When people think of insurance, Automobile insurance is usually one of the first types that come to mind. It is perhaps the most important of all the property and liability insurance lines. Think about it, almost everyone owns at least 1 car, and with a reported 6.4 million accidents in the U.S. in 2005 alone, there is a good chance you or someone you know will be involved in accident at some point in their lives. But the question is what coverage do you need? What does a good Automobile insurance policy cover? What doesn’t it cover?
The problem a lot of the time with buying insurance, is that people don’t always know what is available to them or exactly what there insurance policy includes outside of just fixing the problem when there is one. We are going to take a closer look at what is really included in a automobile insurance policy and what is available to you. This may very slightly by state, so this will just be a guide. Ask your local agent about a specific point if you are not sure or want to learn more about it.
PIP or Personal Injury Protection is just that, it is there to cover you, and is designed to benefit you in four ways. The PIP covers medical expenses, replacement expenses (rental car), work loss (wages lost), and death.
This doesn’t mean if you get in a fender bender and break your leg you can stay home, collect your full wage from work, rent a corvette and get a in home nurse to check up on you. The coverage is helpful but it is not 100% coverage of everything you encounter. The insurance company will only cover a percentage of your salary from work and a percentage of all reasonable medical expenses. The death benefit is a set amount, and they will cover up to that monetary value.
What a lot of people don’t know is that you can customize a policy top suit your needs. Any changes you make will effect you premium, that’s how much you pay each month,6 months or a year. Insurance companies can only do so much but you can make request changes to certain items and make endorsements, add-ons to certain sections if needed.
PAP or Personal Auto Policy is what almost all of us have to some extent and it is geared to be a broad based policy with the family in mind. There are normally three main kinds of coverage included in this policy, they are Liability, Medical and Uninsured Motorists.
PAP will normally cover any vehicle you declare to the insurance company, as well as a newly acquired vehicle, a trailer you own and any auto or trailer you may be using as a temporary substitute because your other, insured automobile, is out of service of one reason or another. You will need to discuss with a insurance agent what the rules are for this as there are limits on the what is considered a newly acquired vehicle and what they will cover. The normal period for newly acquired vehicle that will be a second vehicle is 14 days till the insurance company will no longer consider it a new vehicle and it will be considered uninsured. The policy will also have set weight restrictions on trucks and vans and what you can use them for.
It is important to know Auto insurance is not motorcycle insurance, so the coverage is much different. It is also very important that you remember what exclusions you have in this section, using your auto as a public taxi service or if you decide to take you new corvette down to the drag strip to see what she can do you will be excluded from coverage from coverage in most all policies. There are usually several exclusions listed at the end of each section, you need to make sure you know them before you get in a fender bender
PAP – Liability
This part of the PAP is to cover you in the case that you cause damage to something or someone else and you are held legally responsible for. So if you are in accident you are covered and if you allow some to drive your vehicle and they cause an accident the car will be covered and any damage that is caused in the accident. Check with your insurance agent or read the policy cause there are always exclusions. For example, if you or someone else gets mad at your significant other and decides to play bumper cars with their vehicle, then you and them are up a creek because it was intentional damage and/or injury. It is important that you check this out as there are always several exclusions to every coverage.
Limits. You need to know the limits of your coverage. If you have single limit on your liability it means that only one limit or amount, will cover the entire claim. If you have Split limits are normally considered better as you will have three separate limits to apply for a claim.
If you are in a accident and have a single limit of $20,000 then that will be divided to cover the damage to you, the other driver and the property involved in each separate accident. However if you have Split limits and they are 10/20/10 then you have three separate amounts to apply to each of the three covered areas.
In 10/20/10 the numbers stand for the thousands of dollars you have toward each section of coverage. The first 10 is $10,000 for your personal injury while the 20 is $20,000 for the personal injury that the other person could receive for his injuries. The last 10 is the $10,000 that will be used to cover property damage that was caused as a result of the accident.
PAP – Medical
This coverage provided by this should be obvious, it covers medical expenses and, if needed, funeral expenses. It is also normally designed to cover you and anyone else riding with you in your insured automobile. The limit you select, whether Single or Split will determine how much you have available in the case of a accident. If the coverage overlaps with something else, like workman’s comp or another type of coverage then they will adjust the payment after accident in accord to what other coverage is available, if it is applicable.
PAP – Uninsured Motorists (UM)
This is designed to come into effect in the case that someone hits you and either isn’t insured or doesn’t have enough coverage. Most all states have a NO-Fault Law, the No-fault law would take effect in a accident under the Uninsured Motorist coverage area also. The No-Fault law applies only to bodily injury and usually says, to some degree, that if you are in a accident and have proper insurance, you can file a claim with your insurance company under the No-Fault law. The idea is your own insurance company will pay out and you wont have to go to court sue each other for the damages and waste lots of extra time and money. It is designed to save us all money on the cost of getting insurance.
If you auto is every hit or damaged in a hit and run accident then the Uninsured Motorists (UM) coverage would come in to play there as well. In a accident the Um coverage acts as a gap filler when the regular coverage isn’t enough to cover all the damage incurred or caused in a accident. Again, there are always exclusions to every section but usually in UM there are the fewest, as it acts as a gap filler for coverage weak spots.
Stacked or Non-stacked. Many insurance companies offer and will allow you to Stack or add together insurance limits of multiple policies when you own more then one automobile. There are lots of benefits to having your coverage stacked, primarily is that now you have higher limits in regard to an injured person in a accident.
This is the basic policy break up. You need to remember that each state is different and that not all coverage is mandatory. You can elect to reject certain coverage in you policy or the limits you wish to assign to each type of coverage, you will need to talk to a insurance agent in order to know in your state which types of coverage you can elect not to carry or you can lower the coverage limit on. While this may allow for problems later on, it allows you to have a lower premium, monthly payment, which will of course save you money upfront.
You can also add endorsements to your policy that can be used to remove exclusions or to add exceptions to the various overages so that you have the coverage you need to cover you in regular day to day events. This will raise your premium when you add these endorsements but at least if you add a endorsement to policy a policy about drag racing at the track or delivering valuable objects in your vehicle and then you are covered if you ever get in a accident.
Remember, it is usually better to have slightly more coverage then you need, then to be short and have to pay thousands of dollars out of your own pocket after a accident.