Chances are you're spending hundreds, maybe thousands of
dollars on auto insurance every year. When you stop to consider what a sizable
part of your budget is spent on auto insurance, it makes sense to spend some
time learning the basics. While not a detailed explanation of your auto
insurance coverages, this guide is designed to help you make informed coverage
decisions. Please check your policy for details of the coverages you have.
What if, while driving your car, you caused an accident which resulted in
extensive property damage and serious injuries to yourself and others: do you
know for certain that your auto insurance coverage would pay for most medical
expenses, repair bills, lawsuits and court costs? Having the right coverage and
limits can eliminate or substantially reduce the risk of losing your life
savings.
In the final analysis, you owe it to yourself and your loved ones to know
enough about auto insurance to select the best company and coverages for you.
Liability coverages are among the most important in relation to your financial
security.
In the face of ever increasing medical costs, the possibility of a multiple car
accident, or damage to expensive property, the minimum coverage limits required
by law may not be enough. Choosing low liability limits could be an unwise way
to save on insurance.
This coverage, combined with property damage liability coverage, is the
foundation of any auto insurance policy and is required in most states. If
bodily injury claims or lawsuits are brought against you and if an
investigation or a court finds you to be legally responsible for injuries to
persons, your bodily injury liability insurance will pay, up to your policy
limit, for injuries to other people - such as pedestrians, passengers in your
car, or people in other vehicles. Also, bodily injury liability coverage
provides for your legal defense against those bodily injury claims or lawsuits,
should it become necessary.
Although it varies by state, bodily injury coverage does not generally pay for
your own injuries or to your spouse or other family members, especially when
they are not in your covered vehicle. Injuries to you, your spouse, and other
family members in your vehicle can be protected more completely by medical
payments coverage.
There are different limits of bodily injury liability coverage. Different limits
of coverage are offered to accommodate various levels of protection. If you are
found to be responsible for a serious accident with injuries to several people,
in your car or in other cars, or if there is even one serious injury or death,
your state's minimum insurance may not cover you adequately. An objective in
selecting limits of any liability coverage should be to purchase coverage equal
to the net asset value that you have available and could reasonably lose in the
event of causing damages to others. It is a good idea to consider and purchase
higher limits than what your state requires.
This coverage, combined with bodily injury liability coverage, is the foundation
of any auto insurance policy and is required in most states. If property damage
claims or lawsuits are brought against you and if an investigation or a court
finds you to be legally responsible for damages to property, your property
damage liability insurance will pay, up to your policy limit, for repair or
replacement of things like someone else's car, light posts, or even buildings.
Also, property damage liability coverage provides for your legal defense
against those property damage claims or lawsuits, should it become necessary.
Property damage coverage does not pay for the damage to your own property,
damages to your property are covered under the optional collision and
comprehensive coverages.
There are different limits of property damage liability insurance. Different
limits of coverage are offered to accommodate various levels of protection. If
you are found to be responsible for a serious accident with damages to several
vehicles, or even one expensive vehicle, your state's minimum insurance may not
cover you adequately. An objective in selecting limits of any liability
coverage should be to purchase coverage equal to the net asset value that you
have available and could reasonably lose in the event of causing damages to
others. It is a good idea to consider and purchase higher limits than what your
state requires.
Each state's Financial Responsibility Law requires minimum property damage
liability limits.
This optional coverage pays, up to the policy limit per person, for medical
expenses regardless of fault for you and the occupants of your covered vehicle
who are injured in an automobile accident. It also protects you and the
relatives living in your household if they are injured in someone else's car,
or by a car as pedestrians. All reasonable and necessary medical expenses are
covered within the period of time specified in your policy. This coverage is
valuable if you do not have health insurance, because payment will be made
while the liability is being determined.
This optional coverage is different from medical payments coverage in that it
covers only those reasonable and necessary medical expenses, up to the policy
limit, which are not covered by another source, such as health insurance or
another person's auto insurance (except Medicare). This coverage pays up to the
policy limit per person for medical expenses as outlined above, regardless of
fault, if you or the occupants of your covered vehicle are injured. This
coverage also protects you and the relatives living in your household if
injured in someone else's car, or by a car as pedestrians under the same
coverage conditions.
This coverage is designed to complement your health insurance as most medical
insurance policies carry co-insurance and/or deductible provisions and is less
expensive than standard medical payments coverage.
This optional coverage applies if your car is damaged by fire, theft,
vandalism, glass breakage, windstorm or even contact with an animal. The
coverage provides to repair your car, or pay the actual cash value if the car
is deemed to be a total loss, less your deductible. Comprehensive coverage does
not cover wear and tear, engine failure, or other mechanical difficulties. When
you are financing your car, comprehensive coverage may be required by the
lienholder.
This optional coverage provides the payment to fix your car, or pay the actual
cash value if the car is deemed to be a total loss, if it is overturned or
damaged in a collision with another car or object. This coverage would pay for
damages to your covered vehicle regardless of who is at fault, but this
coverage is subject to a deductible. As with comprehensive coverage, if you are
financing your car the lienholder may require collision coverage.
This optional coverage is invaluable if you have a covered loss and you do not
have another car to use while yours is being repaired. This coverage is
available for purchase if you carry collision or comprehensive coverages on the
vehicle. We will reimburse you, up to the policy limit, for rental car expenses
incurred when the covered vehicle is not driveable or is in the shop for
repairs during a reasonable period due to a covered loss. The policy limits are
a per day dollar limit up to a total dollar limit per accident. Several limit
combinations are available for many types of vehicles.
Suppose you are injured in an accident caused by an uninsured motorist? Or, what
if you are injured by a hit-and-run driver?
This coverage is commonly referred to as UM coverage. This coverage is important
and is required in many states because even in mandatory insurance states there
are still vehicles without insurance coverage in force at some time during the
year. This coverage pays for injuries, up to the coverage limit, caused by a
driver who is uninsured, or an unidentified hit-and-run driver, who is legally
liable for those injuries. This coverage also protects relatives who live with
you, the occupants of your insured car, and while you are a pedestrian.
Please note that uninsured motorist coverage does not pay for damage to
your car which was caused by an uninsured motorist. Damage to your car would be
covered under collision coverage or uninsured motorist property damage coverage
if it is allowed in your state and you carry it on your vehicle.
The coverages and limits vary by state
What if you are injured and the coverage limits of the person at fault are not
enough to pay your medical bills?
This coverage is commonly referred to as UIM coverage. This coverage will apply
if another driver, who is legally responsible for an accident which injures
you, is required to pay more than their bodily injury liability coverage
limits. This coverage will pay up to the coverage limit, but only after all of
the liable person's coverage limits have been exhausted. This coverage also
protects relatives who live with you, and as a pedestrian.
The coverages and limits vary by state