What are the basics of automobile insurance?

An automobile policy may include several different forms of coverage to protect you in case of an automobile accident. Within one policy there may be:

  • liability coverage,
  • medical expense coverage,
  • collision coverage,
  • uninsured motorist, and
  • under-insured motorist coverage.

Each of those types of coverage is dramatically different and each of them has a different objective.

Liability coverage is designed to protect you, the insured, in the event you are involved in a collision in which some other person is injured as a result of your alleged negligence. If a person is injured and they contend that you are negligent, then they may assert a liability claim against you for their medical expenses, lost wages, pain and suffering, resulting disabilities, disfigurement, etc.

Your liability insurance policy would cover you in that instance by providing you with an attorney to defend you in that claim and by indemnifying (reimbursing) you for any judgment rendered against you in that case up to your policy limits. If your policy limits are $50,000, but the judgment entered against you is for $500,000, then your insurance company is only obliged to pay $50,000. The remaining $450,000 may come out your pocket.

Also within an automobile insurance policy there may be comprehensive coverage. Comprehensive coverage is a type of first party coverage wherein you may make a claim against your own policy as a result of damage to your vehicle. If your vehicle was damaged in a collision and you do not wish to or cannot assert a claim against the other party (or if you were at fault), then you may make a claim against your own policy under your collision coverage. Your insurance company will then pay you for repair cost of your vehicle. In the event your vehicle is totaled, it will pay you the fair market value for that vehicle. If someone other than you was at fault, your insurance company may then have a right of recovery against that other driver.

Most forms of collision coverage do carry a deductible. This means that you would only be compensated by your insurance carrier for the amount of money that exceeded your deductible amount.

Auto insurance coverage also offers what is referred to as medical expense coverage or personal injury protection coverage. This is a type of first party coverage wherein you may make a claim against your own insurance company for medical expenses incurred as a result of a collision. If you are injured in an automobile collision while in your car, you can make a claim against your policy for payment of your medical expenses to the extent that they were reasonable and necessary as a result of this collision. If you are a passenger in someone else's vehicle, then, assuming there is medical payments coverage for the vehicle you are riding in, you can make a claim for medical payments under that policy. You may be able to make a claim for medical payments under your
own policy, too.

Another form of coverage under a typical automobile insurance policy is uninsured motorist and under-insured motorist coverage. This is a very important form of coverage because it protects you in the event that you are involved in a collision that is the fault of an uninsured or under-insured motorist. Uninsured motorist coverage is a very broad form of coverage. Even if you are a bicyclist or a pedestrian struck by an uninsured motorist (or by a hit-and-run motor­ist), you may make a claim for and recover under your own uninsured motorist coverage.

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