Understanding auto insurance
BI? UM? PIP? Trying to make sense of your automobile policy coverage options and the limits that you need? We can help!
We’ve covered the basics below, which provides the information you need (including acronyms!) to understand your automobile insurance policy and coverage options.
Auto insurance basics
An automobile insurance policy is designed to provide you with a level of protection against property, liability and medical costs if you are involved in an accident.
- Property coverage pays for damage to or theft of your car.
- Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
- Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.
Comprehensive and collision coverage
Damage to your vehicle from a collision with another vehicle or object should be covered under your collision coverage. Collision coverage is typically required if your car is still being financed—but once your car is paid off, you often have the choice to keep or remove collision coverage from your auto policy. Although your policy may be cheaper without it, collision coverage can be beneficial in helping you cover damages to your vehicle for which you are found at-fault. If the damages were caused by a third party, it would be up to their insurance company to cover the damages.
Comprehensive (Other Than Collision or OTC)
Simply put, comprehensive coverage provides insurance for losses caused by anything that isn’t covered under your collision coverage, such as losses from natural disasters, riots, vandalism and contact with an animal. If a tree were to get struck by lightning and fall on top of your vehicle, your comprehensive coverage could help cover damages to your vehicle from the incident. Although comprehensive insurance tends to have lower premiums than collision insurance, the cost can vary depending on your deductible amount and policy limits.
Collision coverage is generally sold with a deductible of $250 to $1,000; comprehensive insurance is usually sold with a $250 deductible. When deciding on a deductible that’s right for you, take into consideration your available cash, disposable income and the value of your vehicle.
Bodily injury liability (BI)
Mandatory in most states, this covers injuries that you, the designated driver or policyholder cause to someone else. Claims for bodily injury include medical bills, loss of income, or pain and suffering. It does NOT cover the cost of damage to your vehicle, or to you or other people on your policy.
Property damage liability (PD)
Covers you or someone driving the car with your permission if the car damages someone else’s property. It also provides you with legal defense if another party files a lawsuit against you.
Medical payments (MP) or personal injury protection (PIP)
This no-fault coverage provides medical expenses to you and your passengers injured in an accident. Medical payments may also cover policyholders and their family members when injured while riding in someone else’s car or when they are hit by a car while on foot or bicycling. If you and your regular passengers already have health insurance that covers similar expenses, medical payments coverage may be unnecessary. Check your health insurance policy for details.
Uninsured or underinsured motorist coverage (UM or UIM)
This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver. Underinsured Motorist coverage comes into play when an at-fault driver has insufficient insurance to pay for your total loss. This coverage will also protect you if you are hit as a pedestrian.
Selecting liability limits
Most states require car owners to purchase a minimum of bodily injury and property damage liability insurance. In the event of a serious accident, you want enough insurance to cover a judgment against you in a lawsuit, without jeopardizing your personal assets, such as your home and savings.
Top ways to save on your auto insurance premium
- Consider raising your deductible.
- Keep up your good driving record.
- Drive less to qualify for a low-mileage discount.
- Drive a car with safety features such as anti-lock brakes, airbags, etc.
- Install an anti-theft device.
- Ask about our multi-policy discounts.
Home and auto bundle
Home and auto insurance protects the policyholder from large expenses resulting from loss, damage and injury associated with his or her home, property and automobile. The two types of insurance—homeowners and automobile—are separate products but are frequently bundled, or purchased together, which usually results in a discounted rate.