What Coverage’s should you have on your vehicle?

August 21, 2015 at 9:15 am Leave a comment

What Coverage’s should you have on your vehicle?

The coverage’s that an individual needs is highly dependent upon their personal and financial situation.   The key to getting the right coverage’s is to understand them and to make an informed decision.   Most states have minimal requirements for liability coverage, and a few have requirements for personal injury protection.   Let’s examine each coverage and its applicability.

Bodily Injury Liability or BI coverage will provide protection to your or anyone meeting the definition of an insured under your policy.  It is important to read the policy definitions to understand who will be covered while driving your vehicle.   BI coverage is typically provided on a per person and a per occurrence basis, such as $25,000 per person and $50,000 per accident.  This means that the most the insurer will pay is $25,000 per person but not more than $50,000 in totality.   Policies can also be purchased as a combined single limit, such as $300,000CSL.   This means that the insurer will pay up to $300,000 in total, irrespective of the parties involved with no individual limit up the purchased amount of coverage.

Property Damage or PD coverage will provide protection in the event that you or anyone meeting the definition of an insured under your policy.   Most states have a requirement for a minimum amount of property damage coverage.   This coverage is provided on a per occurrence basis, such as $10,000 per accident.   It is important to note with the rising prices of vehicles, state minimums are often insufficient, so it is recommended that you consult with an agent to secure the appropriate amount of coverage.

Uninsured Motorist Coverage protects you or others as defined in your policy in the event that an uninsured driver causes an accident resulting in injury to you or other covered parties.   Like liability, this coverage will generally have split limits on a per person and per occurrence basis, although some carriers also offer combined single limits.   In some states this coverage can be offered as stacked versus non stacked.  Stacked means that your UM coverage can be multiplied by the number of vehicles on the policy.   For example, if you had $25,000/$50,000 UM stacked on four insured vehicles your coverage would be $100,000/$200,000.    Non stacked means that your coverage’s are what you purchased and the other insured vehicles would not come into consideration.

Under-insured Motorist coverage or UIM protects you or others as defined in your policy in the event that someone with limited liability coverage causes an accident resulting in injury.  Consider a situation where a person has minimal limits of $25,000/$50,000 but your injury is far more severe.   If you had UIM coverage of $100,000/$300,000, it would kick in to cover portions above the underlying at fault party coverage.   In some states you would be entitled to the full amount of your coverage, in others there may be an offset for underlying liability coverage.

Uninsured Motorist PD and Under-insured motorist PD, or UMPD/UIMPD, provides coverage to your vehicle in the event that an uninsured or under insured motorist causes property damage.    These coverage’s vary by state and availability should be determined through a local agent.

Collision provides insurance to your vehicle in the event of an accident, irrespective of fault.   This coverage typically has a deductible that is applied in the event of a crash.    If you have a $2000 dollar estimate for damages and your deductible is $500, your net proceeds from the insurer would be $1500 dollars.

Comprehensive provides insurance to your vehicle for damages other than collision such as theft, vandalism or floods.   Filing a claim under comprehensive is not considered a chargeable accident.   There is typically a deductible.   Some carriers provide specified perils only coverage as opposed to comp, so it is important to understand what those specified perils cover.

Personal Injury Protection or PIP provides coverage to the insured and others as defined in the insurance policy for medical expenses and related costs as the result of an accident.   It will coverage reasonable medical expenses and in some cases things like lost income, replacement or substitute services.   Only 13 states require PIP coverage.  In other states it is optional.  The coverage limits vary by state.

Medical Payments Coverage provides coverage to the insured an others as defined in the insurance policy for medical costs associated with an auto accident.   Medpay is available in most jurisdictions and can be purchased in some PIP states to coverage out of pocket deductible and copays.

Aftermarket Equipment provides coverage for non factory add ons to your vehicle such as new rims, a high end stereo or vehicle customization.    It is important to understand that an insurer is covering only what comes out of the factory in most situations.   If you have add on equipment, you will need to consider adding this coverage.

Rental coverage provides a daily amount, typically reimbursable, for rental charges incurred when your vehicle has been involved in an accident.  In some situations, there may be rental available through your carrier when the insured vehicle is inoperable.   This should be verified with your agent or insurer.

Towing Coverage will provide reasonable reimbursement in the event of a vehicle breakdown.   Coverage’s and limitations will vary by policy.

Roadside Assistance may also be available depending on the insurance carrier.

The big question now is how much coverage is needed and that depends on your individual situation.   It is recommended that you speak with a licensed agent or direct seller of insurance to determine exactly what is needed to protect your assets.   As a final disclaimer, the content of this blog should not be construed as legal advice.  If you have a legal question, please consult with an attorney.

ee insurance carrier.

The big question now is how much coverage is needed and that depends on your individual situation.   It is recommended that you speak with a licensed agent or direct seller of insurance to determine exactly what is needed to protect your assets.

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Contact the Author

Chris Tidball is a claims and revenue management consultant and author of the "20 Essential Rules" series of self and organizational improvement books. You can ask him a question at chris@christidball.com

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