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What Coverages Are Included in Auto Insurance?
Written by Tyreo Harrison
December 04, 2018
When it comes to auto insurance, most drivers know that they need it, they know the basics about their policy choices—deductible, premiums, covered drivers—but rarely do consumers have a in-depth understanding of exactly what their policy covers. While it can be somewhat boring to pour through the pages of you insurance policy, it's important to understand the details of your coverage to ensure you aren't under-or over-insured. State mandates for required auto insurance coverage can vary depending on which state you reside in, and for most states you’re required to carry your state’s minimum coverage amounts to be able to cover damages and injuries in the event you cause an accident. Here are a few basics about what’s covered, insurance terms, and what you should understand about the standard coverages that come with the average auto Insurance policy.
Any licensed members in your household
Any driver you give permission to drive your vehicle
How long are insurance terms and what you should know about them?
A typical auto policy term is six months
Policies are reviewed at the time of renewal to determine any additional or decreased risks—which may lower or increase your next six-month premium
High-risk drivers could be offered monthly terms at a higher premium
Before you accept your terms for your auto insurance policy, be sure to check your state requirements and their limits when it comes to minimums. You will also want to be on the lookout for these six standard coverages so you're fully protected in the event of an accident.
1. Bodily Injury Liability
Bodily Injury Liability coverage gives you protection if you cause injury or death to someone during an auto accident. This type of coverage does not cover damages to vehicles or property and it's recommended in the event of a devastating accident to purchase enough insurance coverage to cover a judgement. In the event you're sued due to an accident causing serious injuries or a death occurs, it's a good rule of thumb to purchase enough insurance coverage so your personal assets aren't at risk if you're sued.
2. Medical payments or personal injury protection (PIP)
Medical Payment insurance coverage takes care of your medical bills and the medical bills of anyone else in your vehicle during the time of the accident. Medical bills can rake up pretty quickly so ensuring your coverage is adequate is important. Personal Injury Protection (PIP) goes a little further and serves as an extension coverage for Medical Payments coverage. PIP is not required in all states, but it can be an optional coverage offered by your insurance carrier. Check with your insurance carrier to see if you're required to have this insurance coverage.
PIP can help cover lost wages for yourself, additional medical expenses, some funeral expenses, and much more. Check with your insurance carrier to determine if your state requires PIP and choose a limit that fits your needs and budget. Medical and PIP does not cover treatment for injuries for those individuals in the other vehicle involved in the accident. Bodily Injury Liability insurance will cover injuries and medical payments for those individuals in the other vehicle if you cause an accident.
3. Property Damage Liability
This will cover any damage caused by an accident—from a person’s property to a public space. Property Damage Liability also affords you protection if a third party files a lawsuit against you because you damaged their property. Although it’s difficult to know how much damage an accident will cause or who will be involved, it’s best to purchase a reasonable amount to be on the safe side to ensure you're covered from out of pocket expenses in the event you incur uncovered damages.
4. Collision Coverage
Collision coverage covers damages you cause to your vehicle and/or other vehicles during a collision. The cost of this type of coverage depends on the deductible you select. The higher the deductible, the lower the cost for collision coverage. For example, the average deductible most drivers elect is $500, but you can lower or raise your deductible to lower or raise your insurance premium.
5. Comprehensive Coverage
Not all damage is caused by driving accidents. Comprehensive coverage protects you from all other types of damages to your vehicles. Some examples include: a rock hitting your windshield, a fire, flood, or theft. The cost for this type of coverage also depends on the deductible amount you select. The higher the deductible, the lower the cost, and vice versa.
6. Uninsured and Underinsured Motorist
It is very important to have uninsured and underinsured motorist coverage on your policy. Unfortunately, there are many uninsured and underinsured drivers on the road, and you don't want to be held liable for their irresponsibility. This coverage pays for injuries and damage to your vehicle caused by hit-and-runs or if a person doesn’t have insurance coverage at the time of an accident.
Driving comes with many responsibilities including properly insuring your vehicle. Make sure you double check your state's minimum auto insurance requirements so you're properly insured, and be sure to ask your agent about available discounts to help you reduce your rates.
In the end, it's important to do your homework, but you can save a little time allowing an independent insurance agent do the heavy lifting when it comes to shopping around for the best quote for you—don’t just settle on the lowest premium. Properly review the coverages presented to you so you can choose the best option that provides the protection you need at a price you can afford.
As Executive Vice President, Lending & Insurance Solutions, Ty Harrison leads teams of lending and insurance professionals that are dedicated to delivering value-added programs, services and technology tailored to address the needs of lenders, loan servicers, portfolio managers, mortgage brokers, insurance agents and insurance brokers.
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