Types of coverage
When you purchase an auto insurance policy, you're really buying several types of coverage. There are seven basic types of coverage:
- Bodily injury liability coverage pays for damages other people incur if you or someone you allow to drive your car causes an auto accident. Examples of damages include medical expenses, rehabilitation, funeral costs, settlement of lawsuits, and legal expenses.
- Property damage liability coverage pays for damage to other people's property if you or someone you let drive your car causes an auto accident. It usually pays for repair or actual cash value (ACV) of others' property and your legal expenses.
- Personal injury protection (PIP) coverage pays for medical, rehabilitation, funeral, and childcare expenses as well as for loss of earnings and in-home assistance if you and your passengers are injured in an accident, regardless of who is at fault.
- Uninsured and underinsured motorist bodily injury coverage pays medical, rehabilitation, and funeral expenses, loss of earnings, and other damages if you or your family are involved in a vehicle, bicycle, or pedestrian accident caused by an uninsured or underinsured motorist or a hit and-run driver.
- Uninsured motorist property damage coverage pays for damage to your auto caused by an uninsured driver. This optional coverage generally duplicates your collision coverage, but may be a good buy if you have a high deductible on your collision coverage or don't have collision coverage.
- Collision coverage pays for repairing your vehicle in a collision or rollover.
- Comprehensive coverage pays for damage to your vehicle resulting from theft, vandalism, windstorms, fire, hail, etc.
Extra liability coverage
You can buy a separate personal umbrella policy to provide extra liability protection if you are sued. An umbrella policy benefit will start paying when your other policy's liability limits are exhausted. For example, let's say you lose control of your car and cause an accident that kills one person, seriously injures four others, and damages seven vehicles and one residence. The liability damages sustained in this accident are likely to exhaust the limits of your auto policy. A personal umbrella policy provides additional liability protection.