Vehicle insurance is a contract between the policyholder and insurance company that protects the policyholder against losses from included perils in exchange for a premium. Schedule of coverage details what losses are covered and what are the limits. And policy documents outline the details of the agreement like the responsibilities of both parties, conditions and when a claim can be submitted. Car insurance policies are issued for six month or annual terms and are renewable. The automobile insurer reassesses the risks once again at each renewal and lets the policyholder know the new premium payable at least 30 days in advance. The coverage chosen directly affects premiums while other factors like driving records, age, gender, credit score, details of the vehicle are influential too.
Vehicle owners have the option of choosing the coverage they want but every vehicle owner must have at least liability and other state required coverages in virtually every state. Auto insurance can provide protection for the following losses;
- Liability describes your legal responsibilities against other road users, vehicle and property owners and pays for the damages and injuries you cause in an accident you are at fault.
- Physical damages to your own vehicle are covered with Collision and Comprehensive coverage. Collision is for traffic accidents and Comprehensive is for other losses out of your control like fire, acts of nature, theft and vandalism.
- Medical expenses for your and your family’s injuries may be paid if you buy Personal Injury Protection or Medical Payments coverage. They may also include lost wages and funeral expenses.
- Other benefits include provision of a rental car, roadside assistance and others depending on coverage arranged.
Who may be covered by your auto insurance?
In terms of drivers, any driver included in your policy is insured while driving your automobile. Members of your household must be included, unless they are explicitly excluded from driving your car. Also, standard policies cover occasional drivers, as long as they have your permission.
In terms of the benefits of the provisions, third parties can make a claim on your policy if they are injured or suffered damages in an accident you caused. Your car can be repaired or replaced if you suffer an insured loss, providing you have full coverage. You can also protect yourself and family members against possible injuries with PIP or Medical coverage regardless of who was at fault.
Here are the types of common auto insurance coverages, what they cover and their limits;
Liability coverage protects third parties in case you or any allowed driver causes them harm with your vehicle and has two components;
Bodily Injury Liability is for injuries they suffer and
Property Damage Liability is for monetary damages.
It is usually expressed like $25,000/$50,000/$25,000 and that means;
$25,000 bodily injury liability limit per person injured
$50,000 bodily injury liability limit per accident
$25,000 property damage liability limit
The minimum limits vary depending on which state you live in as they are set by individual states. Although you cannot go below the minimum there is nothing stopping you from increasing the limits. Most experts would advise you to increase the limits to something like $100,000/$300,000/$100,000.
Minimum liability vehicle insurance is legally required in virtually every state. Personal Injury Protection (PIP) would be required as well in no-fault states. And over twenty states require some level of Uninsured Motorist Coverage (UMC) as part of the minimum legally required coverage.
Collision coverage pays for repairs or replacement of your own car if it is damaged in an accident, even if it is your fault.
Comprehensive coverage pays for other damages to your car that are out of your control and not covered by collision like fire, theft, acts of nature and vandalism.
Comprehensive and Collision compliments each other and together they compensate for almost all types of damages that may come to your car. Typically each has a deductible. Also, both are optional coverages but you may be required if you have a loan or lease your car.
Personal Injury Protection (PIP) is designed to pay for your and your families medical costs and consequential losses after a vehicular accident, regardless of who is at fault.
Medical Expenses coverage offers similar provisions but usually at a lesser amount.
A minimum PIP is required by no-fault states. It is optional in other states.
Uninsured Motorist coverage (UMC) pays for your and your passengers injuries and damages in case they are caused by a driver with no insurance. It usually comes in two parts but can be as much as four parts as some states separate Uninsured and Underinsured Motorist coverage.
UM Bodily Injury is for injuries you and your passengers sustain in an accident caused by an uninsured driver and it is available when you are a pedestrian as well.
UM Property Damage covers your and your passengers’ damages in case you are hit by an uninsured driver. The latter may not be available everywhere in which case buying Collision would help you deal with such risks.
Some states’ minimum requirements include UM BI automatically often for the same limits as your liability coverage. Few states require UM PD as well. In other states, UMC is optional.
One of the most common additional inclusions are Rental Reimbursement and Roadside Assistance coverages. You can also have GAP Insurance and accident forgiveness, depending on costs and your needs.
Automobile insurance won’t cover general wear and tear and maintenance. Also, personal car insurance won’t normally cover when the vehicle is used for business.
Driving without the state mandated minimum vehicle insurance can result in a fine, driver license suspension, or even jail time and you are still liable for the injuries and damages you caused. Also, if you don’t have the corresponding coverage when you suffer losses, you will have to pay the damages out of your pocket.