Many times people tell me that they have full coverage on their auto insurance and a close look at their auto insurance policy reveals that all they carried was PIP (Personal Injury Protection), PD (Property Damage), Collision and Comprehensive. There are lots of gaps in their portfolio.
Just yesterday I was involved in a car accident; a young man, who was so apologetic, and who proudly stated, “This is my first car accident,” had rear ended my vehicle. Accidents do happen! Fortunately the damages were minor. But I was reminded that at the time of an accident is not the best time to find out if you have the right coverages
You may want to know what all the various coverages mean ahead of time so you can figure out which coverage and how much you should carry.
First I must give you a disclaimer. I’m going to talk in basic and general terms. I am not making any recommendations here and encourage you to review your Auto Policy to get a full understanding and to know the specific terms and how it applies to your situation.
Major components of an Auto Insurance Policy include:
Bodily Injury Liability (BI) – This provides coverage for injuries to the other party caused in an accident that you are responsible or liable for. This includes your defense costs if you are sued.
Most companies offer you limits ranging from $10,000/$20,000 (10/20) to $250,000/$500,000 (250/500) – The first number represents the maximum they will pay per person and the second is the maximum they will pay per accident. For example if you carry 10/20, your policy will pay up to a maximum of $10,000 per person and a maximum of $20,000 per accident.
You should carry the limits that will give you peace of mind and protect your assets. For example if a judge awards the other party $100,000 for their injuries and your policy only pays 10,000, where will the other $90,000 come from? The more assets you have the higher liability limit you should carry.
Property Damage Liability (PD) – This provides coverage for damage to the property of others if you are responsible for an auto accident. This could include the other vehicle, a house or other real property as well as a street light, sign etc.
Typically you can buy anywhere from $10,000 to 100,000 limit for this coverage. It does not cost a lot to increase this coverage and similar to the example given above if your policy doesn’t have enough to cover the damages they can come to you for the difference.
Personal Injury Protection (PIP) – This is mandatory coverage in the state of Florida and several other states in the U.S.
Florida is a No Fault state, which basically means if you are in an auto accident regardless of whose fault it is, you are responsible for your first $10,000 of medical bills and lost wages. Your Personal Injury Protection (PIP) coverage can pay toward these expenses. It also includes limited funeral expense coverage.
Uninsured Motorist Coverage (UM) – This coverage protects you if you’re involved in an accident, it’s the other person’s fault and they didn’t carry Bodily Injury Liability insurance, or didn’t carry enough of it and it may also apply if they were a hit and run driver. This coverage pays towards your medical expense and pain and suffering. You can choose limits similar to the limits discussed above for Bodily Injury Liability.
Medical Payments (MP) – Pays towards medical and/or funeral expense for covered drivers and their passengers. This would be in addition to the PIP and UM coverage listed above.
Comprehensive (COMP) – This coverage pays towards the damage to your vehicle caused by something other than collision. For example if your vehicle is stolen or vandalized, damaged by windstorm or hailstorm, is flooded, if you hit an animal an/or damage caused by fire. Typically the claim is settled based on the amount it takes to repair your vehicle or in the event of a total loss, the actual cash value (acv) of your vehicle at the time of the loss.
Collision (COLL) – This coverage covers the damage to your vehicle if it’s involved in an accident. Like Comprehensive coverage above, the claim is settled based on the amount it takes to repair your vehicle or in the event of a total loss, the actual cash value (acv) of your vehicle at the time of the loss.
Rental Reimbursement – This coverage pays toward the cost of a rental vehicle while your car is being repaired after a car accident. Typically you choose the limit on a per day basis and usually coverage is limited to 30 days.
Towing – Typically pays for the cost of towing your vehicle if it is not able to be driven. Usually there is a distance and payment limit for this coverage.
Roadside Assistance – This coverage provides assistance in the event you get stranded on the road. Examples include if your battery is dead, your key is locked in the car, you run out of gas or get a flat tire.
Keep in mind, with Towing and Roadside Assistance coverage, some companies consider it as a claim against your policy and this may affect your future rates for car insurance.
I encourage you to take the time to review your policy and to discuss the coverages with your agent before you may actually need it.