An automobile insurance contract is between the insured (first party) and the insurance company (second party). Insurance serves the purpose of covering the risk of financial liability or the loss of a motor vehicle the owner may face if their vehicle is involved in a collision resulting in property or physical damages. Consumers may be protected by different levels of coverage depending on which insurance policy they purchase. Some states require drivers to carry mandatory liability insurance coverage to ensure that their drivers can cover the cost of damage to other people or property in the event of an accident. Liability coverage is referred to as a third party because it benefits a third party who is not part of the original insurance policy.
When a potential client meets with an attorney, it is common for them to say that they have “full coverage.” Full coverage generally means that the client has all of the coverage the company offers with the maximum limits.
Bodily Injury and Property Damage Liability Coverage
All drivers in California are supposed to carry a minimum amount of liability insurance on their vehicles. There are two types of liability coverage: bodily injury coverage and property damage coverage. If you cause an accident that injures or even kills another person, the Bodily Injury (BI) portion of your liability insurance will pay for the related expenses. Bodily Injury (BI) will cover hospital and medical bills, rehabilitation, long‑term nursing care, funeral expenses, lost earnings, pain and suffering, and other expenses, up to the limits you select.
If you cause an accident that damages another person’s property, the Property Damage (PD) portion of your Liability insurance will pay for the related expenses. Property damage (PD) will cover the expense to repair or replace damaged items, including other vehicles, lamp posts, houses or even a pet, up to the limits you select.
The minimum amount of liability insurance required by law is $15,000 per person, $30,000 per accident and, $5,000 for property damage. This is often referred to as a 15/30 or 15/30/5 policy. A 15/30 insurance policy represents the maximum amount for an automobile accident claim. The first number represents the maximum amount an insurance company will pay per person for injuries sustained in said accident. The second number represents the maximum amount an insurance company will pay per accident. An insurance company will pay no more than $15,000 per person for injuries, and no more than $30,000 per accident regardless of how many people were injured.
For example, you were at fault for an accident that caused bodily injury to another person and caused damage to another vehicle. Say the other person’s medical bills were $2,000 and your medical bills were $1,500. The damage to the vehicle was $3,000. All medical expenses and damages would be covered under a 15/30/5 policy because they are under the liability limit. If a driver carries the minimum liability policy and causes an accident which results in medical expenses and damages exceeding the limits the insurance company will pay the maximum limit. The person who caused the accident is responsible for paying the remainder which could result in your personal assets being put at risk.
Uninsured/Underinsured Motorist Coverage
Uninsured motorist coverage protects you in the event that you are involved in an accident with an uninsured driver. This type of coverage is generally referred to as UM/UIM coverage. Uninsured and underinsured motorist breaks down into two coverage types: bodily injury and property damage. This type of coverage will reimburse you for medical expenses, costs, and property damage caused by the uninsured motorist. In addition to injuries to the driver, the bodily injury portion of uninsured and underinsured motorist coverage may also cover injuries to your passengers or family members who are driving the vehicle at the time of such an accident.
Like bodily injury coverage, uninsured motorist coverage is represented by two numbers on your policy. Generally coverage begins at 15/30 and can increase in increments up to 100/300. With most policies, if you have uninsured motorist coverage, you will also have underinsurance coverage. Underinsurance coverage will pick up where the liability coverage ends in the case that the expenses exceed the maximum amount of the policy.
For example, if your injury claim is worth $30,000, and the adverse driver has a 15/30 bodily injury liability coverage, and you have 100/300 underinsurance coverage, you will be fully compensated for the value of your claim.
Please note that UM/UIM is fault-based coverage. If the other driver is not at fault for the accident, UM/UIM coverage does not apply.
Medical Payments Coverage
Medical payments coverage (also known as Med Pay) is another type of coverage that you may have on your auto insurance policy. The premium for this coverage is relatively affordable. Medical payments coverage is single-limit per person coverage. The coverages offered by insurance companies are generally $1,000, $2,000, $5,000, $10,000, $25,000, $50,000, and $100,000. This coverage pays for reasonable and necessary medical expenses resulting from an auto accident. It can also help cover you if you or your family member is injured in another car or injured as a pedestrian. Med Pay generally covers medical expenses for you, your passengers and any family members driving the insured vehicle at the time of the accident, no matter who is found to be at fault.
Unlike UI/UIM coverage, Med Pay coverage is not fault-based. Even if you are in an accident that does not involve any other drivers, this coverage will still pay for reasonable and necessary medical expenses. Your Med Pay coverage also pays for the medical bills of every passenger in your vehicle at the time of the accident, regardless of fault. For example, if you have four passengers in your vehicle at the time of an accident, then you and your four passengers all have Med Pay coverage up to your limits. If you have $5,000 in Med Pay coverage, you and every one of your passengers have this limit available to them for an accident. Also, Med Pay coverage is not vehicle specific. It will follow you to protect you in any accident you are involved in, no matter the vehicle.
Collision and Comprehensive Coverage
Collision coverage provides coverage for a vehicle involved in an accident, regardless of who is at fault. This coverage is designed to provide payments to repair the damaged vehicle. It can also provide payments if the vehicle is not repairable or totaled. Most car crashes and automobile accidents fall under this kind of insurance policy. The types of damages include: colliding into another vehicle, another vehicle colliding with yours, or colliding into a streetlight, pole, or some other stationary object.
Comprehensive coverage covers a vehicle that is damaged by another type of incident that are not considered collisions. For example, vandalism, theft, or collision with an animal is considered comprehensive damage. This type of coverage can also be known as “other than collision” or “comprehensive coverage.”
No-fault insurance is a type of insurance in which the provider reimburses damages incurred by its customer in an accident, regardless of who is at fault. Essentially, this eliminates the need for a driver to go after another party’s insurance company in order to be provided with damages caused by the adverse party. A frequently asked question about no-fault insurance is what does it cover? No-fault insurance covers bodily injury, medical bills, and other losses. However, no-fault insurance does not cover property damage.
Personal Injury Protection (PIP)
Personal Injury Protection, or “PIP,” is an extension of auto insurance that covers medical expenses. In some cases, PIP will cover lost wages and other damages. PIP is sometimes called “no-fault” coverage because it is not fault-based coverage. PIP is also called no-fault coverage because a claimant’s, or insured’s, premium should not increase due to a PIP claim. PIP can be a great supplement to your health insurance.
Personal injury protection insurance is similar to medical payments coverage but with an important difference. Medical payments coverage pays the medical costs for you and your passengers in the event of a covered auto accident, regardless of who is at fault. Unlike PIP, medical payments coverage doesn’t cover other expenses such as lost wages, rehabilitation services, funeral costs and services, such as childcare, that you may be unable to perform due to injuries from a covered accident.
Rental Car, Towing, and Wage Loss Coverage
Generally, this coverage will provide you with a finite sum of rental car coverage in the event your vehicle is involved in an accident and it needs repair or if it is a total loss. The limit on this coverage is usually less than $1,000. There is also a limit on the daily cost of the rental car. Generally, most policies will pay up to $30 per day and will provide a maximum of $500 – $800 of coverage.
In the event you are involved in an accident, it is comforting to know you can have your vehicle towed to a repair shop, and that you can obtain a rental car without the delay involved with relying on the adverse driver’s insurance to pay for your towing and rental car expenses. Generally, your carrier will arrange a direct billing with the rental car company. When they do allow for direct billing, the rental car company bills your insurance carrier directly instead of you. Most first party and third party carriers have this arrangement with Enterprise Rental Car.
Wage loss coverage is available on most auto policies. It will provide you with a finite sum of wage loss coverage. Each insurance company is different regarding the amount of wage loss coverage that they offer. In most cases, it can be as little as $1,000 or as high as $10,000. The premium for this coverage is reasonable. In most cases, there usually is a ten (10) day or two (2) week period that must elapse before this coverage becomes effective. Wage loss coverage pays only a portion of your wage loss, such as two thirds of the actual wages, and will only pay up to the limit of your coverage.