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Auto insurance provides financial security in the event of an accident, covering costs such as car repairs, medical bills, lost wages and more.
State and company policies on coverage differ, making it essential to familiarize yourself with them. A great way to do this is by comparing quotes.
Types of Coverage
When it comes to auto insurance, there are various types you can select from. Each coverage has its own requirements and limits, so it’s essential that you understand the distinctions between them.
Liability Coverage
Most states require car owners to carry liability coverage in their insurance policy. This safeguards you in case of lawsuits or financial loss due to negligence on your part or that of other passengers.
Liability coverage will cover your medical expenses and repair the harm you cause another vehicle or person. It also pays a portion of lost wages as well as other related costs.
Bodily Injury Liability (BIL): This type of coverage for car insurance is the most popular, and it also helps safeguard your personal assets in case you cause an accident that causes injuries to others.
Collision and Comprehensive: These coverage types are required by law for most financed vehicles, but you have the option to add them onto your car insurance policy as well. Doing so may be especially beneficial if you drive a newer model or one with high value.
Weather and Animal Damage Coverage: These coverages help pay for damage to your car caused by hurricanes or floods, as well as injuries from animals or falling objects.
Uninsured/Underinsured Motorist Coverage: This coverage is essential for car insurance policies, as it helps pay for damages caused by a driver who is uninsured or underinsured.
Having these types of coverage can help you avoid out-of-pocket expenses and save you time and stress in case of an accident.
Medical Payments: This coverage pays for medical costs for you and your passengers regardless of who caused the accident, including funeral expenses if anyone in the group dies in a crash.
These types of coverage can range greatly in cost and limit, so it’s essential to shop around for the best rates. Doing this allows you to keep your premiums as low as possible while still receiving adequate protection.
Liability coverage protects you in case of an accident that causes injury to another party or damages their property. It’s one of the most essential components of car insurance policies.
Most states require a minimum amount of liability insurance in order to drive legally, yet these levels of protection often fail to cover the full costs associated with serious injuries and property damage after an accident.
As a general guideline, aim to increase your liability limits as much as you can afford without compromising other features. If unsure how much coverage is necessary, contact an agent to discuss the details of your case.
Bodily injury liability provides medical expenses to those injured in an accident caused by your negligence, as well as funeral costs and lost wages.
State laws vary on who qualifies for liability insurance coverage, so it’s wise to become acquainted with your state’s regulations prior to purchasing this coverage.
California law requires motorists to have a minimum bodily injury liability of $25,000 per person and $50,000 per accident, as well as $100,000 in property damage liability.
In addition to liability coverage, some companies provide other forms of insurance like uninsured/underinsured motorist coverage and personal injury protection/medical payments (PIP). These additional coverage options may provide more comprehensive financial security should an accident occur that was not your fault.
Typically, full coverage includes collision and comprehensive insurance in addition to liability protection. Some banks and lenders may even require you to have full coverage when borrowing or leasing a car.
If you are uncertain of your state’s minimum liability requirements, reach out to the Department of Motor Vehicles in your area or speak with an agent.
Most insurance experts suggest purchasing higher liability limits than your state’s minimum, even if you opt for less comprehensive and collision coverage. It doesn’t cost that much to increase your limits significantly, and it could save you thousands of dollars if an accident results in significant financial losses.
PIP Coverage
PIP insurance is an auto policy type that helps cover medical expenses and lost income for you and your passengers, even if they were at fault in the accident. Depending on your state, PIP coverage may be required by law or offered as an optional add-on to liability coverage.
PIP (Protective Insurance Benefits) are designed to cover health care costs that arise as a result of an auto accident, regardless of your state and policy limits. Furthermore, PIP usually pays for lost income and child care expenses as well.
The cost of a PIP policy varies by state and driving record, but typically accounts for 15-20% of your overall insurance premium. The amount of deductible you select will also contribute to this cost; choose wisely!
In most states, your initial benefit from PIP is for medical bills resulting from injuries in a car crash. To receive these benefits, you must submit a claim either online or over the phone.
Another advantage is rehabilitation, which may include physical or occupational therapy as part of your recovery process. This is an integral step in the healing process.
The third benefit is for lost wages and inability to work, which can be a substantial financial blow if you’re unable to earn income due to an injury. In certain states such as New York, this benefit may cover up to 80 percent of your lost earnings.
After an accident, there may be optional benefits available for funeral and burial expenses, as well as services like child care that you are unable to perform due to the effects of your accident. Unfortunately, these benefits are usually restricted by the terms of your policy and won’t fully reimburse all funeral costs incurred.
If your state requires PIP coverage for auto insurance, it’s worth researching your options. Not only will this help you make an informed decision about car insurance, but it could also save money in the long run by decreasing out-of-pocket medical expenses.
Uninsured Motorist Coverage
Uninsured/Underinsured Motorist Coverage, also known as UM coverage, shields you financially in the event of an accident with a driver who does not carry liability insurance. Furthermore, UM coverage pays for damages you would otherwise need to cover out-of-pocket such as medical bills and car repairs.
Your state may require you to carry uninsured/underinsured motorist coverage. For further details, contact the department of motor vehicles in your area.
In addition to Uninsured/Underinsured Motorist (UM) coverage, many states also require drivers to have personal injury protection (PIP) or no-fault coverage. This type of policy covers expenses resulting from a crash that was your fault and may pay medical bills, lost income, and other covered costs up to a predetermined amount.
It’s essential to remember that even if you are required by law to have Uninsured/Underinsured Motorist (UM) or Personal Injury Protection (PIP), it’s wise to purchase more than the minimum amounts in your state. For instance, in New York you are required by law to have $25,000 of UM coverage per person ($50,000 per accident) as a minimum.
Another option is to “stack” your Uninsured/Mutual Coverage (UM) coverage, which involves combining the limits of multiple vehicles insured under one policy. This practice is legal in 28 states and increases available UM coverage based on how many cars you have insured.
Farmers agents can assist you in deciding how much uninsured motorist coverage you require to remain secure. They may also suggest discussing Uninsured/Underinsured Motorist Property Damage (UMPD), which pays for car repairs after an accident with a driver who doesn’t have enough liability insurance to repair your vehicle.
Optional coverage for uninsured drivers is an idea worth considering, particularly in states with high rates of uninsured motorists.
Uninsured/Miranda Covered (UM) coverage can be added to your existing auto policy or purchased separately. When considering whether to include this coverage in your plan, be sure to speak with an agent about the requirements in your state.
