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What do all of these limits mean? Many people carry auto insurance and have no idea what their limits of coverage are. They'll know after a claim, but it might be too late. Your auto insurance coverages are broken into the following categories: Bodily Injury: injuries caused to another party (including your non-family member passengers) Your policy will be either a split limit policy or a combined single limit policy, although most are split limit. A split limit policy might looks like this: Bodily Injury Liability - $250,000 each person/$500,000 each accident This means that the insurance company would pay no more than $250,000 for injuries that you cause to any one person, and no more than $500,000 for all of the injuries in the accident combined. A combined single limit policy will combine the bodily injury liability with the property damage payout. A combined single limit policy might look like this: Combined Liability Single Limit - $300,000 This means that the insurance company would pay no more than $300,000 for injuries and property damage that you have caused. There is no cap for any one person or category. The largest portion of an auto claim is often the bodily injury payout. The way people sue in today's society, it's especially important to make certain that your liability limits are sufficient to protect your personal assets. Property Damage: damage you caused to someone's vehicle, home, fence, or other property. If you maintain a split limit policy, your policy might look like this: Property damage liability - $100,000 This means that the insurance company would pay no more than $100,000 for damage that you cause to another vehicle or vehicles, a home, utility pole, fencing, or any other property. If you maintain a combined single limit policy, your property damage limit will be combined with the bodily injury limit. Medical Payments: coverage for you when you are injured (pays your health insurance deductible or other gaps that might not be included by health insurance - like broken glasses) Your policy might show a limit that looks like this: Medical Payments per Person - $5,000 After an accident, your insurance company would pay up to $5,000 for each person in your vehicle. The most common payment made under this category would be for you and your family members in your vehicle after you have caused an at-fault accident. If your passengers are non family members, your bodily injury liability limits would pay for their injuries, which would always be a higher limit of coverage. Uninsured and Underinsured Motorists: coverage for YOU when YOU are injured by someone with no insurance (uninsured), or they have insurance but their limits are less than your limits (underinsured). Under a split limit policy, you might see this: Uninsured Motorists Coverage - $100,000 each person/$300,000 each accident Underinsured Motorists Coverage - $100,000 each person/$300,000 each accident This is a very important coverage since it's coverage for YOU. If someone hits you and they have no insurance (uninsured), the payment to you under this category could include medical costs incurred, lost wages, and other expenses that you have incurred due to this not-at-fault accident. If someone hits you and they have insurance, but they maintain a limit lower than your policy limit, they could be classified as "underinsured." Your policy could pay the difference between your limit and what you have received from their insurance company. For example, if they maintained a $100,000 bodily injury limit, but you maintained a $250,000 underinsured motorists limit, your own insurance company could give you up to $150,000 ($250,000 - $100,000 = $150,000). If you have an excellent driving record and think that you are more likely to be involved in a not-at-fault accident, this could be the most important coverage on your policy. Most people carry health insurance, and health insurance could pay your medical bills after a not-at-fault accident if the other party didn't have insurance or had minimal coverage. Health insurance, however, won't help you make your house payment, pay lost wages, or provide income needed to pay everyday bills. A sufficient limit of uninsured and underinsured motorist coverage is very important! Comprehensive: coverage for your vehicle when it is damaged by claims that aren't defined in the policy as a Collision. This could include deer, hail, fire, theft, vandalism, or glass breakage. Comprehensive is often shown on your policy as "other than collision." Most policies include a deductible, which is the amount that you would pay before the insurance company pays. It might look like this on your policy: Losses Other Than Collision - less deductible of $100 A customer can save money by increasing the deductible. Since comprehensive includes theft coverage, a security alarm can lower your comprehensive premium as well. Comprehensive claims are not-at-fault losses that shouldn't affect your future premiums. A significant amount of claims however, could make an insurance company uncomfortable. For example, a car parked on the street every night gets vandalized on a regular basis. Since the customer has no garage, this trend could continue. After paying several of the same claims, with no end in sight, an insurance company might opt to cancel the policy. Although the premiums might not increase after the claim, a customer could pay a higher premium if their policy is cancelled and they have to obtain insurance with another company. Collision: coverage for your vehicle when it collides with another vehicle, or hits a moving or stationary object (other than an animal). Collision coverage might look like this on your policy: Collision less deductible of $500 Unlike a comprehensive claim, a collision claim will probably impact your future rates. In the past, insurance companies would only surcharge a policy after an at-fault collision loss. In the past few years, however, companies have started to apply small surcharges to not-at-fault claims as well. Sometimes, this not-at-fault surcharge could be the removal of a claims free discount. Examples of collision claims would be: At fault examples: hitting another vehicle in the rear backing into a pole sliding on a snow-packed road into the ditch colliding with another vehicle in an intersection Not-At-Fault examples: your vehicle is struck while parked and unoccupied your vehicle is hit by another party who leaves the scene Collision is one of the highest premiums on your policy. Most customers opt to maintain a higher deductible. Towing: pays for the cost of towing your vehicle Towing is an optional coverage that might appear on your policy like this: Emergency Roadside Service - $75 per disablement This coverage is not restricted to just towing. Coverage could also apply to: fixing a flat tire running out of fuel locking your keys in your vehicle jump start to a vehicle Most companies will ask you to pay the bill yourself, and then request reimbursement. There are a handful of companies that request that you call their 1-800 number when you need emergency service. They will have a network of towing providers (similar to a PPO for health insurance) that provide significant discounts to the company. Some companies offer end of the year bonus money if you don't submit a claim during the policy year. Calling that company's 1-800 number for a tow usually won't jeopardize that bonus, but paying the claim yourself and submitting it for reimbursement probably will. Towing claims should not affect your future premiums. Car Rental: pays for a replacement vehicle while your car is in the body shop being repaired after a covered claim Car rental coverage might appear on your policy like this: Car Rental $30 per day/$900 max This would mean that the insurance company would pay no more than $30 per day for a rental vehicle and no more than $900 total. This is an inexpensive coverage and one that can be very important if you don't have another vehicle to drive while your car is being repaired. Uninsured Motorists Property Damage: pays when your vehicle (insured for liability only) is damaged by someone who is uninsured Uninsured Motorists Property Damage, known as UMPD, might appear on your policy as: Uninsured Motorists Property Damage less deductible of $250 This is a coverage that is most commonly maintained by someone who has liability only (no comprehensive or collision) on their vehicle. This would pay to fix your vehicle after being struck by someone who has no insurance. Rather than you pursuing this other party by hiring an attorney and/or going through small claims court, the insurance company will pay for your vehicle and seek reimbursement from them. If you maintain collision coverage, this coverage is not necessary, as collision will pay to fix your vehicle. |
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