Auto and Motor Vehicle insurance provides financial coverage in the event of an accident, theft, vandalism or collision involving a motor vehicle. Policies typically provide property, liability and medical coverage. Property coverage pays for damage to or theft of a vehicle. Liability coverage takes care of the policyholder’s legal responsibility to others for bodily injury or property damage. Medical coverage pays for the cost of rehabilitation, treating injuries and in some cases lost wages and funeral expenses. Auto and RV insurance covers cars, RVs, motorcycles, all-terrain vehicles (ATVs) and watercraft.
If you are involved in an accident or have your car stolen, having the right kind of auto insurance can help protect you against financial loss. Auto insurance is simply a contract between you and your insurance company. You agree to pay the insurance premium and the insurance company agrees to pay your covered losses in the event of a claim. There are seven major types of car insurance coverages available to you: 1. Bodily Injury Liability This vital insurance is required coverage in most states. It applies to injuries that you, the designated driver or policyholder, cause to someone else. It pays the medical bills, lost income, pain and suffering, even funeral expenses for people who are injured in an auto accident (provided you were held responsible for their injuries). Family members listed on the policy are also covered when driving someone else’s car with their permission. It is very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money. You should therefore consider carefully whether the coverage you have chosen is adequate to protect your financial security against the expenses for which you could legally be held responsible. Expenses are only paid up to the limit of coverage you have selected, so you should definitely consider buying more than the state-required minimum to protect assets such as your home and savings. 2. Medical Payments or Personal Injury Protection (PIP) This auto insurance pays for the treatment of injuries to the driver and passengers of the policyholder's car. At its broadest, PIP can cover medical payments, lost wages, and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs. In addition, PIP will protect you and other household family members if you are injured while riding in another person’s car. This is an optional insurance*, mainly because it may duplicate coverage in your comprehensive health plan. However, many policyholders believe that it is a good idea to carry Medical Payments coverage for those out-of-pocket expenses their health insurance may not cover (like an annual deductible or co-payments). Another reason to consider adding PIP when requesting an auto insurance quote is to ensure there is some protection for those passengers in your auto who may not have health insurance. 3. Property Damage Liability This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else's property. Usually, this means damage to someone else’s car, but it also includes damage caused to lamp posts, telephone poles, fences, buildings or other structures. With even used autos having book values of $15,000 or higher, it is in your best interests to get adequate coverage—enough to repair or replace someone else’s car. As with Bodily Injury Liability insurance, it is probably better to overestimate, rather than underestimate Property Damage Liability coverage. This type of auto insurance coverage is mandatory in most states. 4. Collision This coverage protects your car. It pays for damage to your vehicle resulting from a collision with another car or object, or as a result of flipping over. It also covers damage caused by potholes. Collision coverage is generally sold with a deductible of $250 to $1,000—the higher your deductible, the lower your premium. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car—minus the deductible—up to the limit of the actual cash value of your car. If you're not at fault, your insurance company may try to recover the amount they paid you from the other driver’s insurance company. If they are successful, you'll also be reimbursed for the deductible. 5. Comprehensive This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, theft, falling objects, earthquakes, hail, floods, vandalism, riots or damage caused by hitting an animal (such as birds or deer). Comprehensive auto insurance also provides coverage, without a deductible, for transportation expenses incurred by you in the event of a covered loss. Comprehensive insurance will also reimburse you if your windshield is cracked or shattered after your policy’s deductible (if any) is applied. If one of the covered damages occurs, you simply pay the deductible amount, and the comprehensive coverage pays the remaining repair or replacement expenses, up to the limit of the actual cash value of your auto. Comprehensive insurance is usually sold with a $100 to $300 deductible, though you might want to opt for a higher deductible as a way of lowering your premium. States do not require that you purchase collision or comprehensive coverage, but if you have a car loan, your lender may insist you carry it until your loan is paid off. 6. Uninsured and Underinsured Motorist Coverage This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver who is held legally responsible for your injuries. It pays medical and other related expenses up to the limits of the coverage you select. Underinsured motorist coverage comes into play when an at-fault driver has insufficient insurance to pay for your total loss. This coverage will also protect you if you are hit as a pedestrian. 7. Towing and Labor Towing and Labor coverage helps to reimburse expenses you incur if your car is temporarily disabled. It is available if you have purchased at least Comprehensive coverage.
*Personal Injury Protection may be required if your policy is issued in a state which has “No Fault” or “Reparations” laws governing your auto insurance.
Can I Drive Without Insurance?
No! Auto liability insurance is required in almost every state. If you have financed your car, your lender may require comprehensive and collision (coverage for damage to your vehicle) insurance as part of the loan agreement. If you have leased your vehicle you will be required to carry liability coverage as well as comprehensive and collision. Even if your state is one of the few that does not require auto insurance, all states have financial responsibility laws. These laws require that all drivers demonstrate the ability to cover their liability if they are involved in a motor vehicle accident. A Certificate of Insurance, Certificate of Self-insurance, Surety Bond or Certificate of Deposit are typically all acceptable forms of proving financial responsibility. If you can not meet the states financial responsibility requirements, you must purchase insurance. Penalties for driving without insurance differ from state to state, and include license suspension/revocation, fines ranging from $75 to $5000 and up to 12 months in jail. In some states, your license plates and registration receipt can be seized and your car impounded. Additionally, you can be held legally responsible for damage or injuries you cause.
FAQ
What Are My Rights When Filing an Auto Insurance Claim?
Every state has laws protecting consumers and as a car insurance policyholder, you have certain rights. Your policy is a legal contract between you and your insurer. It defines your rights and obligations as well as the rights and obligations of the insurance company.
If you have any questions regarding your rights under the policy, talk to your auto insurance agent or company representative. You may also contact your state insurance department, state attorney general's office or your state's consumer affairs department.
What Happens When I Report a Loss?
If you are in an automobile accident, you should file a claim with your auto insurance company. Your claim will be assigned to a customer representative who will contact you to go over the details of your accident and advise you on the next steps in the claim process.
What Is Uninsured Motorist Coverage?
There are two types of Uninsured Motorist Coverage: • Uninsured Motorist Bodily Injury Coverage protects you and the occupants of your vehicle for bodily injury up to your auto insurance policy limits as a result of an accident with a legally liable uninsured motorist or "hit and run" driver. • Uninsured Motorist Property Damage protects your property up to your car insurance policy limit for property damage that results from an accident with a legally liable uninsured motorist or "hit and run" driver. These coverages are not available in all states and are sometimes subject to a deductible.
Auto Insurance Glossary Aggregate Limit: The maximum amount that could be paid for a claim on an insured vehicle, regardless of the number of people injured or the number of items damaged.
Bodily Injury Liability: Protects the insured as the owner or driver of a vehicle for all sums, up to the policy limits, which the insured becomes legally obligated to pay because of bodily injury to a third party.
This coverage also pays defense costs against legal actions. Bodily Injury Liability limits are usually split; the first figure defines payment limits to a single person per accident, the second defines payment limits in total for all persons injured.
Collision Coverage: Auto insurance that protects your vehicle against direct and direct accidental loss by collision with another vehicle or fixed object.
Comprehensive Coverage: Car insurance coverage that protects against losses to your vehicle caused by something other than a collision. This includes such perils as hitting an animal, vandalism, riots, floods, wind and hail, fire, theft, and glass breakage.
Deductible: A portion of an insured's loss that is not paid by car insurance. The deductible is subtracted from the amount that the insurer would otherwise be obligated to pay.
Direct Loss: The immediate reduction in value arising from damage to property.
Earned Premium: A portion of the auto insurance premium which represents coverage already provided. Full Glass Coverage: If chosen, any comprehensive car insurance deductible would be waived for glass claims. This option is not available in all states.
Hazard: Anything that increases the chance of an automobile accident. (e.g., icy pavement, fog).
Liability: This means that a person (or group of people) is legally responsible, or liable, for the injury or damage suffered by another person (or group of people).
Medical Payments: Auto insurance coverage that pays up to a specific amount for injuries sustained by you and covered persons in your vehicle, regardless of who is at fault. Unlike Personal Injury Protection (PIP) medical payments only covers medical expenses.
Motor Vehicle Report: A report that lists moving violations (such as speeding tickets) and serious violations that a driver has accumulated in the past several years.
No Fault Coverage/Personal Injury Protection (PIP) (BRB): These are broadly used terms for most first-party benefits only in those states that have this type of coverage. The extent varies by state, but it generally pays for medical and rehabilitative expenses, work loss, funeral expenses and replacement services incurred by you, members of your family, passengers in your vehicle, and pedestrians injured by your vehicle as a result of an accident.
Property Damage Liability: Similar to Bodily Injury Liability but limited to damage caused by you to another person's property, such as an auto, fence, telephone pole, etc.
Quote: A statement regarding the premium that will be charged for certain auto insurance coverage.
Rental Reimbursement: Available to drivers who chose comprehensive coverage for their car. This coverage helps to reimburse expenses that you may incur if you need to rent a car while your auto is being repaired due to a covered accident or your covered vehicle is temporarily disabled.
Stacking: For an increased premium, stacking allows Underinsured or Uninsured Motorists coverage to be multiplied by the number of vehicles on the policy, when necessary, to pay a claim. Stacking is not available in all states.
Towing and Labor: This coverage helps to reimburse expenses you may incur if your car is in an accident or becomes temporarily disabled and needs to be towed to a repair shop. It is available for those drivers who have chosen comprehensive auto insurance coverage.
Umbrella Policy: A liability insurance policy that provides additional coverage to extend beyond the limits stated in your car insurance policy.
Underinsured Motorist Coverage: This coverage pays for your injuries when a legally liable third party has insufficient limits to cover your injuries. Underinsured motorist property damage protects your property up to your policy limit for property damage that results from an accident with a legally liable underinsured motorist or hit and run driver. This coverage is not available in all states, is sometimes subject to a deductible and can be rejected in writing by the insured. Uninsured Motorist Coverage: Protects you and the occupants of your vehicle for bodily injury up to your policy limit as a result of an accident with a legally liable uninsured motorist or hit and run driver.
Uninsured Motorist Property Damage protects your property up to your policy limit for property damage that results from an accident with a legally liable uninsured motorist or hit and run driver. It is available in some states and is sometimes subject to a deductible. This coverage can be rejected in writing by the insured in some states.
Vehicle Identification Number (VIN): The VIN is the serial number of a vehicle, usually found on the door frame or dashboard on the driver's side. The number identifies specific characteristics of the vehicle, including passive restraints.
GUIDE
How Do I Choose an Auto Insurance Company?
Many people choose their insurance provider based simply on the premium amount in their car insurance quote. While price is an important factor, it shouldn't be the only one you use to choose an auto insurance company.
Cost is important, but there are many other factors to consider in addition to price when selecting the best auto insurance company for you. Here are the main points to keep in mind as you start the auto insurance quote process: • Financial Stability — You buy car insurance to protect you financially and provide peace of mind, so it is best to select a company that is financially sound. Independent rating agencies measure and report the financial strength of insurance providers, so make use of this excellent resource to help you make a wise decision. • Service and Claims — While assessing financial strength is one of the most important elements to consider in choosing the right insurance company for you, it is equally vital to research a company's customer service record. Your company and its representatives should answer your questions and handle your claims fairly, efficiently and courteously. You can get a feel for customer focus by talking to other customers who have used a particular company. Also, your state insurance department will be able to tell you if the insurance company you are considering doing business with had many consumer
complaints about its service relative to the number of policies it sold. The better a provider's service and claims record, the better your chances of having a good experience in the event you have a question or need to file a claim. • Price and Product — The rule here is to make sure that you get the coverage that's best for your circumstances at the price that is best for your pocket. Many companies sell insurance policies and prices vary greatly from one to another, so it really pays to shop around. Get at least three price quotes from companies, agents, brokers, and from the Internet. Your state insurance department may publish a guide that shows what insurers charge for different policies in various parts of your state. • Licensing — Not every company is licensed to operate in each state. As a general rule, you should buy from a company licensed in your state, because then can you rely on your state insurance department to help if you have a problem. To find out which companies are licensed in your state, contact your state insurance department.
How Much Auto Insurance Coverage Do I Need?
The amount of coverage you choose for your car will directly affect your premiums. Some coverage is legally mandated at the state level, but find out how to choose the coverage you actually need. Car insurance is designed to protect your assets from lawsuits that could arise as a result of an accident. Whether or not an accident is your fault, if you are found legally responsible for bills that are more than your insurance covers, you will have to pay the difference out of your own pocket. Therefore, it is imperative that, when deciding your coverage level, you focus on getting enough insurance to adequately address any claims, and keep you and your family on a sound financial footing. Our licensed agent or broker can help you make decisions regarding adequate protection. The first step is to choose your coverage level. The Insurance Information Institute (I.I.I.) recommends that you get $100,000 of bodily injury protection per person and $300,000 per accident. If your net worth is more than $300,000, consider buying additional liability insurance. You should also consider purchasing an umbrella or excess liability policy. These policies pay when your underlying coverage is exhausted, and typically cost between $200 and $300 per year for a million dollars in coverage. In addition to liability coverage, consider adding collision and comprehensive coverage when requesting an auto insurance quote. This coverage amount is based on the market value of your car and the cost of repairing it, so the maximum you can recoup is typically the actual cash value of the vehicle. For collision and comprehensive you will need to select a deductible. The selected deductible is your proportionate share of the claim. Your claim must exceed the selected deductible in order for the insurance company to pay for damages to your vehicle. Typically, deductibles are $500 or $1,000; the higher your deductible, the lower your premium.
Will My Insurance Cover the Cost of Renting a Car After an Accident?
Many insured drivers are surprised to find out that their auto insurance does not automatically cover the cost of a replacement rental car after an accident. Since the average car is in the repair shop for two weeks after an accident, it can cost as much as $500 to rent a replacement car. However, some insured drivers pay little or nothing to rent a car because of an inexpensive but often overlooked option known as Rental Reimbursement. Rental Reimbursement insurance covers the cost of renting a car while your car is being repaired or while you shop for a replacement and is available for as little as $1 or $2 a month with almost every auto insurance policy. Rental Reimbursement Insurance is bypassed frequently by those who believe they will not have a car accident or those focused solely on paying the cheapest premium. However, the cost of a replacement rental car adds up quickly, so even if you don't have an accident for eight or nine years, the coverage pays for itself when you need it most.
Car Breakdown Safety
If you are in an accident or your car breaks down, safety should be your first concern. Take the following precautions when your car breaks down: 1. Stay inside your car. Never get out of the vehicle, unless unsafe to do so, to make a repair or examine the damage on a busy highway. Under most circumstances standing outside the vehicle in the flow of
traffic is a bad idea. What if the car was on fire? 2. Move to a safer place. Get the vehicle to a safe place before getting out. If you've been involved in an accident, motion the other driver to pull up to a safe spot ahead. In the case of a blowout or a flat tire, move the vehicle to a safer place before attempting a repair—even if it means destroying the wheel getting there. The cost of a tire, rim or wheel is minor compared to endangering your safety. 3. Call or signal for help. If you can’t drive the vehicle to a safe place, it might [might? You just said never to get out…] be better to stay in your car and wait for help or use a cell phone to summon help. Alternatively, place a “Call Police” sign in your side or rear window (not the windshield). 4. Warn other drivers. Carry flares or triangles to mark your location once you get to the side of the road. Marking your vehicle’s location visible to give other drivers advance warning can be critical. Remember to put on your hazard lights!
What Should I Do at the Scene of an Accident?
Knowing what to do if you are involved in an accident can save lives and also make the claims process easier. Here are some helpful tips. 1. Stop your car and find out if anyone is injured. [How can you do this if you should NEVER get out of your car (See Car Breakdown Safety article?] 2. Call the police. Tell them how many people were hurt and the types of injuries you observed. They will notify the nearest medical personnel. The police will also need to know your exact location, whether there are any disabled vehicles and if the accident is blocking traffic. 3. Stay at the scene of an accident until a police officer tells you that you are free to go. You could be ticketed for leaving the scene. 4. Protect yourself and the accident scene, and try to warn approaching drivers by turning on your vehicle’s flashers. 5. Exchange vital information with the other driver(s) involved. Make detailed notes on: • the names, telephone numbers (including cell phone numbers) and addresses of all drivers, passengers and witnesses involved in the accident • license plate numbers • the make and model of each car • driver's license numbers • insurance identification • the names and badge numbers of all responding police officers or other emergency personnel 6. Ask the investigating officer where you can obtain a copy of the police report. You will probably need it when you submit your claim to your insurance company. 7. Keep copies of all documentation relating to the accident. 8. Notify your insurance agent as soon as possible. 9. Keep a disposable camera in your car to take pictures of the accident scene and damages.
