Auto Insurance

What You Need To Know

Imagine, it’s the weekend and you are out on a family drive. Winding roads, clear sky, and upbeat music – could this day get any better? Swaying with the music as you drive along, BAM! You’ve just rear-ended the van in front of you. Crumpled hood, smashed in bumper and the other driver is complaining of neck pain. Hefty bills alert! But thanks to your car insurance (also called auto insurance). You know you’re covered and won’t have to dig deep in your pockets to cover the costs.

Accidents happen more frequently than you realize. The Association for Safe International Road Travel (ASIRT) reports that road accidents cost the US $380 million annually in direct medical costs.  Compared to other high-income countries, the US has a 50% higher number of deaths from road crashes. Clearly, accidents in the US are unfortunately a common occurrence, and it’s vital that you have auto insurance.

In this article

Auto Insurance and Personal Auto Policy 

Auto insurance is a legally binding contractual agreement between you (the insured) and the insurance company (the insurer). It protects you against gratuitous financial losses due to vehicular theft or vandalism  in return for a monthly premium. Additionally, it compensates for medical expenses, vehicular and property damages.

Broadly categorizing, there are two types of auto insurance – commercial auto insurance and personal auto policy (PAP). Commercial auto insurance is for vehicles used primarily for commercial purposes, while PAP is for privately owned cars. 

Medical payments following car accidents can be quite high. For any death or bodily injury sustained in an auto accident, your PAP pays for reasonable medical and funeral expenses. PIP, on the other hand, covers you and your passengers’ health costs as well as resulting lost wages after an accident.  

For instance, in Florida, PIP covers 80% of all reasonable and necessary medical expenses. Expenses can be of x-rays, ambulance, hospital, dental, rehabilitative, and nursing services. It also pays 60% of lost wages and has a $5,000 death benefit.

What Does Personal Auto Policy Cover?

PAP coverages depend on the laws of your state and the type of policy that you purchase. However, the general coverages of a PAP are as below:

Auto Liability Coverage

In most states, auto liability coverage is mandatory. The auto liability coverage can be for:

  • Bodily Injury Liability – Costs associated with a third party’s injuries caused by an accident.
  • Property Damage Liability – Costs related to replacing or repairing another person’s property.

Basically, auto liability coverage covers all the costs that you are liable for.

Medical Payments or Personal Injury Protection (PIP)

Medical payments following car accidents can be quite high. For any death or bodily injury sustained in an auto accident, your PAP pays for reasonable medical and funeral expenses. PIP, on the other hand, covers you and your passengers’ health costs as well as resulting lost wages after an accident.

For instance, in Florida, PIP covers 80% of all reasonable and necessary medical expenses. Expenses can be of x-rays, ambulance, hospital, dental, rehabilitative, and nursing services. It also pays 60% of lost wages and has a $5,000 death benefit.

Your ride deserves the utmost care. Get a quote today!

Uninsured and Underinsured Motorist Protection (UI/UIM) Liability Coverage

A PAP is not mandatory in all states and many drivers go without one. Additionally, even in states where having a PAP is compulsory, some drivers may be underinsured. There is a possibility that you may get in an accident with an uninsured or underinsured motorist. In such cases, UI and UIM coverages cover your costs for bodily injury and property damages.  

Physical Damage Coverage

Your PAP covers damages to or a complete loss of your insured auto (owned or non–owned like a borrowed car). You can decide how much property damage cost you want your PAP to cover you against different risk exposures.

Collision Coverage

This coverage covers the costs to repair your vehicle after a collision with vehicle or objects. Your insurer pays for the repair or replacement of your vehicle. The replacement coverage is provided by deducting your deductibles from the actual cash value of your auto. Usually, your lender and auto leaseholder ask for collision coverage.

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Comprehensive Coverage

Comprehensive coverage covers physical damage to your insured auto from theft, vandalism, fire, hail, or falling objects. Your car insurance compensates for the repair or replacement costs of your damaged auto. The damage should be due to covered peril . However, this coverage excludes any damages caused due to collision or overturn.

Though comprehensive coverage is optional, your lender may ask you to include it in your PAP.

Others

There are other types of personal auto policy coverages that you can include per your needs. Your local auto insurance agent will advise you during the insurance purchase process. The different coverages that you may want to ask about are:

  • Rental reimbursement coverage
  • Sound system coverage
  • New car replacement coverage
  • Gap coverage
  • Towing and labor cost coverage

Your ride deserves the utmost care. Get a quote today!

Exclusions

Your car insurance does not cover all kinds of damages nor all kinds of risks. There are some exclusions, such as:

  • Intentional bodily injury or deliberate property damage
  • If someone uses your insured auto without your permission
  • Off-road rides
  • Vehicles with less than four wheels
  • Vehicles used for flight or in water 

Common Endorsements

Endorsements help you personalize your insurance policy. They add, modify, or remove coverages as per your need. The most common endorsements for your PAP are as follows:

Lessor

If you hit someone with your leased car, the injured party can sue you and your lessor. In such cases, a PAP covers defense costs for your lessor too.

Trust Endorsement

Consider you are driving a car whose title is held solely in the name of your family trust. If you hit someone, the injured party can sue you and the trust. With trust endorsement, you add the trust as an additional insured.

Additional Resident of your household

This endorsement is for additional residents of your household like roommates, domestic partners, housekeepers, etc. These people may use your vehicle but do not own it. With this endorsement, your PAP extends coverage to the named person.

Miscellaneous Type Vehicles

Recreational vehicles like dune buggies, motorcycles, motor homes, motorized gulf carts, etc., are usually excluded from a standard PAP. You can protect your recreational vehicles through a Miscellaneous Type Vehicles endorsement on your PAP.

Limited Transportation Network aka No Passenger Public or Livery Endorsement

If you use your vehicle for ridesharing, this endorsement is for you. Typically, your PAP contract is void if you use your auto for commercial purposes. This endorsement limits coverage from the time you log into transportation network platform. It does not consider passenger occupancy in your auto.

Once you add endorsements to your policy, they become a part of the legal contract. Any endorsement remains part of your policy through renewal unless a validity period is mentioned.

Reach out to your local auto insurance agent to get expert advice on the type of PAP you need. Your agent can recommend the best options to you for affordable auto insurance.

Let us know if you have any questions regarding your car insurance in the comments section below.

Do I need car insurance?

Almost all states require you to have car insurance except Virginia, New Hampshire, and Mississippi. If you are a Virginia resident and do not have car insurance, you are subject to an uninsured motor vehicle fee by the state. Likewise, in the other two states, you have the option to post cash bonds.  

Additionally, many other states offer self-insure by posting a bond or depositing funds at the DMV. However, this usually costs tens of thousands of dollars so may not be a realistic option for the average driver.

How can I keep my car insurance costs low?

There are many ways to keep your premiums low:  

  • Maintain a good driving record.  
  • Make timely payments to your insurer.  
  • Determine the cost of auto insurance before purchasing a vehicle. For instance, high premiums are charged for high-performance vehicles. 
  • Keep your annual mileage low.  
  • Ask about available discounts. Here are a few of the more common ones:
    • Specific occupational discounts. 
    • Students with good grades can lower their premiums. 
    • Have multiple policies with the same insurer. 
    • Have multiple cars on the same policy. 
    • Take a defensive driving course.
Does my personal auto policy cover losses if I use it for ridesharing?

No, as soon as you use your car for commercial purposes like ridesharing, your car insurance will be void. A commercialized vehicle has higher liability risks than a personal vehicle. Higher risks means higher costs of insurance. If you want to use your vehicle for ridesharing, you can either opt for an endorsement or purchase rideshare insurance.

Your ride deserves the utmost care. Get a quote today!