There are many different kinds of auto insurance coverage. To choose the right one, you should decide what you need to protect. The following is a list of various types of auto insurance coverage for you to consider.
Liability Coverage
If you choose extremely low limits, you are jeopardizing your financial stability. For instance, if you are involved in an accident and caused a severe damage that has exceeded your liability limit, then you are responsible to pay for the additional amount.
Bodily Injury Liability (BI) (Mandatory in most states) - It covers people’s body injuries or death that you are responsible for, and legal defense for any lawsuits filed against you. Usually, the auto insurance company would require you to have the same level of coverage for all your insured vehicles. It does not cover you or any other people on your policy. The limit of the coverage is the maximum amounts that are paid for each person or each incident.
Property Damage Liability (PD) - It covers you for the damage that your car causes to someone else’s property, and legal defense for any lawsuits filed against you. The covered properties include anything and everything that are damaged in an accident. The limit of the coverage is the maximum amounts paid for each accident.
Tip:You should always buy enough PD to cover for the potential damage that your car can cause on other objects.
Physical Damage Coverage
Not required by state but if you have a loan or lease, then the creditor would make it mandatory. Both coverage pay for the additional cost that exceeds your deductible amount. For example, if your deductible is $1000, and the damage caused is worth $1500, then you would have to pay $1000, and the insurance company pays $500.
Comprehensive Coverage - It covers your car’s (or other cars you may be driving) for losses generated from accidents excluding collision. Your car would be covered if it is stolen, or damaged by flood, fire or animals. It covers the cost to fix your car after the deductible is subtracted.
Collision Coverage - It covers your car’s damage when it hits, or hits by another object.
Both coverage are recommended for:
Financed or leased cars. Most auto insurance companies would require you to have this coverage.
New or excellent condition cars. This coverage can replace or repair the car if it is lost.
Old or poor condition cars.
Uninsured and Underinsured Motorist Coverage
If you do not have Collision coverage, both coverage policies pay for the repair cost of the insured car up to the limit (the limit in some states is $3500). If you do have Collision coverage, both coverage policies only pay for your Collision deductible (this happens in some states and not all). Depending on the state and the auto insurance company, both coverage policies can be joined together or sold individually.
Uninsured Motorist Property Damage (UMPD) - It covers the property damage maintained on your insured car when the operator does not possess the insurance. UMPD cannot replace Collision coverage because it cannot pay for the total repair/replacement costs. UMPD is only relevant when you are in an incident with a driver without insurance.
Underinsured Motorist Property Damage (UNDPD) - It covers the property damage maintained on your insured car when the operator does possess the insurance. However, the liability limit of the ignorant driver is not enough to pay for the damage. UNDPD cannot replace Collision coverage because it cannot pay for the total repair/replacement costs. UNDPD is only relevant when you are in an incident with a driver without sufficient liability insurance.
Uninsured Motorist Bodily Injury (UM) - It covers you, insured people in your household, and passengers who were injured or died in an accident caused by an uninsured or hit-and-run driver. Your medical costs would be covered by UM (up to the limit). UM covers the cost of any accident up to the limit. The limit is the maximum amount that the coverage would pay for each person or accident.
Underinsured Motorist Bodily Injury (UNDUM) - It covers you, insured people in your household, and passengers who were injured or died in an accident caused by an underinsured driver. In this case, the underinsured driver cannot meet up to the damage cost, so your coverage would pay for the difference until the liability limit. UNDUM pays for the difference between what the underinsured driver’s insurance covers and your bodily injury coverage. The limit is the maximum amount that the coverage would pay for each person or accident. If the limit is below the damage cost, then you would have to pay for the rest with your own money (unless you have health insurance).
Tip:People covered under both injury policies are: policyholders, other drivers covered by the policy, and passengers. Both policies are good for people without health insurance. If the limit selected is not appropriate, you would have to pay for the extra amount from your own pocket.
Personal Injury Protection Coverage (PIP or MEDEX)
It covers the medical, hospital, and funeral costs (up to a certain limit) of you, other passengers in your car, and pedestrians hit by you. PIP covers your own injury on a first-party basis without factoring the fault element. This coverage is only available in some states.
Depending on the state, the type of people who are covered varies. Generally, the policyholder, policyholder’s relatives in the same household, passengers, other authorized drivers, and policyholder and family members in another person’s car or as pedestrians who have been hit by another car are all covered.
The PIP would pay for the total costs up to the limit. Some states have limits of $10,000.
This coverage is ideal for people without health insurance that can appropriately pay for the costs, and people who always carpool or often have passengers.
Guest Personal Injury Protection covers guest passengers in your car. In Kentucky, this is mandatory if all the drivers under your policy have refused the no-fault coverage.
In New Jersey, you would be given the choice of the following PIP plans.
Full PIP Primary: The primary coverage of the injuries maintained by you or your passengers in an accident. It also covers income continuation, funeral expenses, death benefits, and essential services costs.
Full PIP Health Primary: You should buy this plan if there is another health insurance company that acts as the primary coverage for injuries maintained by you or your passengers in an accident. This plan also covers income continuation, funeral expenses, death benefits, and essential services costs.
Medical Only PIP Primary: The primary coverage of the injuries maintained by you or your passengers in an accident.
Medical Only Health Primary: You should buy this plan if there is another health insurance company that acts as the primary coverage for injuries maintained by you or your passengers in an accident.
Note:The Full PIP Health Primary and Medical Only Health Primary are not available if your primary health insurance provider is Medicare or Medicaid. Also, some health insurance does not cover injuries caused by car accidents. If you are unsure, you should choose Full PIP Primary or Medical Only PIP Primary.
First Party Benefits - Medical (FPB or MEDEX)
It covers a few areas of insurance coverage. FPB pays for your medical costs if you or any relatives in the same household are injured from an accident. This is very similar to the Medical Payments coverage and Personal Injury Protection.
Depending on the state, limits and coverage services vary. Below is a list of the typical services that are offered under this coverage.
Relevant medical and surgical treatment.
Crucial rehabilitative services (physical therapy, speech pathology, and so on).
Essential dental, psychiatric, psychological, and optometric treatment.
Ambulance and nursing service.
Necessary medications, medical supplies, and prosthetic devices.
FPB covers the policyholder, drivers stated on the policy, and relatives in the same household as the policyholder.
FPB covers the costs until the stated limit. Aside from FPB, the following coverage policies are also available and sometimes are presented as a package.
FPB – Accidental Death,
FPB – Combination Package,
FPB – Extraordinary Medical,
FPB – Funeral, and
FBP – Income Loss.
Medical Payments (MEDPM)
This coverage policy disregards the fault element and is limited by the stated terms and conditions. If you and your passengers already have health insurance that covers for similar costs, MEDPM may not be necessary. You should check your health insurance policy.
It covers the medical costs from the following situations.
Yours and your passengers’ injuries from an accident.
You are hit by a car as a pedestrian.
Yours (as the policyholder) and your family’s injury from an accident while sitting in another person’s car.
You (as the policyholder) and your family hit by a car as pedestrians or while bicycling.
Loan/Lease Gap Insurance (LLG)
LLG is also known as GAP, Loan/Lease Payoff. This coverage policy is optional. You must have Collision coverage and Comprehensive coverage in order to buy LLG. Also, you must have a deductible and your financed or leased car must have a creditor holder.
LLG covers for you when your car is damaged. It would also pay for the difference between the following values:
The real cash value of your car when it is lost, minus the deductible and the car’s salvage value (if maintained by the owner or insured).
Any amount owed on the car when it is lost, minus unpaid finance fees, excess mileage or wear and tear costs, other fees related to the loan or lease, and the car’s salvage value (if maintained by the owner or insured).
GAP insurance is not combined with the auto policy. However, LLG is much cheaper to buy with your auto policy.
Towing and Labor (TL)
TL is also known as the Tow Club, Emergency Road Service, and Emergency Roadside Service.
You can only purchase this coverage if you already have Comprehensive and/or Collision coverage. Some policies only allow the coverage to pay when a claim has been filed against your physical damage coverage.
Property Protection Insurance (PPI)
This coverage policy is mandatory in Michigan. It protects you from the damage you cause on parked cars or fixed properties such as buildings.
Custom Parts and Equipment (CPE)
CPE is also known as Additional Customized Parts or Equipment, Customized Parts and Equipment, and Electronic Equipment.
It covers the permanent installation of custom parts or equipments that are not installed by the original manufacturer.
The following is a list of customized equipment examples:
Dealer-installed equipment (not offered by the original manufacturer);
Running boards, brush bars, roll bars, undercarriage lighting, fog lights, bed liners, camper shells, trailer hitches and so on;
Customized wheels, spoilers, suspensions, or relevant performance equipments;
It covers the medical, hospital, and funeral costs (up to a certain limit) of you, other passengers in your car, and pedestrians hit by you. PIP covers your own injury on a first-party basis without factoring the fault element. This coverage is only available in some states.
