Introduction to Automobile Insurance

 

Auto insurance pays for damages, injuries, and other losses that are covered under your policy. Depending on the type of coverage, auto insurance pays for your damages, another driver’s damages, or a passenger's damages. The most common types of auto insurance are:

 

Liability

Liability coverage pays for claims against you arising from other people's injuries or damage to their property.  There are two types of liability coverage:
 
  • Bodily Injury (BI). If you injure someone in an auto accident for which you are legally at fault, this coverage will pay for medical and funeral expenses of the injured parties and the cost, if any, of your legal defense. It does not pay for damage to your car or for your medical expenses.

 

  • Property Damage (PD). Property damage pays for damage that you cause to someone else's vehicle or property resulting from an accident for which you are at fault. Property damage liability coverage does not cover your car or property.

 

The financial responsibility laws require drivers to carry both BI and PD liability coverage.
 

Physical Damage

Physical Damage coverage pays for damage to your vehicle or a vehicle operated by you. Physical damage also provides coverage if your vehicle is stolen. The policy limits for physical damage coverage are usually not defined by dollar amount.  Instead, your insurer will pay the lesser of the actual cash value of the stolen or damaged property or replace the property.  Types of physical damage coverage include:
 
  • Collision. This coverage pays for damage to your car from an accident regardless of who is at fault. It usually includes a deductible that you must pay. Selecting a higher deductible can lower your collision premium.

 

  • Comprehensive. This coverage pays for damage to your car caused by events other than a collision, including theft, fire, flood, and windstorm.  Comprehensive coverage also pays for a loss to your vehicle from contact with birds or animals or breakage of glass.  Again, selecting a higher deductible for this coverage can lower your premium.

 

Medical Payments/PIP

  • Medical Payments. This coverage pays for medical, hospital, or funeral expenses for you and others injured or killed while riding in your car, regardless of fault. It also covers you and family members if struck by a car as a pedestrian or if riding in another car.

 

  • Personal Injury Protection (PIP). This coverage pays for medical expenses and 80% of lost income, regardless of who is at fault in the accident. It also pays for assistance with personal services you are unable to perform because of an auto accident. You, your family members, and your injured passengers are covered under PIP. Insurance companies must offer to sell you PIP coverage along with your liability coverage. If you decide not to purchase PIP, you must reject it in writing. PIP coverage is available at limits of $2,500 and up.

 

UM/UIM

  • Uninsured/Underinsured Motorists (UM/UIM). Unfortunately, not everyone purchases auto insurance. If you or your passengers are injured by someone who does not carry auto insurance, or does not carry enough insurance, UM/UIM coverage will pay for injuries and property damage up to your policy limits. Similar to liability coverage, UM/UIM is offered as two separate coverages and is available at limits less than or equal to the limits of liability specified in the Bodily Injury (BI) and Property Damage (PD) liability portion of your policy.  

 

  • UM/UIM BI covers medical, funeral, and other related expenses. 

 

  • UM/UIM PD covers the costs to repair or replace property that is damaged in an accident caused by an uninsured or underinsured driver.  UM/UIM PD coverage is subject to a $250 deductible.

 

Auto Insurance companies must offer to sell you UM/UIM coverage along with your liability coverage.  If you decide not to purchase UM/UIM, you must reject the coverage in writing.