Basic Automotive Insurance Coverage Explained

While everyone that drives in this country has to have some form of auto insurance by law, many do not understand the basics of their policies. While we don't all have to be auto insurance experts, it is important to at least comprehend the major bricks that build our auto insurance policies.

Collision Coverage.
This covers loss to your own auto caused by its collision with another vehicle or object. If you cause an accident, collision coverage will pay to repair your vehicle, and is normally the most expensive part of an auto insurance policy. You must choose a deductible, which is the amount you, the insured, must pay before the insurance company pays the remainder of each covered loss. The higher the deductible, the lower the premium costs. However, keep in mind that this is the amount you must pay (generally to the repair shop) if your vehicle is damaged, so deciding on your deductible, which directly affects your premium, can be a bit of a balancing act.

Comprehensive Coverage.
This covers damage to your vehicle caused by an event other than a collision or overturn. Examples include fire, theft, vandalism, and falling objects. This also comes with a deductible you select, which is how much you will pay before the insurance company pays the remainder.

Liability.
The official definition of liability from the InsWeb glossary is: "That portion of the insurance contract which pays and renders service on behalf of an insured for a covered loss arising out of the insured's responsibility to others imposed by law or assumed by contract." In simpler terms, if you are at fault in an accident, liability insurance will pay to cover injuries and property damage costs caused to others in the accident (including your legal defense costs, if applicable). Bodily injury coverage pays for things like medical costs and lost salary to others; while property damage pays for repairs to other people's property you damaged in the accident (other than your own car). Liability coverage (which is the state mandated part of your policy) is the basic building block of any auto policy, and minimum liability limits vary from state to state.

Below are some common extra coverage items that are available to you:

Medical Payments

This pays you and your passengers for medical and funeral expenses incurred in an auto accident, regardless of fault. It will also cover injuries sustained by you while you're operating someone else's car (with their permission), in addition to injuries you or your family members incur when you are pedestrians.

Personal Injury Protection

This is the name usually given to no-fault benefits in states that have enacted mandatory or optional no-fault auto insurance laws. Personal Injury Protection (PIP) usually includes benefits for medical expenses, loss of income from work, essential services, accidental death, funeral expenses, and survivor benefits.

No-Fault Insurance

Many states have enacted auto accident compensation laws permitting auto accident victims to collect directly from their own insurance companies for medical and hospital expenses regardless of who was at fault in the accident. Although there are many legal variations of no-fault insurance, most states still allow people to sue the negligent party if the amount of damages exceeds a certain state-determined threshold.

Uninsured/Underinsured Motorists Coverage:

Uninsured Motorists Bodily Injury

Uninsured Motorists Bodily Injury (UMBI) covers you for all sums (up to your policy limits) if an accident occurs with an uninsured or hit-and-run motorist who is determined to be legally at fault.

Underinsured Motorists Bodily Injury

Underinsured Motorist Bodily Injury covers you for all sums (up to your policy limits) if an accident occurs with a motorist who is underinsured (i.e., they carry bodily injury limits less than your UMBI limits and less than the amount of the injuries).

Uninsured Motorists Property Damage

Uninsured Motorist Property Damage (UMPD) Liability coverage pays for property damages caused by uninsured drivers.

There are also other extra items, such as rental reimbursement and towing and labor charges in case of a breakdown. As mentioned above, please visit the Insweb Auto Insurance Glossary for further definitions.

Remember to keep yourself adequately covered; while having the bare minimums required by each state may keep you in compliance with state laws, they may not be enough to protect your assets if you have a major incident. Insurance experts recommend that you review your insurance policy often and thoroughly.

[NerdyByNature]

Always struggled understanding insurance. I watched, took notes, and I feel a lot better about my understanding. Thanks!

[quentinm.williams]

insurance is a bit confusing with all the different terms but here I am trying to learn everything that school did not bother to teach us

[marielbavelasquez]

watched this is economics. is it weird that i noticed that the lady didn't blink at all?😂

[triv]

By far the easiest-to-understand breakdown of car insurance, thank you ^^

[Engagetargetmedia]

Understanding car insurance terminology and coverage for consumers. 

[franklinsandrea]

I have a question for you left eye someone Augusta mattress to his vehicle but my people didn't have any damages my question is do I still have to pay deductible when my vehicle doesn't need any repairs only the other person's car

[sharminjahan]

Thanks a lot. Would you please explain if Collision coverage is 500 in policy... does it mean that Deductible is 500?

[bonifaciomagdiwang]

if you drive the car for 5 years or more with no accidents. and paid the monthly car insurance. and after that you got an accident you should not pay any deductible because the insurance got your money in more than 5 years is no make sense

[pianoinstrumentals]

what about the total lose if we totaly lose the vehicle in accident caused by us or the vehicle stolen?

[hi_centipedes]

For a car worth $5k, what is better: Collision coverage or Uninsured motorist?

[noir]

I dnt have a car but I usually rent cars what kind of insurance can I opt for?

[autoinsurancechannel]

What happens if someone that doesn't have insurance hits you?

[RS-iovm]

one major factor for your price is how many miles a year you put on your car....less mile save money. and I can say so many other things than that

[drk]

I got into an accident 3 months ago and the accident wasn’t that big our and their property damages will not exceed 500$ at all and now I received a letter says that I will exceed the limits over 50, 000$ for bodily injuries both of the cars have a little crack and that lady went to the hospitals and she making drama and now my company asking me to pay what ever will exceed 25, 000$ injury per person. Who knows what should I do and I don’t have money at all I’m 18 and just trying to get a job for my lil expenses !!! Weird world

[WorkoutByWilson]

What about fire. My car hood caught fire. My insurance is saying they might not cover if mechanical. But there was nothing wrong with my car

[mylock]

Can you sue a person with dolly a day insurance

[josefholzer]

What I want to know: if there is a income level to qualify for auto insurance policy?

[bgaripov]

Even if the accident is not your fault, your UM is not going to pay for your car.

[brittanys]

Although the other party is 100% liable you are scrutinized & you still have to fight tooth & nail for what is rightly owed