Understanding Auto Insurance Policies
Understanding auto insurance policies requires one to be familiar with the basic terminology like collision, bodily injury liability, comprehensive and property damage liability. These are explained in this article.
Collision coverage, as the name implies, will pay for repairs for damage of the insured vehicle when it crashes against another moving vehicle or a stationary object. Of course the deductible amount will be subtracted against the bill and only the balance amount will be reimbursed by the insurance company. Higher the deductible, lower will be the premium that one needs to pay. This is similar to a medical insurance. Having a higher deductible actually means that the insured person takes some of the risks associated with an accident. Thus too high a deductible makes insurance cover meaningless.
Comprehensive coverage includes damages to the vehicle that may be caused by fire, vandalism, falling objects, wind, theft, flood etc. These are damages that do not occur due to an accident. Obviously the premium will increase if one adds comprehensive coverage to the insurance policy.
Other than the two covers given above, the third one is liability coverage. This is the insurance cover for causing damage to the third party i.e. when a vehicle collides with another on the rear or say when it hits a stationary object, the repairs to the vehicle or object is paid for through this coverage. This could include bodily injury caused to the driver of the other vehicle.
Bodily injury coverage specifically provides cover, in case of fault, for causing injury to the other person driving the car. The costs like medical expenses, loss of wages etc. would be paid for through this cover. Any legal costs if the other driver files a lawsuit are also covered. This type of insurance cover is compulsory in many states.
Property damage liability coverage specifically includes cover for causing damage to other’s properties in case of an accident. The damage could be for a building, vehicle or any other object that the insured car has hit. Similar to bodily injury coverage, this policy also covers any costs due to a lawsuit arising out of the accident.
A few more terminology that one often hears in insurance parlance is given below.
Personal Injury Protection covers the medical expenses of the insured driver regardless of whose fault it is in case of an accident. This coverage is compulsory in some states. Medical Coverage covers medical expenses regardless of whose fault it is when caused due to an auto accident.
Each policy has its own limit and degree of coverage. Also the laws governing auto insurance vary from state to state. One must be aware of them to know the minimum that he or she needs to spend on auto insurance. Also it is not necessary to take full insurance coverage like collision and comprehensive if the car is very old and its market value is low. The insurance premium may equal the value of the car in that case!
