What Does Car Insurance Cover?

China iTech Ghana
Saturday, October 2, 2021 | views Last Updated 2021-10-02T14:48:12Z

You have the keys. You have the car. Now all you need is car insurance and you’ll be ready to hit the road. Here is a look at common car insurance coverage types.

What Does Liability Insurance Cover?

Liability car insurance covers you when you cause property damage or injuries to someone else. For example, if you cause an accident and the other driver breaks their arm, your liability insurance would pay for medical bills and for the damage to the other vehicle. Liability insurance also covers legal costs if you are sued because of a car accident.

When you buy liability car insurance, you’ll have the option to choose your policy limits. You will often see the limits written as a series of three numbers. For example, you might see it written as 20/40/10. That means:

  • $20,000 of bodily injury/death coverage for one person per accident
  • $40,000 of bodily injury/death coverage to more than one person per accident
  • $10,000 of property damage coverage per accident

You are required to purchase liability car insurance in most states. It’s a good idea to buy more than your state’s minimum requirement. That’s because you have to pay for any amount that exceeds your policy limits and you could be sued for the balance. Generally you want to buy enough liability insurance to cover what you could lose in a big lawsuit.

What Does Uninsured Motorist Insurance Cover?

If a driver without insurance crashes into you, uninsured motorist coverage (UM) pays for your injuries and—in some states—damage to your car. It also covers your passengers and family members who live with you. In addition to medical costs and car repair bills, it pays for funeral expenses and for lost wages. Uninsured motorist insurance also covers you if you’re hit as a pedestrian.

Underinsured motorist (UIM) coverage is similar to UM. It pays for medical bills and other expenses if a driver who does not have enough insurance crashes into you.

UM is required in some states and optional in others. Generally, UM is a good coverage to have. One out of eight drivers are out on the road without car insurance, according to the Insurance Research Council.

If you buy UM, you will typically have to match your liability car insurance amounts. For example, if you have liability limits of 100/300, you will have to buy UM in that amount.

What Does Collision and Comprehensive Insurance Cover?

Collision and comprehensive insurance are often sold together, but they are two separate coverage types.

Collision insurance pays to repair or replace your car if you crash into another car or object (such as a fence, guardrail or tree).

Comprehensive insurance pays to repair and replace your car if it is stolen or damaged by fire, flooding, hail, vandalism, falling objects (like a tree branch) or a collision with an animal.

Collision and comprehensive insurance are optional coverage types in terms of state laws. But if you have a car loan or lease, your lender or leasing company will likely require you to carry both coverage types.

Both collision and comprehensive insurance have an insurance deductible. Deductibles are commonly in amounts such as $250, $500, $1,000 and higher. A deductible is the amount deducted from an insurance claims check. For example, if your car repair bills are $2,000 and you have a $500 deductible, the insurance payment will be $1,500.

A higher deductible will lower your car insurance premium, but make sure you can afford to pay that amount out-of-pocket.

Comprehensive and collision insurance only pay out up to the actual cash value of your car. (For example, if your car is totaled.)

Medical Payments and Personal Injury Protection

Medical Payments is often referred to as “MedPay.” It covers medical expenses for you and your passengers regardless of who is at fault for the accident. MedPay is often sold in small amounts and is not available in all states.

Personal injury protection (PIP) is a similar coverage that pays for medical bills and other expenses for you and your passengers, no matter who is at fault for the accident. 

PIP also covers other expenses such as lost wages, rehabilitation costs, funeral expenses and survivor benefits, and services you cannot perform due to injuries like house cleaning or child care.

PIP is required in some states. In other states, PIP is optional or not offered. In states where it’s required, there is a minimum amount mandated under state law, but you can buy more. In states that offer it, but don’t mandate it, you can choose the coverage amount that works best for you.

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  • What Does Car Insurance Cover?

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