Understanding Automobile Insurance Coverages

[Alex8181]

Before reading this article please understand that this is very general information being provided and is only the first step in understanding what insurance is doing for you. Each state has different laws and even different variations of the coverage. For more detailed information please consult your insurance representative.

Bodily Injury Liability:
Bodily Injury Liability is what provides you financial protection against claims by other people based on injuries or death from an accident. When you are at-fault in an auto accident payment to the other party is paid out of your liability coverage.
When choosing your Bodily Injury Liability please keep in mind that you are protecting your financial assets with this coverage. You want to choose a limit that will be enough to protect your financial net worth, both present and future. This would include bank accounts, savings, real estate, stocks, bonds, etc.
Think about it this way, suppose you are sued for the value of your financial net worth, but your liability limit is lower than the amount demanded, guess who is footing the rest of the bill. That?s right, it?s you. Your insurance company is definitely not going to pay more than the limit that you have chosen. The fact that emotional distress and pain & suffering, which have no set dollar values, would be paid under this coverage, it is not uncommon to be sued for your financial net worth. It?s also a smart idea to adjust your limits accordingly as your financial situation changes.

Property Damage Liability:
Property Damage Liability provides coverage for damage to the other person?s property resulting from an accident in which you are considered at-fault. Property Damage Liability limits do not need to exceed your financial assets because unlike bodily injury, property damage always has a set value, so you only need to choose an amount that you are comfortable with. Many people choose the same Property Damage Liability limit that they have their Bodily Injury Liability but can never exceed that limit.

Medical Payments:
Medical Payments provides coverage for anyone injured while occupying a insured vehicle, the insured while occupying a non-owned vehicle, and the insured as a pedestrian hit by a vehicle. This coverage pays for medical and surgical expenses caused from a vehicle accident, X-rays, dental expenses, funeral expenses, and chiropractic expenses.


Uninsured Motorist and Underinsured Motorist:
This coverage consists of Uninsured & Underinsured Bodily Injury and Uninsured & Underinsured Property Damage. The Uninsured/Underinsured Motorist Coverage provides compensation to the insured when involved in an accident where the other party is at-fault but does not have any insurance coverage or not enough coverage. There are no recommended limits of Uninsured Motorists coverage since the limits carried depends on your own individual needs. You should determine your needs by considering the loss-of-income protection required, potential costs of medical care, loss of service needs, and rehabilitation needs. When choosing your coverage limits, also keep in mind that the coverage applies only to auto accidents, should be purchased as a supplement to other protection available, should not be purchased as a substitute for more generally applicable coverage, and that medical coverage from employment or other sources that may provide adequate coverage.
Uninsured Motorist Bodily Injury covers injuries suffered by a covered person because of an accident caused by an uninsured motorist or a hit-and-run driver. It pays for medical care, work loss, and any other compensable damages determined by law.
Uninsured Property Damage pays for damage to the insured vehicle, and in some states the personal property carried in the vehicle.
Underinsured Motorists Bodily Injury and Property Damage applies to bodily injury or property damage to a covered person when the other driver is at fault, and the other driver?s limits are less than your Underinsured Motorist coverage or the other driver?s limits are less than your damages..

Comprehensive:
Comprehensive insurance covers direct and accidental loss not caused by collision. Some examples of covered perils are wind/hail, theft, vandalism, and glass breakage.
In most locations, payment is based on the actual cash value of the insured vehicle at the time of loss less the deductible. Therefore, a limit is not shown on the declaration. Actual cash value is usually determined by finding the average sale value of similar vehicles in your area.

Collision:
Collision insurance covers loss due to the upset of the insured auto or collision with an object, excluding animals. Collision with animals are usually covered under Comprehensive, go figure. Your insurance company will pay to replace or repair the insured vehicle and equipment with like kind and quality, minus the deductible. Payment is also based on the actual cash value of the vehicle at the time of loss and so limits are not usually listed on the policy.