Most states require drivers to carry auto insurance to protect themselves and others financially after a car accident. Basic auto insurance also covers the costs of damage when the car has been broken into, damaged by natural events or burned in a fire, and it typically provides at least six types of coverage.
Some states require at least one or two types of coverage, such as Personal Injury Protection (PIP) and uninsured motorists coverage (UM). Here’s a close look at what type of coverage you get with the most basic auto insurance coverage:
Bodily Injury Liability (BI) and Property Damage Liability (PD)
This type of basic auto insurance coverage covers the costs associated with injuries to people involved in the accident, and not any damage to property or the vehicle. It only covers other people’s bodily injuries, or the costs associated with a death that occurs during the accident. If you don’t have this type of coverage, you may be responsible for paying several thousands of dollars in damages.
Property damage liability (PD) protects you against a lawsuit when you are involved in an accident that causes damage to another vehicle, house or other property.
Collision and Comprehensive Coverage
Collision insurance covers the cost of damages to your car when your car gets hit by another vehicle or object. When you lease or finance a car, you will usually be required to get this type of basic auto insurance coverage.
Comprehensive coverage covers more than collision insurance, covering the cost of damages to your vehicle and other vehicles you’re driving, coverage when your car is stolen, and the costs associated with damage from floods, fires and other natural events. You can benefit most from this type of auto insurance coverage when you have purchased a brand new vehicle or are financing or leasing your vehicle.
Uninsured Motorist Bodily Injury (UM) and Underinsured Motorist Bodily Injury (UNDUM)
This type of auto insurance covers medical expenses up to the limit on your policy when you are involved in an accident when the other driver doesn’t have insurance. This type of insurance covers the policyholder, other drivers and passengers.
Underinsured motorist bodily injury (UNDUM) provides reimbursement for damages when the person who was responsible for the accident does not have enough insurance coverage. This type of coverage also covers the policyholder, other drivers and passengers.
Personal Injury Protection (PIP) and Medical Payments
Personal Injury Protection (PIP) is required by many states, and pays for medical expenses and lost wages for you, and any passengers, in the event of an accident. Medical Payments coverage will pay for the costs of medical expenses incurred by you and your passengers after an accident. Any family members on the policy who are injured in someone else’s car will also be eligible for reimbursement of some medical expenses with this type of coverage.
Sources:
http://www.insure.com/car-insurance/basics.html
http://insurance.freeadvice.com/insurance_help.php/102_170_569.htm
http://www.carinsurance.com/CoverageDefinitions.aspx
