Can Someone Explain These Automobile Coverages? - Part One

A driver who's unlucky or careless can maim or kill other persons and severely damage or destroy property. This deadly potential is a primary reason for having auto insurance. In fact, most states have versions of financial responsibility laws which require proof that you are financially able to pay for any damage that you may cause while driving. Insurance policies are the most common method of complying with these laws. More specifically, drivers are typically required to carry liability insurance at some minimal limit which varies by state.

Bodily Injury Liability

This covers damage or injury that you may cause to other persons. The key is that it involves your being held financially responsible for injuries to other persons as a result of the way you operated your car. This coverage does not apply to your injuries.

Property-Damage Liability

This covers damage that you may cause to the property of others. The key is that it involves your being held financially responsible for property you may damage or destroy as a result of the way you operated your car. This coverage does not apply to damage to your property.

Uninsured motorist coverage

The limits and coverage details also vary widely by state. It typically pays for your expenses that result from an accident caused by an uninsured driver. Now be careful with this coverage. An uninsured driver must be the one who is responsible for causing the loss. "Uninsured" is typically defined to include a person who has no insurance; a person who can't be located ("hit and run drivers");a person who has insurance, but their insurance company is financially incapable to provide coverage; plus other situations which may be considered to involve an "uninsured" motorist. IMPORTANT: The amount of protection under this coverage may depend upon state law. Payment under this coverage part may be controlled by the limits mandated by the state's financial responsibility law. Or, a particular state may have specific uninsured motorist legislation that dictates what limit or limits must be offered to insurance consumers. In some cases, a consumer may choose to reject the coverage. Typically, the rejection must be in writing.

Underinsured motorist coverage

Although the coverage concept is similar to uninsured motorist, this coverage is for injuries caused by a driver who is inadequately insured. Basically, it operates as excess insurance, paying for your expenses which exceed the amount of insurance protection available from the other driver's policy. For example. you are seriously injured by a person who carries a bodily injury liability limit of $25,000. Your injuries amount to $50,000. Your Underinsured Motorist Coverage limit is $100,000. If the loss circumstances qualify for coverage per the policy's underinsured motorist provisions, your policy would pay the difference between $25,000 and $50,000, or an additional $25,000.

Remember that this is merely an introduction to complex policy coverages. Be sure to contact your agent for detailed insurance information. Please watch for Part Two of this topic which discusses other, typical auto policy coverages.


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