Auto insurance offers anything from the most essential coverage and limits to the entirely built-out options and well-rounded protection to fit your lifestyle and any car customization
If you have a car registered under your name, Auto insurance becomes your necessity. But understanding the various coverages, their implications, and the adequate limits can be challenging to address. Securing the appropriate Auto insurance before a car accident is of utmost importance. Accidents, by their very nature, are unforeseen and unplanned events. We can never predict when we might be involved in an accident, the circumstances surrounding it, or the extent of financial damages to ourselves and others. So, never leave purchasing or updating your Auto insurance for later – it may simply be too late.
“Liability Only” vs. “Full Coverage"
Two common terms are often used when discussing Auto insurance coverage: “liability only” and “full coverage.” While these terms may seem straightforward, their interpretations can vary among individuals, leading to potential confusion and trouble. Two policies labeled as “full coverage” may provide vastly different levels of protection, with some offering liability limits in the hundreds of thousands or even millions of dollars while others only offer tens of thousands.
What is the difference between the two?
Liability Only Auto Insurance Policy
Liability Only Auto Insurance Policy is often purchased as the most basic, minimum coverage required by law. It provides protection for damages and injuries you cause to others in an accident where you are at fault. There are typically two types of coverage included:
- Bodily Injury Liability: This covers the medical expenses, pain and suffering, and legal costs for injuries to other people.
- Property Damage Liability: Covers the cost of repairing or replacing other people’s property you damaged in an accident.
While Liability Only insurance is more affordable than Full Coverage, it only protects others. It does not cover any damages to your vehicle or injuries you sustain in an accident.
Full Coverage Auto Insurance Policy
Full Coverage Auto Insurance Policy is referred to as a more comprehensive and robust policy that includes not only liability protection for others but also coverage for your own vehicle and injuries. In addition to Bodily Injury and Property Damage Liability, Full Coverage often includes:
- Collision Coverage: This covers the cost of repairing or replacing your vehicle if it is damaged in a collision, regardless of who is at fault.
- Comprehensive Coverage: This covers non-collision-related damages to your vehicle, such as theft, vandalism, fire, natural disasters, or hitting an animal.
An Auto insurance policy typically consists of seven primary coverages, each designed to address particular damages up to predetermined dollar amounts. Relying solely on the term “full coverage” may give a false sense of complete protection in the event of a car accident, which could lead to a rude awakening later on. So, you should familiarize yourself with at least the basics of Auto insurance coverage before shopping for a policy to ensure you select the right coverage for your needs.
Let’s go over the core coverages of an Auto insurance policy.
Bodily Injury Liability Coverage
Bodily Injury (BI) Coverage provides support in the unfortunate event of a car accident where you are at fault and someone else gets injured.
This coverage helps cover the injured parties’ medical expenses, including hospital bills, doctor’s fees, and rehabilitation costs. It can also assist in paying for any legal fees that may arise if the injured parties decide to take legal action.
Having Bodily Injury Coverage ensures you can fulfill your responsibilities and compensate others for their injuries, providing them with much-needed support during a difficult time. Moreover, protecting yourself from potentially overwhelming financial liabilities.
Property Damage Liability Coverage
Property Damage coverage (PD) is another key component of Auto insurance. It protects you from liability if you cause damage to someone else’s property.
Whether it’s a minor fender bender or a more severe collision, accidents can result in significant property damage to other vehicles, buildings, a fence, or other structures. Without proper coverage, you could be held personally liable for the costs associated with repairs or replacements.
As we have established already, when selecting an Auto insurance policy, it is essential to consider the limits of each coverage carefully. Property Damage coverage is the third number in the split limit option and often matches Bodily Injury coverage limits. For example, if your BI limits are $50k/$100k, your PD limit will likely be $25k or $50k. But unlike the Bodily Injury coverage, the Property Damage limit applies to all the damaged property.
Keep in mind that if the costs of property damage exceed your coverage limits, you may be held responsible for the remaining balance.
When selecting Property Damage coverage, it must be mentioned that this coverage does not pay for the damages to your car.
Uninsured/Underinsured Motorist Bodily Injury (UMBI) Coverage
Uninsured/Underinsured Motorist Bodily Injury (UMBI) is a type of coverage designed to protect you, the policyholder, and your passengers. And is applied in case you are involved in an accident with a driver who either has no insurance (uninsured) or does not have enough insurance coverage to fully compensate for the damages (underinsured).
Suppose you are in an accident caused by an uninsured or underinsured driver, and UMBI coverage is included in your Auto policy. In that case, your insurance company steps in to cover the expenses the at-fault driver’s insurance would typically handle. This coverage can help you and your passengers pay for medical bills, lost wages, and pain and suffering. It ensures that you are not left with financial burdens if you are involved in an accident caused by someone else who lacks adequate insurance protection.
Medical Payments coverage is designed to pay for medical expenses for you and your passengers if you are injured in a car accident, regardless of who is at fault.
With this coverage, your Auto insurance company will cover medical bills related to injuries sustained in the accident up to the limit listed in your policy. This coverage can help with various medical expenses, such as hospital visits, ambulance fees, doctor’s consultations, X-rays, surgeries, and even funeral expenses in the unfortunate event of a fatal accident.
One of the wonderful benefits of Medical Payments coverage is that it provides quick access to funds for medical treatment, as it does not require the lengthy investigation process that may be involved in determining fault for the accident. This is especially valuable if you don’t have health insurance or if your health insurance has high deductibles or coverage limitations.
It’s important to note that Medical Payments coverage is optional and not required by law in all states. However, it can offer valuable financial support and peace of mind in case of injuries resulting from a car accident.
Collision Deductible in Car insurance refers to the amount you are responsible for paying out of pocket before your insurance company covers the cost of the replacement or repairs to your vehicle in the event of a collision-related accident. When you purchase Collision Coverage as part of your Auto insurance policy, your insurance provider will pay for the damages to your car minus the Deductible amount.
For example, if your vehicle sustains $5,000 in damages due to a collision and you have a collision deductible of $500. In that case, you must pay the first $500 (deductible) for the repairs, and your insurance company will cover the remaining $4,500.
The Deductible amount can vary depending on the coverage options and your financial preferences. Generally, higher Deductibles result in lower insurance premiums, while lower deductibles lead to higher premiums. It’s important to consider your financial situation and risk tolerance when selecting your Collision Deductible to ensure you can comfortably cover the Deductible amount if an accident occurs.
Comprehensive Deductible, also known as Other Than Collision coverage, in Auto insurance, also refers to the amount you pay out of pocket before your insurance company covers the cost of damages to your vehicle caused by non-collision incidents. This coverage protects your car against various risks, such as theft, vandalism, fire, hail, falling objects, and hitting an animal.
Like Collision coverage, you must pay the Comprehensive Deductible amount before your insurance provider steps in to cover the remaining repair costs. And once again, opting for a higher deductible typically results in lower insurance premiums, while a lower deductible leads to higher premiums.
Rental Reimbursement coverage is another optional add-on that helps cover the cost of renting a temporary replacement vehicle if your insured car is stolen or damaged and needs repairs.
The coverage typically has a daily or per-occurrence limit, which means it will reimburse you up to a specific dollar amount per day or for the entire rental period.
Rental Reimbursement coverage can be valuable, especially if you heavily rely on your car for daily activities, work, or transportation. It ensures that you don’t face significant disruptions in your life if your vehicle is out of use for an extended period.
Roadside Assistance coverage is also an optional add-on that provides valuable support and services when you encounter unexpected car troubles while on the road. With this coverage, you can access a range of assistance services that can help you when you are stranded due to a flat tire, a dead battery, running out of fuel, a mechanical breakdown, or other non-accident-related issues.
Roadside Assistance May Include
When you have Roadside Assistance coverage, you can call a designated hotline, and a service provider will be dispatched to your location to help. The typical services covered under Roadside Assistance may include:
- Towing: If your car is disabled and cannot be driven safely, Roadside Assistance will arrange to tow your vehicle to a nearby repair shop or location.
- Battery Jumpstart: If your car’s battery is dead, they will jump-start your vehicle to get it running again.
- Flat Tire Assistance: If you have a flat tire, the service provider will replace it with your spare tire.
- Fuel Delivery: If you run out of fuel, Roadside Assistance will deliver a small amount to help you reach the nearest gas station.
- Lockout Service: If you accidentally lock your keys inside the car, they can assist in gaining access to your vehicle.
Roadside Assistance coverage can be particularly beneficial for drivers who travel long distances, have older vehicles prone to breakdowns, or simply want the peace of mind that help is just a phone call away in case of emergencies. Adding this coverage to your Auto insurance policy can save you from the inconvenience and potentially high out-of-pocket expenses for these roadside services.
Here you have it. These are the primary core coverages of Auto insurance. Of course, every policy, insurance company, and each state may have unique endorsements, restrictions, exclusions, and limitations. Read your policy documents carefully, or contact our agency and let us assist you with your Auto insurance needs.