Basic auto insurance policy

Understanding the coverage for your car

While different states have different mandates for auto insurance -and there are several additional options (such as gap insurance) available, most basic car policies consist of six types of coverage. Here's all you need to know about each.

*Note that each type of coverage is priced separately, so there is variability in policy limits and pricing.

First of all, remember that this part of the policy is required by law in all jurisdictions.

Bodily injury liability coverage applies to injuries that you, the designated driver or policyholder, cause to someone else, while driving.

It’s 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. It's recommended that policyholders buy more than the state-required minimum liability insurance, enough to protect assets such as your home and savings.

As this also is part of Liability coverage, this as well is required by law.

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 to lamp posts, telephone poles, fences, buildings or other structures your car hits.

This coverage pays for the treatment of injuries to the driver and passengers of the policyholder's car. The policy limit is generally listed as ‘Per Person’, meaning per person medical expense, without citing total number of persons.

At its broadest, PIP(especially in the state of MD) 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.

Collision coverage pays for damage to your car resulting from a collision with another car, an object, such as a tree or telephone pole, or as a result of flipping over; and the accident was caused by your negligence. It also covers damage caused by potholes. Remember that 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.

Note that collisions with animals, such as deer are covered under comprehensive.

Collision coverage is generally sold without limit, but with a deductible.

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 and, if they are successful, you'll also be reimbursed for the deductible. This is called subrogation process.

This coverage reimburses you for loss due to theft, fire or damage caused by something other than a collision with another car or object.

Comprehensive covers events such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer. It will also pay to repair your windshield if it is cracked or shattered.

Comprehensive insurance is usually sold with a separate deductible, although some insurers may offer the glass portion of the coverage without a deductible.

This coverage reimburses you, a member of your family, or a designated driver if one of you is hit by an uninsured driver or a driver who doesn’t have sufficient insurance to pay for your total loss.

This coverage also offers protection in the event a covered driver is the victim of a hit-and-run or if, as a pedestrian, you are struck by an uninsured or underinsured motorist.

This coverage includes: Bodily Injury (to you or your family members), as well as Property Damage.

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