Your personal automobile could be one of the most indispensable items you own. Without it, you may not be able to commute to work, drop your children off at school, or take a vacation. But it is also one of the greatest liabilities you own. Catastrophic lawsuits and legal judgments occur daily due to accidents resulting in death, long-term disability, major medical expenses, and property damage.

First, take proper precautions to reduce your risk like obeying traffic laws and performing regular maintenance on your vehicle. Second, understand how your auto insurance steps in to protect you should you have a claim. Here’s a good start:

Liability coverage for an auto is available in two ways:

1.       A single limit that applies to all injuries and property damage you cause in a single accident. One pool of money pays for all your liability.

2.       A split limit policy has three limits:        

a.       One for bodily injury you cause to a single person

b.      One for all injuries caused in the accident (involving two or more people)

c.     One for all the property damage you cause in the accident

An example for a split limit policy would be:

Mike runs a stop light and hits a vehicle with two passengers. He has a split liability policy with limits of 50/100/50.  (a/b/c)

Passenger One has Bodily Injury bills totaling 30k and owns the vehicle. The Property Damages incurred total 19k. Mike’s auto policy is sufficient for Passenger One because he has 50k for bodily injury per person. He only has 70k left (100k – 30k) for Passenger Two. His third limit shows that Mike also has 50k for property damage.

Passenger Two has bodily injuries totaling 65k. Although Mike’s pool has 70k left, Mike’s per person limit states the insurance company will max at 50k for Passenger Two. So, Mike will have to fork over 15k.

Now, what about you? What if someone hits you and he doesn’t have sufficient coverage? No coverage? Or he doesn’t stick around to introduce himself?

There’s coverage for that. It’s called Uninsured and Under Insured motorist coverage. (UM/UIM) When you are injured in an accident caused by another auto, the economic value of your injury equals your out-of-pocket expenses and compensation for pain and suffering. If the other driver in underinsured for your case, you may get a legal judgment against him and try to collect from him personally. Because this may be a long process, look to your UM/UIM

1.       Uninsured Motorist – either a hit and run, or no auto insurance

2.       Underinsured Motorist – have auto coverage, but not enough to cover your Bodily Injuries or Property Damage

Next on the list is coverage for your medical bills. You will see this as either Medical Payments Coverage or Personal Injury Protection Coverage (PIP).Regardless of fault, these coverages will pay your medical bills in the event of an accident up to the limit you purchased. PIP as an added protection of reimbursing you for some of your lost wages and possibly a replacement service like hired help.

Last, what about your vehicle?

Comp and Collision offer coverage for your vehicle. Collision insurance covers damage from colliding with another object like a vehicle or post. Comprehensive steps in to cover other types of accidents including fire, wind, hail, and theft. These coverages have separate deductibles, so evaluate your options when comparing coverage.

                We will be exploring each coverage in more detail in our blog! Stay Tuned!