Types of Auto Insurance Coverage
While everyone knows that having insurance on their vehicle is required by law, there are many different types of auto insurance, not all of them mandatory. If you are looking for the least expensive type of coverage then you probably only need liability, no-fault or pip, depending on which state you live in. However, the minimum required insurance only protects the other vehicle and the people within it. If your automobile is being financed, then the lender will require at least collision and comprehensive to protect their investment. Above and beyond that there are a number of optional coverages that you could carry for greater protection against loss.
Liability and Bodily Injury
Most states require liability and bodily injury at the very minimum. Those two coverages are in force in the event that you are found at fault, or partially at fault in an accident. Liability covers loss of property (vehicle) in either vehicle while bodily injury covers injuries in the other vehicle.
This type of coverage is protection for any damage to your vehicle as the result of an accident. If you are in an accident, whether at fault or not at fault and you sustain damage to your vehicle you could make a claim against your own insurance company. If you are at fault, collision will cover damages up to the amount you are covered for, minus the deductible. However, if you are not at fault you could still file the claim with your insurance company and then they would work on your behalf to recover payment from the other company.
The easiest way to understand comprehensive coverage is when referring to damage to your vehicle that is sustained in any way ‘other than collision.’ If a tree falls on your vehicle it is considered comprehensive. Any act of nature that causes damage to your vehicle is comprehensive. Insurance will cover the loss up to the limit set forth in your policy minus the deductible.
Uninsured Motorist – Underinsured Motorist – Underinsured Motorist Bodily Injury
Carrying uninsured motorist (UI) or underinsured motorist (UIM) protects you in the event that the other party is found at fault and either does not have insurance or insufficient coverage to pay for damage to your vehicle. Underinsured motorist bodily injury (UMBI) covers you and anyone in your vehicle should the other party be found at fault and have insufficient coverage to pay for injuries up to and including death.
Personal Injury Protection and Medical Payments
Medical Payments, often referred to as Med Pay, is an optional coverage and is similar to bodily injury in nature except it pays for the insured and any passengers in his or her vehicle, not in the other car. Personal injury protection (PIP) isn’t required in all states but there are states which have no-fault insurance laws that require all motorists to carry this coverage. In most other states it is available as an optional coverage.
Full Coverage a Misnomer
You may hear people use the term “full coverage” when it comes to carrying collision and comprehensive as optional coverages on their insurance policies, above and beyond the legally required liability insurance. This is actually not quite true because there really isn’t any type of protection that could be 100% foolproof in covering all losses all of the time. You can purchase policies with optional coverage, but full coverage would be hard to find at almost any price.
If you are unclear on certain insurance terms and phrases, the best thing to do is look over your insurance company’s website. Many of the more reputable national companies have extensive ‘knowledge bases’ that have good definitions of insurance terms so that their policy holders know their options and rights. The purpose of carrying insurance is to protect against risk, and the best protection of all is knowledge.