Insurance coverage for autos is comprised of many different types like liability, comprehensive and collision coverages. Some of these like
liability protection is typically mandatory while others like collision insurance coverage is optional. What kind of auto policy do you need depends on
your particular situation. If you have an older car, it may not make sense to have comprehensive and collision protection at all. We have put together
information on different types on car coverages so you can make an informed decision for your personal insurance needs.
Types of Insurance Coverage
Liability insurance:Liability coverage is typically required by all states in the United States. This will typically cover any bodily damage (physical harm to another person) resulting from a car accident if it is your fault. This will also cover property damages (like Automobiles, Road signs, Houses etc.) if you are found to be the guilty party in an auto accident claim.
The liability coverage is typically written as three numbers like 25/50/25. If you carry such a motor policy, this means that you have maximum protection in the amount of $25,000 for bodily injury damage per person, coverage of $50,000 for bodily injury damage per accident and coverage of $25,000 for property damage per accident. Different states in America set their own limits of liability coverage. You can get that information from this website:
Minimum Liability insurance coverage
What does this all mean? That first number 25 means that the Insurance company will pay for things like medical bills, hospital fees and lost wages in the amount of $25,000. If there are multiple people injured in an accident, the insurance will limit auto coverage in the amount of the second number 50 ($50,000) that was mentioned above. The last number 25 is for property damage coverage. The insurance company will pay upto $25,000 for things like other autos involved in the accident, any road signs or property items like fences and household items that were destroyed in the accident. This is again assuming that you were at fault in the accident. If we reverse the scenario and another person is at fault, then their insurance company will be responsible for not only damage to their vehicle but also to your auto, your medical bills and property damages.
Let's say that you live in Nevada and have 15/30/10 liability coverage and you are involved in an accident where you were at fault. In addition several people get hurt in that accident unfortunately. If an ambulance is called which takes one or more people to the hospital, you will be held liable for payment of any medical expenses. If your car insurance coverage limit is only $30,000 per accident, and the total bills happen to be around $50k, you will be responsible for this amount.
$50k - $30k= $20,000
As such it is recommended that typically you carry 100/300/100 liability coverage or at the very least 50/100/50 insurance coverage.
Comprehensive and Collision CoverageComprehensive and collision coverage on the other hand are necessary to cover damages to your car. When you are involved in a car accident, the insurance company will pay for damages to your vehicle minus any deductible that are specified in your auto policy.
Collision insurance protection will help you pay for any damages to your car in the event of an accident, hence a collision! This insurance coverage typically carries a deductible, an amount between $250 to an amount of $1000. This deductible portion is typically paid by you (if you are at fault in an accident) and the rest of the damages are covered by the car insurance provider. Let's say you are involved in an accident and the damage to your SUV is around $4000. If your auto coverage deductible is $500, this means is that your company will pay you the following for collision damages.:
$4000 - $500 = $3500
Most often the insurance carrier just cut you a check in that amount and you can take the car to any body shop that you like for repairs.
Comprehensive insurance is for damages that are not due to a traffic accident. It can include things like fire, damage, theft, vandalism, hit and run and natural disasters like tornadoes, hail damage or a big FAT deer in the road! An insurance deductible still applies in this scenario, just like the collision coverage. If you have an older car, lets say more than 10 years, it is recommended that you do not carry Comprehensive and Collision coverages at all.
Auto Medical payments and No-fault coverageAuto medical payments coverage will pay for medical expenses incurred by you or the passengers in an accident. It does not matter if you are at fault or not, this car coverage will cover any medical expenses like ER visits, doctors' fees and hospital charges. Some states have No-fault or PIP (Personal Injury Protection) insurance coverage also. Just like the Auto Medical payments options, this coverage insruance will pay for medical expenses in addition to lost wages (Earnings you had to forgo due to injury). PIP coverage will also pay for lost wages if the passengers are injured and unable to perform their regular work duties.
Uninsured and Underinsured motorist coverageSometimes you may be involved in a "Hit and Run" accident or where the person responsible for the accident does not have insurance coverage. This happened to me years ago in Phonix AZ as I was just sitting at a RED light and minding my own business! Wham Bamm!
If you are not at fault, having Uninsured motorist coverage will pick up the tab. In a similar fashion, Underinsured motorist coverage kicks in when someone else is at fault, however they do not have enough insurance to cover all the expenses. In this scenario your Underinsured motorist coverage will take care of the expenses.
Related Links for Insurance CoverageCar Coverage definitions from CarInsurance.com
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Keys facts about Auto liability insurance - Nationwide
Learn more about coverages like Liability, Comp and Collision