FAQ: Car Insurance
What is liability insurance?
In most circumstances, the liability insurance of a party at fault in a car accident pays for the resulting damages. It does not usually pay for the damages of the party not at fault in the accident. There are two kinds of liability insurance: bodily injury and property damage. Bodily injury expenses include medical bills, rehabilitation expenses, and lost wages. Property damage expenses include the repair or replacement of any items belonging to another person that are damaged or destroyed.
Who is usually covered by automobile liability insurance?
Named insured. This is the person or people named in the policy, no matter what car they are driving.
Spouse. Even if the spouse of the named insured is not named on a policy, liability insurance almost always covers him or her, unless the couple does not live together.
Other relative. This refers to anyone living in the household with the named insured who is related to the insured by blood, marriage or adoption, usually including a legal ward or foster child.
Anyone driving the insured vehicle with permission. Someone who steals the car is not covered.
Which vehicles are normally covered under an auto insurance liability policy?
Named vehicles. An accident in a non-named vehicle is covered only if a named insured (see above) was driving.
Added vehicles. This includes any vehicle with which the named insured replaces the original named vehicle, and any additional vehicle the named insured owns during the policy period (you may be required to notify the company of the new or different vehicle within 30 days after you acquire it).
Temporary vehicles. A temporary vehicle is any vehicle, including a rental vehicle, that substitutes for an insured vehicle that is out of use because it needs repair or service, or has been destroyed.
What is uninsured or underinsured motorist coverage?
Uninsured or underinsured motorist coverage (UM coverage) pays for a person’s injuries if he/she is struck by a hit-and-run driver or by someone who does not have adequate insurance -- either because they have no coverage or because they do not have enough coverage -- to pay for the resulting injuries. Normally, this type of coverage is limited to bodily injury, and it will not pay for damage to a vehicle or for other types of property damage. To get that kind of coverage, a person will need collision coverage in his/her policy.
Who is usually included in uninsured/underinsured motorist coverage?
Most UM coverage will pay up to a policy's UM limits for injuries caused to:
- An injured person or a relative who lives with him/her, while a driver or passenger in the vehicle named in the UM insurance policy or any other vehicle, or while a pedestrian
- anyone else driving the insured vehicle with permission, and
- anyone else riding in the vehicle named in the insurance policy, or in any other vehicle in which the named insured is driving but which he/she does not own.
What are the limits on the ability to collect under an uninsured/underinsured motorist provision?
UM coverage usually limits an ability to collect -- and the amount received -- as follows:
- If the accident involves a hit-and-run driver, the injured person must notify the police within 24 hours of the accident.
- If the accident involves a hit-and-run driver, the driver's car must have actually hit the injured person -- being forced off the road by a driver who disappears is not sufficient.
- UM coverage will be reduced by any amounts received under other insurance coverage, such as a personal medical insurance or any applicable workers' compensation coverage.
- If the injured person or a relative are injured by an uninsured motorist while in someone else's car, the UM coverage will be secondary to the UM coverage of that other car's owner.
What is collision coverage?
Collision coverage will pay for the repairs to a vehicle if the owner is the one who is at fault in the accident. (Ideally, if the other party is at fault in the accident, their property damage liability insurance will pay for the repairs to the car.) Collision coverage is usually the most expensive type of auto insurance.
What is comprehensive coverage?
Comprehensive coverage pays for damage to a car that was caused by events other than a car accident. Covered events can include theft, fire, vandalism, natural disasters -- even hitting a deer. Comprehensive coverage, like collision coverage, usually insures only the actual value of the car and not the replacement value.
How is the actual value of a vehicle determined?
The actual value of a car is the amount that the car was worth at the time that it was damaged or destroyed. Unless the car is brand new or a collector's item, this value is usually less than the replacement value -- that is, what it would cost to repair damages to the vehicle with materials of similar kind and quality. You can find the actual value of your car by going to a library or bookstore and referring to a Kelley Blue Book. You can also find the value online at the Kelley website at http://www.kbb.com.