What Types of Auto Insurance Coverage Are Available?
Car insurance is a contract between you and an insurer where you agree to pay a premium in exchange for the insurer’s promise to cover your losses if an accident occurs. Ask your agent or broker questions if you don’t understand something in your policy.
Required in most states, auto liability insurance helps pay for injuries and vehicle damage you cause to other people. Other coverages include comprehensive, which covers damages from things like theft and natural disasters, and guaranteed asset protection or GAP. Contact Nicholson Insurance for professional help.
Liability coverage helps pay for property damage or injuries to others in an accident you cause, up to your limit. It’s usually required by law to legally drive a car in most states. This type of insurance is broken down into 2 parts: property damage liability and bodily injury liability.
For example, imagine you run a red light at a four-way stop and slam into another driver’s car. That other driver may be injured and if the crash is serious, you could end up with a medical bill or even a lawsuit. That’s why it’s important to have high enough liability limits to protect your assets and finances.
You’ll also want to consider personal injury protection (PIP) or medical payments insurance. This type of coverage pays for your own and your passengers’ medical bills, no matter who is at fault, up to the limits in your policy. It can also help cover lost wages and household services you can’t perform because of your injuries. PIP and MedPay are required in some states, while other states offer it as an optional add-on to your car insurance.
Finally, you’ll also want to think about uninsured and underinsured motorist coverage. This type of protection pays for you and your family’s injuries if the at-fault driver is uninsured or has very low insurance limits.
In addition, most states require a minimum amount of collision and comprehensive coverage. This type of car insurance covers damage to your vehicle from an accident, regardless of who’s at fault. It’s best to pair it with your liability coverage for maximum protection.
You’ll need to disclose all information about your cars and drivers when obtaining car insurance quotes, including any tickets or accidents you’ve had within a certain timeframe. This is because your insurance company will review your driving history to make sure you are a good risk before quoting you a price. Be prepared to pay higher rates if you have a history of accidents or violations. That’s why it’s smart to reassess your needs and coverage options once in a while, especially when life changes occur.
A comprehensive auto insurance policy (sometimes called “other than collision” coverage) helps pay for damage to your vehicle that isn’t caused by a collision with another car or object. This includes things like hail, theft or hitting a deer. It’s typically an optional coverage that can be added to a policy, but lenders often require it for vehicles they lease or finance. It can also be paired with liability coverage for maximum protection.
Whether or not to get comprehensive coverage depends on the value of your vehicle and your risk tolerance. For example, if you have an older vehicle that isn’t worth much and the likelihood of being stolen or damaged by a natural disaster is low, you might consider skipping it. However, if you drive a newer and more valuable vehicle or own it outright, comprehensive may be worth the additional cost.
Both collision and comprehensive insurance offer actual cash value payouts for your vehicle, which is the actual amount it will take to replace your vehicle minus any depreciation. They also both have deductibles, or the amount you will be responsible for paying before your policy kicks in. The deductible you choose will have a direct impact on your monthly premium, so it’s important to consider your options carefully.
When shopping for auto insurance, it’s usually recommended to get higher liability limits than state minimums to protect yourself financially in the event of an at-fault accident. Most experts recommend working with a licensed insurance professional to determine the appropriate liability limit for your specific situation.
Often, you can save money by bundling comprehensive and collision coverage into a single “full coverage” auto insurance policy. This is usually a requirement for those who lease or finance a car, as they want to ensure the lender will be paid back in the event of an accident. It’s also a popular option for those who drive a classic car that needs to be protected from unforeseen events such as weather or animal strikes. Many drivers find it easier to keep track of their auto insurance this way, too.
Uninsured Motorist Bodily Injury Coverage
Uninsured motorist coverage, or UM coverage, protects you in the event of an accident caused by a driver who doesn’t have liability insurance. It also covers you if the at-fault driver has coverage, but not enough to pay for your damages. This is one of the many types of coverages that are commonly included in a “full-coverage” auto insurance policy.
UM bodily injury coverage (also known as UMBI) pays your medical bills, pain and suffering, lost wages, funeral expenses, and other damages if you’re involved in an accident with an uninsured motorist. It may also cover you if you’re hit as a pedestrian or while riding your bike. Some states allow you to stack your UM insurance limits with your other liability coverage limits to increase your total protection.
Most states require some level of uninsured motorist coverage, and it’s usually offered as an add-on or bundled with comprehensive and collision coverage on a standard policy. Some people choose to buy higher limits than the minimum required by their state, as a way to protect themselves from drivers who don’t have any or enough car insurance.
If the at-fault driver has UM coverage, it will usually cover your damages up to the amount of their coverage limit. The same is true for underinsured motorist coverage, which is often referred to as UIM. In some cases, the difference between the uninsured or underinsured motorist coverage limit and your underlying liability limit will be paid by your insurer.
Uninsured and underinsured motorist coverages are typically the most affordable additions to your car insurance policy. The cost increases as your underlying liability limits increase, but it’s still far less than paying for an accident with an uninsured or underinsured driver. Uninsured and underinsured driver coverage can help you avoid the financial risk of an accident with an irresponsible driver, so it’s well worth the extra expense. You can find out how much uninsured and underinsured motorist insurance you need by answering a few simple questions in our online auto insurance calculator. Then, compare rates from top providers to find the best deal on the coverage that meets your needs.
Personal Injury Protection (PIP)
PIP is a form of no-fault car insurance that pays your medical expenses and those of any passengers in your vehicle after an accident, regardless of who caused the crash. It also covers non-medical costs like childcare and lost wages. PIP is mandatory in 12 states that follow no-fault insurance laws, and it can be a good supplement to a policy in other states.
In most cases, your PIP coverage will cover 80% of your medical bills. However, some insurers limit your PIP benefits to a maximum of $50,000 per person and $75,000 for the entire accident. You can choose to opt out of PIP altogether, if you and all your household members have health insurance that will cover auto accident injuries.
PIP insurance may overlap with your health insurance in some cases, but the amount of coverage you have under PIP is typically higher than what’s available under health insurance. If you’re able to afford large health insurance limits, consider reducing your PIP limits so that the remaining balance can be used for other types of car accident-related costs.
In addition to paying for your own medical costs, PIP will pay for services you can’t perform yourself due to accident-related injuries, like child care and house cleaning. It can even help you cover funeral costs. While you might think this is a waste of money, keep in mind that an accident can be a stressful and expensive time for anyone.
It can take a while to get PIP benefits after an accident, so it’s important to report your injury to your insurance company as soon as possible after the crash. You will need to provide your medical provider information, your insurance policy number and a description of the accident. The company will then assign you a PIP claims representative and a nurse case manager for the medical portion of your claim.