Understanding Personal Auto Policies

While it may appear difficult to read, it is extremely beneficial to understand your personal auto insurance policy.  The main purpose of your personal auto insurance is to transfer some of the risks of driving from yourself to your insurance company. By transferring that risk, you save yourself from the heavy financial burden that can come after an accident. Your policy can pay for these losses, give you peace of mind, and satisfy legal requirements.

Liability

Liability insurance is required to drive legally. Liability covers property damage and bodily injuries to the other car(s), people, property, etc. involved in an accident in which you were at fault. You have liability limits, the amount that can be paid out by your insurance. Most commonly, liability limits are written as a split limit. A split limit will be written like 25/50/25. The first number represents the amount per person that could be paid for bodily injuries incurred as a result of the accident. The second number is the amount that could be paid, up to a maximum total, for all bodily injuries incurred in the accident. The third number describes the payment that could be issue for all property damaged in the accident. Remember, all of this coverage is for others involved in your accident, not for you or your vehicle. So in this case, your insurance would pay a maximum of $25,000 per person, $50,000 total for all injuries and $25,000 for all property damage. This coverage does not protect you or your own car, which is why many people choose to add other types of insurance to their personal policy. 


Collision and comprehensive

There are two types of insurance that you can select to supplement your required liability insurance: collision and comprehensive. Collision insurance pays for your  vehicle to be repaired after you collide with another vehicle or an object such as a tree. This insurance will typically cover the cost of the repairs or pay to replace your vehicle if it is totalled. Comprehensive coverage, on the other hand, pays for repairs to your vehicle when it is damaged by something other than a collision. This could include things like vandalism, fire, theft and weather-related damage. It also protects your vehicle from falling and flying objects like a mailbox ripped up by a storm. This coverage may also insure your vehicle in case you hit an animal, like a deer,  and sustain damage. This coverage is also called Other Than Collision or OTC coverage. Both collision and comprehensive coverage are usually optional, unless you are in the process of paying off a loan on the vehicle. 


MedPay/PIP

MedPay is another additional coverage that can be added to your policy. This insurance covers your own medical expenses in case of an accident, regardless of who was at fault. There is another very similar insurance called Personal Injury Protection (PIP). In addition to liability coverage, either MedPay or PIP may be required to drive in your state. PIP includes things like lost wages, whereas MedPay only covers medical expenses. In most states, only one of the two is available for purchase.


Uninsured/Underinsured motorist

Although it is illegal to drive without the minimum coverage, there are still some drivers who do it. An coverage option on your policy called Uninsured Motorist coverage comes in here.This coverage can protect you in case you are in an accident caused by a person with no insurance. Getting the claim payment from an uninsured motorist can take a very long time, and with this coverage your insurance company can pay you the money owed. The company will then subrogate the driver, which means they will work with the uninsured motorist and local law enforcement on your behalf to get back the money that was paid out to you. The same process is true for a similar coverage called Underinsured Motorist coverage which is used when the other person had insurance but not necessarily the coverage limits needed to cover your losses. 


Policy Details 

Once you decide how much coverage you want for your personal vehicle policy, it is important to understand the details of your policy. Covered vehicles are all personal autos, but not recreational vehicles such as ATVs. Any vehicle weighing over 10,000 pounds is also not covered. No vehicle being used for commercial use, such as a taxi service, can be covered on your personal auto policy (PPA policy). All insured autos must be listed on your declarations page, which can be found in your policy and should be read carefully. You must inform your agent if anything on your declaration page changes, including buying a new car, to ensure coverage.  

Your premium, which is the amount you pay in order to keep your policy active and legally binding, can vary greatly depending on the state in which you are insured, in part because each state has different liability requirements, laws, and risks associated with driving. Your premium can also be affected by your driving record and many other factors as well. Several at fault accidents, for example, or traffic violations could result in a higher premium than someone with a clean record.

 

The different parts of your personal auto policy can be confusing at first. Even after purchasing, it is important to understand the details of the policy you’ve chosen. Closely review your Declarations Page, check to make sure you have the coverage you desire, and call one of our friendly agents here at Infinity Insurance with any questions. To discuss the details of your policy or for a new auto insurance quote, call us at 1-800-INFINITY.

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