance company covers the remaining costs. However, in some states, UMBI and UIMBI do not include a deductible.

In the unfortunate event of a hit-and-run accident, uninsured motorist coverage can also provide financial protection. Even if the at-fault driver cannot be identified, this coverage can help pay for your medical bills and vehicle repairs.

To summarize, uninsured/underinsured motorist coverage is a crucial aspect of auto insurance that ensures you are protected in case of an accident with a driver who lacks sufficient insurance. By understanding the specifics of this coverage and the requirements in your state, you can make informed decisions about your auto insurance policy and ensure you have the necessary protection in place.

Collision coverage

One of the key advantages of collision coverage is that it provides financial protection in the event of an accident, regardless of who is at fault. For example, if you accidentally rear-end the car in front of you, collision coverage will pay for the repairs or replacement of your vehicle. Similarly, if a friend or family member borrows your car and gets into an accident, collision coverage will take care of the expenses.

Another benefit of collision coverage is that it can help you avoid paying out-of-pocket expenses for repairs that exceed your deductible. In the unfortunate event that your damaged vehicle is deemed a total loss, collision coverage will provide coverage for your loss. Additionally, by combining collision insurance with other coverage options, such as the Liberty Mutual Deductible Fund®, you may even pay nothing at all for repairing or replacing your vehicle.

When deciding whether to opt for collision coverage, it is important to consider factors such as the age and value of your car, as well as your financial situation. For instance, if your car is less than five years old and holds significant value, collision coverage can provide peace of mind and protect your investment. On the other hand, if your car is older and has depreciated in value, the cost of collision coverage might outweigh the potential benefits.

Ultimately, collision coverage is a valuable option for vehicle owners who want the reassurance of knowing that their car is protected in the event of a collision. By choosing this coverage, you can drive with the confidence that you won't have to bear the full financial burden of repairing or replacing your vehicle if an accident occurs.

Frequently asked questions