What’s Covered by Basic Auto Policy?

It’s a rainy Friday morning and you’re driving to work. The driver in front of you slams on his brakes and you run into the rear end of his vehicle. Your car is damaged; the car in front of you is damaged; you’re injured; and the driver of the other vehicle is hurt.* Do you know what your auto insurance policy likely will and will not cover? Read on to learn more.

While states vary in what insurance they require drivers to carry, most of their requirements will be met by a basic auto insurance policy:

Liability. Liability insurance coverage helps to protect you and your family against financial loss arising from legal liability if you cause an accident in which someone is hurt or their property is damaged. You may want to consider purchasing more than the state-required minimum amount of coverage because if you’re involved in a serious accident, you may be sued — and perhaps for a large sum of money. Liability coverage may help to protect your assets by potentially offsetting some or all of those claims.

Bodily injury liability — This coverage applies to injuries that you (or someone driving the car with your permission) cause to someone else — for example, the driver of the vehicle you hit.
Property damage liability — This coverage pays for damage you (or someone driving the car with your permission) cause to someone else’s property. Typically, this means damage to someone else’s vehicle, such as the car you rear-ended, but it also might include damage to lamp posts, telephone poles, fences, buildings or other structures caused by your vehicle.

Medical Payments or Personal Injury Protection (PIP). This coverage pays medical bills incurred by you and your passenger(s) injured in an accident. Costs are covered up to the amount specified by the policy. PIP may cover a broader range of medical costs than standard Medical Payments coverage, such as lost wages. It may also cover funeral costs.

Collision. This coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. Regardless of fault, the coverage typically reimburses you the amount needed to repair or replace your damaged vehicle, minus the deductible you select. This coverage may be required if your vehicle is leased or if you have an outstanding loan on the vehicle.

Comprehensive. Comprehensive coverage helps protect your investment in your vehicle by covering losses to the vehicle resulting from fire, theft, falling objects, riots, storms, earthquakes, floods and collision with a bird or animal. Like Collision coverage, Comprehensive coverage typically includes a deductible which you select. Comprehensive coverage may be required if your vehicle is leased or if you have an outstanding loan on the vehicle.

Uninsured and Underinsured Motorist Coverage. This coverage will help to reimburse you, your passengers and anyone driving with your permission if your vehicle is hit by an uninsured or hit-and-run driver. Underinsured Motorist coverage comes into play when an at-fault driver has insufficient insurance to pay for your total loss. This coverage also will apply if you are hit as a pedestrian.

*Note: The above scenario is fictitious and for illustrative purposes only.

Source: Farmers Insurance Group

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