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Automobile Insurance Policy Coverage

Regardless of where you live, the law requires that you carry auto insurance. Like it or not, this is a requirement if you choose to drive on state roads. If the police catch you driving without insurance, you'll receive a ticket and may lose your driver's license.

A bigger problem is if you get into a car accident and don't have insurance. Not only do you risk having to pay your medical bills out-of-pocket, but you may also become personally liable for damages the other driver suffers.

Here, we'll explain the different types of car insurance. We'll also discuss what type of coverage is right for you.

Minimum Insurance Requirements

State laws require drivers to carry a minimum amount of car insurance coverage. At a minimum, you must have a specific amount of liability coverage. This coverage protects you if you get into an accident and the other driver suffers personal injuries or financial losses.

There are several benefits to having more coverage than the law requires. Of course, the more coverage you want, the higher your insurance premium.

The same is true for deductibles. A deductible requires paying a specific out-of-pocket amount before your insurance coverage kicks in. The lower you want your deductibles to be, the higher your insurance premiums.

In general, the higher your coverage limits, the more your policy will cost. If you are the at-fault driver in a car accident, liability coverage will only pay damages up to a certain amount. For example, your policy may only cover $100,000 for personal injury. You may be responsible for the difference if the other driver has more than $100,000 in medical bills.

There is a chance that the other driver has personal injury protection (PIP). This will help cover some of their medical costs, but there's still a chance that you could be legally responsible for thousands of dollars in damages. If the other driver files a personal injury lawsuit against you, the judge may order you to pay their damages.

Liability Limits

Most insurance policies cover damages up to a specific dollar amount. A driver's insurance company divides coverage limits into different types of damages.

Most insurance policies indicate your policy's liability limits using three numbers. In New York, the minimum coverage amounts are 25/50/10. In California, the minimum coverage numbers are 15/30/5.

These three numbers indicate the liability limits for a car insurance policy:

  • One injured person's bodily injury liability coverage
  • Policy limits for all personal injury damages for all injured parties in a single collision
  • Coverage for all property damage in a single accident

Let's go back to the New York example. Their minimum coverage thresholds are 25/50/10. Your policy must cover at least $25,000 in personal injury for you or the other driver. The middle number represents the $50,000 coverage you must have for the total personal injury damages. Finally, the last number represents $10,000 in property damage to any vehicle damaged during the auto accident.

Common Policy Coverage Categories

Insurance policies cover different types of damage. Here are some common auto insurance coverage categories. It's essential to understand the different types of coverage. It can help protect you if your motorist coverage or the other driver's insurance fails to pay your claim.

Bodily Injury Liability

This describes what the insurance company (insurer) will pay when others suffer an injury or death in an accident for which you are at fault. This money covers medical expenses and damages a victim's family may claim in a wrongful death lawsuit.

Personal Injury Protection (PIP)

With personal injury protection (PIP) coverage, the insurer will pay for injuries you and your passengers suffer. This type of coverage typically pays for medical bills, lost wages, and funeral expenses. PIP does not cover damage to the vehicles.

Property Damage Liability

The insurer will pay to repair damages to other people's property. For example, if you drive over your neighbor's mailbox, this coverage may pay the cost of replacing the mailbox.

Collision Coverage

The insurer will pay for damages to your vehicle, regardless of fault. Your insurance company will pay the outstanding loan if you're still financing your vehicle, which only applies if the insurance company declares your car totaled. It's worth noting that collision coverage applies if you're involved in a car accident. It does not cover damage from other events, such as floods, storms, or fires.

Comprehensive Coverage

This coverage applies to damage caused by something other than a collision. For example, it should pay to fix damage to your car from fire, theft, vandalism, riots, and other random destructive acts.

As with collision coverage, many lenders require that you carry comprehensive coverage on cars you haven't paid off.

Uninsured/Underinsured Motorist (UM/UIM) Coverage

The insurer will pay for injury or death to the insured and their passengers if the person who caused the accident doesn't have insurance. This may also apply if the other driver's insurance company only pays part of your claim.

Discuss Your Automobile Insurance Policy With a Lawyer

Dealing with insurance companies can be frustrating. If you're involved in a dispute with an insurance carrier, contact an experienced car accident attorney near you. An attorney can negotiate with the insurer and advise you on how to proceed.

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