Auto Insurance Coverages

Auto insurance protects your vehicles and keeps your other assets safe from a big liability payout.

Auto insurance is really a combination of several coverages, including damage to your and other peoples’ vehicles, and injury to yourself, your passengers, other drivers and anyone else. Even if you are driving an expensive car, the greatest financial risk you face while on the road comes from bodily injury to yourself or others. High liability and uninsured motorist limits are an important part of a good financial plan.

Summary
  • While most people think about the vehicle itself in “auto insurance,” your liability for bodily injury to others is your biggest risk.
  • Uninsured motorist coverage protects your passengers and you when an uninsured driver is at fault for an accident.
  • Collision and comprehensive coverages are for your vehicle. Classic/collector vehicle insurance typically pays you more for the vehicle than standard auto insurance.
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Auto Coverages

Below are the main coverages that could be on your auto policy. Some are required in every state, some in some states, and some are optional.

“Full-coverage” insurance includes liability, uninsured motorist, medical payments (or PIP), comprehensive and collision coverages.

Coverage TypeWhat it pays for
Bodily injury liabilityMedical costs of others for an accident you caused
Property damage liabilityRepair costs of property of others for an accident you caused
Uninsured motorist
bodily injury (UM)
Medical costs for your passengers and you for an accident caused by another driver who does not have insurance
Uninsured motorist property damage (UMPD)Repair costs of your property for an accident caused by another driver who does not have insurance
Underinsured motorist bodily injury (UIM) and property damageMedical and/or property repair costs for an accident caused by another driver that exceed their auto insurance’s liability limits
CollisionRepair costs to your vehicle for an accident that damages your vehicle, regardless of fault
ComprehensiveRepair costs to your vehicle for damage unrelated to your driving, such as: theft, hail, vandalism, collision with animals and more
Medical paymentsMedical expenses for your passengers and you following an accident, regardless of fault
Personal injury protection (PIP)The counterpart to medical payments in states with “no fault” liability laws. Following an accident, it covers medical expenses, lost wages, child care, funeral costs and more.
Optional coveragesMany auto insurers offer things like roadside assistance, rental car coverage, spare parts, gap coverage and more. Bells and whistles can be nice.

Bodily Injury and Property Damage Liability Coverage

Even if you’re a great driver (and we know you are!) there is a risk that you could injure another driver, their passengers, damage their car or damage other property and be held liable. Auto liability coverage reimburses other people for those liabilities.

In all states but two (NH & VA), it’s illegal for you to drive without minimum liability limits in place. Your greatest financial risk on the road is actually liability, which can easily push six digits for a bad injury to another driver, let alone multiple passengers.

Bodily injury liability: Minimum limits in many states are $25,000 per person with a max of $50,000 per accident (displayed like this: $25,000/$50,000). Even if you are tight on money, we recommend you buy at least $100,000 per person or $300,000 per accident.

Property damage liability: Property damage liability limits are the maximum amount of payout that your insurance company will provide.

What happens if your liability is higher than your liability limits?
It’s possible for your liability to shoot way beyond the liability limits you have on your auto insurance policy. It’s not so hard to imagine for a multi-car pileup or a car with several passengers. Umbrella insurance is a relatively inexpensive product that substantially increases your liability coverage. It’s called an “umbrella” because it also functions to increase the limits on your other insurance (homeowner, condo, renters, etc.), plus protects you from a number of risks that aren’t otherwise covered at all.

Uninsured & Underinsured Motorist Coverage

What if another driver injures you, your passengers or damages your vehicle but doesn’t have insurance? Or what if their insurance limits aren’t high enough?

Nearly one in eight drivers on the road in America don’t have insurance at all. just imagine how many with insurance are carrying minimum liability limits. This is why uninsured/underinsured motorist coverages are very important.

A good rule of thumb when deciding what coverage limits to buy here is to match those that you selected for your liability coverages. Most insurance companies will not allow you to purchase limits higher than you have for liability.

Uninsured motorist bodily injury: Pays for medical bills when the other driver is at fault for an accident but does not carry any insurance.

Uninsured motorist property damage: Pays for repair expenses caused by an accident when the other driver is at fault and does not carry insurance. “Collision” coverage also covers your vehicle regardless of fault, so this coverage is not necessary to protect your vehicle.

Underinsured motorist bodily injury: Pays for medical bills when the other driver is at fault for the accident and does not carry enough insurance to pay your (and your passengers’) medical bills.

Underinsured motorist property damage: Pays for repair expenses caused by an accident when the other driver is at fault and does not carry enough insurance. “Collision” coverage also covers your vehicle regardless of fault, so this coverage is not necessary to protect your vehicle.

Collision & Comprehensive Coverage

Insurance for your car itself. These coverages come to mind for most people when they think about “car” insurance, and actually represent most of the situations when you will see a difference between classic/collector insurance and standard auto insurance.

Collision: Covers the damage to your vehicle in these common events:

  • You collide with an object such as a car, fence or tree
  • You are hit by a hit-and-run driver
  • Pothole damage
  • Another vehicle crashes into yours

Comprehensive: Covers the damage to your vehicle in these common events mostly not related to driving:

  • Hail or wind
  • Earthquake
  • Fire
  • Explosion
  • Collision with an animal
  • Vandalism
  • Falling objects (e.g., tree branch)
  • Cracked or shattered windows

Collision and Comprehensive coverages each have a deductible that can be as low as $0 or up to $5,000.

Medical Payments and Personal Injury Protection (PIP)

The moment after someone else or you are hurt in a car accident is not the time to get approval from an insurance company. It’s time to go to the hospital. Medical Payments (in most states) and Personal Injury Protection (in some states) covers the medical expenses for these situations. Both coverages are available to you, regardless of fault.

Medical Payments: Offers a relatively small amount (in the range of $1,000 to $5,000, depending on your policy), that is enough to cover all or part of the below expenses. Higher amounts for medical bills are covered with liability or uninsured motorist coverages.

  • Injury treatment for your passengers and you for medical, dental, surgical and chiropractic care
  • Injury treatment for your family and you for injuries sustained while riding in someone else’s car or as pedestrians
  • Ambulance fees
  • X-rays, nursing and prostheses
  • Funeral costs following a fatal crash
  • Health insurance deductibles or copays

Personal Injury Protection (PIP): Is required in states that have “No-Fault” laws requiring that drivers submit injury claims to their own insurance,  regardless of fault. No-fault states are FL, HI, KS, KY, MA, MI, MN, NJ, NY, ND, PA and UT.

PIP coverage can offer higher limits and always covers more expenses than Medical Payments, but coverages vary widely by state. Common coverages for PIP insurance are:

  • A survivor’s benefit (similar to life insurance but a smaller benefit)
  • Lost wages
  • Essential services like house cleaning or childcare if you are unable to perform them because of an injury

Who pays if you are hurt in an auto accident that was your fault?

In this case, your Medical Payments or Personal Injury Protection can be used because they are both available, regardless of fault. After that, it’s your health insurance and you. None of the auto insurance coverages for liability or uninsured motorist coverages apply.

Tip: Use your Medical Payments (or PIP) reimbursement payments to pay yourself back for your health insurance deductible and coinsurance.

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