Auto Insurance Coverage And Deductible FAQ

Feb 24, 2011

By Staff writer State Farm™ Employee

Auto insurance can be confusing, especially since state laws vary and require different kinds of coverage. Below is a general Q&A so that you can familiarize yourself with a few key terms as you make your way through the quote process.

Q: Who does my auto insurance policy cover?

A: An auto insurance policy typically covers you, your spouse, relatives who live in your home, and other licensed drivers who have permission to drive your insured vehicle.

Q: What are auto insurance “coverages”?

A: An auto insurance policy generally consists of several kinds of coverage, which represents different aspects of your overall auto insurance coverage. There are many kinds of coverage; some examples are liability, personal injury protection, medical payments, and collision.

Because all 50 states have different auto insurance laws, coverage descriptions vary from state to state. Below you can find some general information about the most common auto insurance coverage. For more specific information about your state, talk to your local agent.

Liability Coverage

Auto liability coverage pays for damage if you’re legally responsible for accidentally injuring someone or for damaging another vehicle or other property in an auto accident.

Auto liability coverage falls into two categories:

  1. Bodily Injury Liability covers medical expenses, pain and suffering, lost wages, and other special damages.
  2. Property Damage Liability covers damaged property, and may include loss of use. Your Liability coverage also pays legal defense and court costs.

State laws usually dictate the minimum amounts of insurance required, but higher amounts are often available.

Personal Injury Protection (PIP)

In some states, this coverage pays the reasonable and necessary medical expenses for covered persons for treatment due to an auto accident. Depending on the state and the particular coverage, it may also pay for rehabilitation, lost earnings, replacement of services (for example, childcare if a parent is disabled), and funeral expenses.

Medical Payments

This coverage pays reasonable and necessary medical and funeral expenses for covered persons when those expenses are related to an auto accident. It’s available in most states.

Collision

This coverage helps pay for damage to a vehicle caused by a collision with another vehicle, or a collision with an object or a vehicle rollover. Collision coverage typically requires a deductible.

Comprehensive Coverage

This coverage helps pay for an insured vehicle’s loss or damage that is not caused by a collision or vehicle rollover. Examples of this type of damage or loss include fire, wind, hail, flooding, vandalism, hitting an animal, and theft. A deductible may apply.

Uninsured Motorist

The uninsured motorist coverage pays for damages when a covered person is injured in an auto accident caused by a driver who does not have liability coverage. In some states, this auto insurance coverage may also pay for property damage.

This coverage varies by state and depends upon policy provisions.

Underinsured Motorist

This coverage pays for damages when a covered person is injured in an auto accident caused by another driver who has insufficient liability coverage.

Application of this auto insurance coverage varies by state and depends upon policy provisions.

Rental Reimbursement

This coverage pays for renting a car when yours is disabled due to an auto accident.

Daily allowances or limits vary by state or policy provisions.

Emergency Road Service

This coverage pays for having your car towed due to a breakdown.

Towing limits vary by state or policy provisions.

Q: What is an auto insurance “deductible”?

A: A deductible is the amount of your own money you have previously agreed to pay in the event of an accident or any other covered loss. Generally, this is the upper-limit of what you will pay in the event of a claim.

Q: Should I choose a higher or lower deductible?

A: Typically, choosing a higher deductible means a lower monthly payment; choosing a lower deductible means a higher monthly payment. When choosing a deductible, you must decide how much you would be willing and able to pay out-of-pocket if you ever had to file a claim. Would you have enough savings to pay a high deductible? Or would you rather pay a higher monthly premium and keep the deductible low?

Q: Should I carry collision and comprehensive coverage?

A: The laws differ from state to state. You may be required to carry collision or comprehensive coverage if your vehicle is leased or financed. Once you have paid off your car, and its value decreases, you might consider dropping this coverage to save money on your car insurance. Consider, though, whether the savings would be enough to offset the risk of having to pay the entire cost of repairing or replacing the vehicle.

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