Automobile insurance is designed to help provide financial protection from auto related damages, loss, or injuries. It is there to protect you, your passengers, other drivers, and pedestrians. In addition, it can protect against financial loss in the event of an accident to your car, as well as the property of others. If your car is vandalized, damaged by fire or stolen, car insurance can provide financial reimbursement. And of course, driving without automobile insurance is illegal in almost all states! Having sufficient auto insurance coverage is a social responsibility. Driving without insurance or the ability to pay for any damages you may cause puts others at financial risk.
A basic car insurance policy contains six types of coverage.
- Bodily injury liability: Liability coverage is for the damage you do to others. This coverage is expressed as three numbers: for example, 100/300/100, which means $100,000 in bodily injury coverage per person, $300,000 in bodily injury coverage per accident, and $100,000 in property-damage coverage per accident. This coverage is also designed to pay for your legal bills if you cause an accident. Because this coverage pays for damage you do to others, states require certain minimum levels of coverage. Bodily injury liability covers medical bills and lost wages to others if you are the cause of an accident.
- Property damage liability: This coverage pays for repairs or to replace property that you destroy, for example, someone elseâ€™s car, or a fence or wall that has been hit. This coverage can also pay for "pain and suffering" damages if you are sued after a car accident.
- Collision: Collision coverage pays to repair your own vehicle in the event of an accident. In the event of significant damage, your car might be considered "totaled." This is the case when the repair costs exceed a certain threshold of the car's value, such as 70 percent. At that point, the insurance company will usually pay to tow the car to a salvage yard and pay you actual cash value.
- Medical payments or Personal Injury Protection (PIP): Medical payments coverage pays for the medical expenses suffered by you and your passengers as the result of an accident. Coverage also extends to you when you are driving someone else's car or if you are injured when a car hits you. The policy pays regardless of who caused the accident. Personal Injury Protection coverage pays for medical expenses and lost wages for you and any passengers who have been injured in an accident. It also covers funeral costs. If you have good health insurance and disability insurance, you might decide not to purchase this coverage, as it may duplicate coverage you already have.
- Comprehensive: This coverage pays for damage to your car that is not the result of an accident. This includes things such as fire, vandalism, theft, natural disasters and collisions with animals (such as hitting a deer).
- Uninsured/Underinsured motorists coverage (UM/UIM): Uninsured motorists (UM) coverage pays for your medical bills if an uninsured driver hits your car or if you're a victim of a hit-and-run. Underinsured motorists (UIM) coverage comes to play when someone causes an accident but doesn't have enough insurance to cover all medical bills. In that case, the at-fault person's insurance pays up to its maximum and then your UIM coverage pays for the remaining bills, up to your policy limit.
Other Types of Coverage for Consideration:
- Rental reimbursement: This protection can pay for a rental car when your vehicle is damaged or stolen.
- Towing and labor coverage: This coverage can pay for the cost of towing or labor associated with road breakdowns.
- Gap coverage: This coverage is for newer vehicles and pays the difference between the actual cash value of the vehicle and the amount left on your car loan if your vehicle is totaled.
If you live or work in Virginia or Maryland, contact us today for more information about automobile insurance. We are here to answer all of your questions, and provide the necessary information and guidance for you to make informed decisions about buying insurance.