What is it?
Automobile insurance at a minimum pays for damages (up to your chosen limits) you cause while driving. Depending on the level of insurance you have, it might also pay for damage to your own car, damage to other property and medical bills for you and passengers in your car and other cars.
How does it work?
Auto insurance covers the party that is at fault in an accident, although your insurance may pay for damages even if you weren’t at fault. This generally occurs when you have an accident with an uninsured or underinsured driver. If you are involved in an accident you must contact your insurer and open a claim. The insurer will investigate and then pay if it is obligated to, subject to the deductible amount you chose when purchasing your policy.
Overview of Coverages
There are several coverage components available in automobile insurance. It is important that you understand your options so that you make an educated decision when purchasing insurance for your automobile.
Liability insurance is the minimum most states require for you to be legal. It is generally comprised of 2 components (also known as “split limits”). The first component is “Property Damage”. This coverage pays for damages to another person’s property (vehicle or otherwise) you become responsible for due to a covered accident. The second component is “Bodily Injury”. It is designed to pay medical expenses and other liabilities such as loss of income etc.
Collision insurance pays for damages to your own car if you are at fault in an accident or if you are hit by an uninsured or underinsured driver.
Comprehensive insurance covers damages not caused by an accident with another car, such as weather damage, fire damage, vandalism, and theft.
Medical Payments coverage helps with immediate medical and funeral expenses related to a covered accident for you and passengers of your vehicle.
Rental Coverage provides a specified dollar amount (per day) to pay for your use of a rental vehicle while your automobile is being repaired after an “at fault” covered accident. You choose the amount when you buy your insurance. It is important to make sure that the amount chosen will be enough to cover a suitable temporary replacement while your vehicle is being repaired.
Uninsured Motorist Property Damage is generally included in your collision coverage when you have elected collision coverage on your policy. If you have a vehicle that you only carry liability coverage on, you can elect to add this coverage for a small increase in premium to be sure you will receive compensation if your vehicle is hit by an uninsured driver.
Uninsured/Underinsured Bodily Injury intends to provide coverage for you and your passengers for bodily injury and other related expense related to your involvement in a “not at fault” accident in which the other driver has no insurance or has insurance with limits not sufficient to pay the full cost of your damages.
The major benefit of car insurance is that you have financial coverage in case you cause an accident and may not have to pay costs out of pocket. Most states require drivers to attest they have valid insurance in order to register their vehicle.