Automobile accidents can result in severe damages that can significantly impact your life. Your auto insurance is there to help cover the cost of those damages. More than 2 million people were injured in auto collisions, and more than 37,000 were killed in 2017—and those numbers have climbed.
Some estimates say car accidents are responsible for $871 billion in societal harm and financial loss every year. Car insurance helps to offset those damages, helping motorists pay for their medical bills, the damage caused to their property, and if they are at fault, those of the other parties involved as well.
Minimum Insurance Requirements
Before you decide on a policy, you should know that each state has its own regulations regarding minimum coverage types and amounts. Without this minimum coverage, you can’t legally drive, so you are required to get coverage for at least the minimum amounts.
However, many people do opt to get coverage above and beyond the minimum requirements, and most experts do recommend going above the legal minimums. Of course, a more extensive policy is also more costly, and this expense can be significant. On the other hand, if you end up needing that extra coverage, the policy may end up “paying for itself.”
Each insurance policy covers specific types of damages and sets a dollar amount for each category. The dollar amounts are your “limits.”
The limit is typically set by the insurance company. For example, in New York state, the minimum amount of coverage required is expressed as “25/50/10.” Each number describes one section of the policy’s liability limits, with the first number indicating the personal injury damage limit for a single individual, the second number indicating the total personal injuries damage limit, and the third indicating the property damage liability limit.
For example, let’s say Alice is texting while she’s driving, and she hits another car that is carrying Beth and Chris. Beth and Chris are seriously injured, and Beth’s car is also damaged. Alice is found to be at fault, and her insurance covers Beth’s injuries up to $25,00 and Chris’ injuries up to $25,000 without exceeding the $50,000 aggregate limit for a single accident. The same policy will cover property damage up to $10,000.
Common Policy Coverage Categories
As you can see, knowing the coverage you have for each category is important. There are also other categories which are not usually required but offer optional, additional coverage. Here are some of the most common categories, to help you make an informed decision about your own auto insurance.
Liability Coverage (Personal Injury)
This category represents the amount that your insurance company will pay if you are at fault in an accident that causes other people to be injured or killed. In the case of injury, bodily injury liability limits are applied to medical bills, lost income and pain and suffering. If there’s a death, the family of the deceased person can make a claim under the liability coverage.
Medical Payments Coverage / Personal Injury Protection (PIP)
Medical Payments coverage is used to pay for your medical bills, even if you caused the accident. It also pays the medical bills incurred by passengers in your vehicle.
Property Damage (Liability)
If an accident occurs that damages a person’s property, and you’re found to be at fault, your property damage coverage will pay for the damaged property. While property damage liability coverage is most often applied to vehicles, it also applies to other types of property. For example, if you ran over a mailbox and damaged it, this coverage would pay for the damage.
If you’re in an accident, and you are at fault, and your vehicle is damaged, this coverage will cover the costs of repairing or replacing your vehicle. Collision coverage may not be part of the required minimum limits imposed by the state, but if you have financed your vehicle through a third party lender, they may require that you maintain collision coverage on the vehicle as a part of your financing contract until the car is paid off.
Another type of coverage that some lenders require until a vehicle is fully paid off is comprehensive coverage. This coverage can pay for damages caused by a wide variety of causes, aside from accidents, including theft, vandalism, fire, riots, and other random or malicious destructive occurrences. For example, if a tree branch falls and damages your vehicle while parked, comprehensive coverage will pay for the necessary repairs.
Uninsured/Under-insured Motorist Coverage
There are times when another driver’s insurance is either insufficient to cover your damages, even when they’re at fault, or they are driving with no insurance at all. This can be disastrous for the insured party, because while they might be able to sue for damages, someone who is uninsured or has minimum liability limits, probably won’t have the funds to pay for all of your injuries. In some cases, but not all, uninsured coverage may also apply to damages from a hit and run accident. Learn More about Uninsured and Underinsured Coverage.
Discuss Questions Regarding Your Policy with an Attorney
Dealing with insurance companies, including your own can be complicated, and in many cases, they may not have your best interests in mind. If you have questions about policy coverage, contact an experienced car accident lawyer to represent you and to negotiate on your behalf.