Types of Auto Insurance Coverage
What coverage can you get on your auto insurance – or what is auto insurance coverage? That can be a confusing question unless you’re in the insurance industry. An auto insurance policy is made up of several different coverages and many parts. We’ll start with the top one – liability insurance.
What is Liability Insurance?
The only type of auto insurance you’re required by law to carry is liability insurance. Liability insurance covers any damages you might be responsible for in an accident. So, liability is for the other guy. An example of this is if you accidentally tap someone at a stop sign and damage their car a little bit. Your liability insurance covers the damages to their car. Liability insurance typically isn’t subject to a deductible. This means that if you tap someone at a stop sign, you can turn that into your insurance carrier, they get their car fixed and you are not out of pocket any money.
PIP vs. Med Pay
The second coverage we usually see is Personal Injury Protection (PIP) and/or Medical Payments (Med Pay.) These are two different types of coverage. PIP pays your lost wages and medical if you’re involved in an auto accident, regardless of who’s at fault. PIP is typically purchased in increments, such as $2,500, $5,000 or $10,000. Some insurance carriers do not offer more than $10,000 in coverage for PIP. Medical Payments is very similar to PIP, but Medical Payments only covers medical expenses if you’re involved in an auto accident, regardless of who’s at fault. So, if you have lost wages. And if you have health insurance, then you can only file under the health insurance or the Med Pay. Again, Med Pay is purchased in increments such as $2,500, $5,000 or $10,000. Some carriers will let you go over the $10,000 threshold for the Medical Payments coverage.
Uninsured Motorist Coverage
The third type of auto insurance coverage we see is uninsured motorist. This one can be very confusing. Uninsured motorist actually covers you if someone hits you who doesn’t have any insurance. According to Value Penguin, 8.6% of Texas drivers in 2019 did not carry auto insurance. Uninsured motorist insurance covers your bodily injuries, just like it was their liability insurance. There is also uninsured motorist property damage coverage that can cover damages to your vehicle. That is usually subject to a $250 deductible. Any time you choose to not carry comprehensive and collision coverage, we highly recommend you get uninsured motorist. We actually recommend you buy it every time, but it’s specifically more important if you don’t carry comprehensive and collision coverage.
Comprehensive coverage is helpful if your car gets vandalized, stolen, damaged by hail, rock chips, etc. – things that are typically outside of your control. Most of the time, the comprehensive deductible is $500, but you can choose any deductible that you prefer. A deductible is what you’re responsible for before the insurance will kick in. In the example of a glass claim, if it’s just a windshield that only costs $450, you would pay that one out of pocket.
Collision coverage covers your car when you crash it. So, if you had a small tap at the stop sign and there is significant damage to your car, the collision coverage will pay to fix your vehicle. If you don’t carry collision coverage, then you don’t have coverage to fix your car if you’re at fault for the accident. Collision, just like comprehensive, is subject to a deductible – typically $500 or $1,000.
The next coverage we see on auto policies is rental reimbursement. This is one that can also be confusing. Rental reimbursement is not coverage for a rental car if your vehicle breaks down. It only covers you for a rental car if your vehicle was damaged in a comprehensive or collision event. The claim must be paid under your auto insurance in order to use rental reimbursement. In our office, we normally recommend a minimum of $50/day for rental reimbursement. This will be applied towards a rental vehicle for up to 30 days. In this post-Covid era, 30 days might not be enough coverage, but that is what is offered.
The last one we see is roadside assistance. This doesn’t just pay to tow you to the nearest collision center if something happened. It can also provide coverage if you lock your keys in your car or you run out of gas. It will typically pay for a tow for up to 15 miles, 5 gallons of gas or a locksmith.
These are the main coverage options on an auto insurance policy. We’re seeing more and more carriers add new endorsements/coverage. Those are all different – like glass coverage or zero glass deductible, accident forgiveness, decreasing deductibles, etc. But these are the typical coverages on the actual auto insurance policy. We hope this helps you in your search. Let us know if there’s anything more we can do for you!