A liability auto insurance policy is required in most states. A typical liability policy includes bodily injury (BI) and property damage (PD) policies together. The reason is simple: After an accident, the driver responsible must be able to pay for damages incurred. These two policies are usually bundled together. The bodily injury (BI) section of the liability insurance policy usually covers doctor and hospital bills for the injured parties as well as other related expenses such as rehabilitation, medicines and lost income. The minimum policy required by most states is the maximum amount the policy will pay for bodily injury to one person and also the maximum for all persons hurt in an accident. Typically these two maximum amounts (listed in thousands of dollars) are listed together with a slash such as: 50/100 This example indicates a $50,000 maximum payout to one injured party and $100,000 maximum payout for all people hurt in the course of one accident. NOTE: The states require a minimum amount of coverage, but drivers can usually buy higher insurance amounts. Generally higher coverage is not that much more expensive. Higher coverage will protect the driver from law suits and possible bankruptcy in case of a severe accident.
Many loan companies and banks will require collision auto insurance when they loan money to buy a car. They do this so that they can protect their investment. A collision policy covers essentially accidents in which your car is involved and usually pays the owner of the policy even if that person is at fault. Collision is often defined as an accident between two cars or when your car hits something like a fence or a house or a barn. This policy is often sold together with comprehensive auto insurance which covers just about everything else that can happen to your car that is not covered by collision. This policy covers expenses such as repairs, damage to the contents of the car, and also towing and possibly storage. The payout is limited to the amount stated in the policy. Generally an insurer will not pay more than the value of the car, known as the 'cash value'. This means that if the total damage to your vehicle exceeds the value of your car, the company will only pay the value of your car, usually declaring your auto to be a 'total loss'. Unlike liability insurance, raising the policy limit beyond the value of your car, will not offer you additional protection, since most companies will only pay up to the market value of the car. Like many insurance policies, there is a deductible the owner must pay first, before the insurance company will pay for any damages. Policy holders can save a considerable amount of money by raising the deductible for this type of insurance. As a general rule consumers can save money over time by paying small loses out-of-pocket while using insurance policies to cover large loses. The amount that a company will pay after an accident is usually determined by an 'insurance adjuster' who will look at your car and then get estimates for the repairs. At this point you may negotiate with the adjuster for a somewhat higher payout. If you are not satisfied with the offer made by an adjuster, you can appeal the settlement offer through either the attorney general's office or the department of insurance in your state. This is usually done after an extended period in which there was no resolution.
A comprehensive auto policy is often required by a bank or loan company who loaned you money to buy your car. This policy is frequently sold together with collision insurance and also may be required as part of the terms of the loan. Comprehensive insures the policy holder against just about everything that is not covered by collision insurance such as: falling trees, floods, bad weather and fire. It may even cover accidents with deer. As with collision car insurance, the value of most claims and also what an insurer will offer to settle a claim will be decided by an insurance adjuster. You then, as the policy holder, may negotiate for a somewhat higher settlement or refuse the offer as inadequate. If you cannot reach a settlement, after an extended period of time, you can file a complaint with either your state attorney general office or with your state's department of insurance. Generally the policy holder will have to pay a deductible before his or her insurance company will pay for any damages. The policy holder can save a considerable amount of money over time by raising the deductible. Like a collision policy, an insurer will not pay more than the 'cash value' of your car, so if damages are more than that value, your car will probably be declared a total loss and the value of the car, before the damages were incurred, will be paid to you, the policy holder. Unlike liability insurance, raising the policy dollar limit above the worth of your car will not offer you additional protection, since most companies will only pay, at most, up to the market value of the vehicle.
No-fault automobile insurance has been mandated by a number of states. No-fault means that a driver's own insurance will cover their damages no matter who is at fault. Generally no-fault states mandate that personal injury insurance (PIP) also be purchased in addition to a liability policy. While no-fault will pay for most ordinary accidents, it will not pay for extremely expensive claims. In this case, when the degree of damages exceeds a "threshold-level," no-fault states generally allow legal remedies through the court system. The reason for no-fault is that when law suits were allowed, no matter what the amount of damages, the price of auto insurance premiums was costly. States that allow persons to sue for any amount are called tort states. In these states law suits are common and the driver who caused the accident is responsible for all costs.
In no-fault states, personal injury (PIP) insurance is often mandatory. This policy covers costs incurred as the result of an accident but without having to determine fault. A PIP policy typically covers smaller car insurance claims. However, no-fault does not mean that a driver cannot be held responsible for an accident. Many no-fault states still require liability insurance (that is bodily injury (BI) and property damage (PD) coverage) since expenses that go over a threshold amount may require that the driver who was at fault pay additional expenses.
Required liability insurance has two parts: bodily injury (BI) and property damage (PD) usually combined together into one policy. The property damage (PD) section of a liability policy covers damages to the other driver's car, personal property in that car and damage to other property such as to a fence or home or damage to the property of a pedestrian. Other expenses such as towing, storage, and the cost of a rental car may also be covered. The dollar amount that the car insurance company will pay is usually calculated by that insurer's adjuster who then negotiates with the injured party for a final settlement. Typically the minimum amount required for this policy is less than that required for bodily injury (BI) and is usually listed as the last of the three numbers for a total combined liability policy, such as:50/100/25 In this example the last number refers to a property damage (PD) limit of $25,000 for each accident. The first two numbers refer to the bodily injury (BI) coverage.
In addition to liability insurance and underinsured motorist (UIM) coverage, uninsured motorist (UM) coverage may be mandatory. In the case of an accident in which an uninsured driver is at fault, this policy usually will pay medical costs up to the maximum liability coverage that is carried by the driver. This policy may also cover the costs of a "hit and run" accident in which the responsible party has left the scene of the accident and cannot be located. NOTE: This policy is not expensive and should be purchased by every auto insurance policy holder, even if not required by the state.
Like the uninsured motorist (UM) policy, the underinsured motorist (UIM) policy, is required by a number of states. This insurance generally covers medical costs up to the maximum liability amount that is carried by the driver, if the accident was caused by a motorist who was underinsured. NOTE: Both the underinsured motorist (UIM) and uninsured motorist (UM) policies are not expensive. These policies should be purchased by every auto insurance policy holder, even if not required by the state.
At the moment, only New York state requires the purchase of this auto insurance coverage. It covers expenses that are due to the death of a person that were the result of carelessness, recklessness or negligence by the driver. A finding of 'wrongful death' comes about due to an investigation by police. This policy can be bought in many other states, although it is not required.