Auto Insurance Frequently Asked Question - What do these mean?
What is included in an automobile insurance policy?
The standard private passenger automobile insurance policy can have up to four different coverages. Only the first coverage is required by California law - Bodily Injury & Property Damage
- Bodily Injury
Cover the medical costs and lost wages for the party that you hit when you are at fault in an accident and deemed to be legally liable. Usually in the form of a split limit such as $15,000 per person/$30,000 maximum per accident. Basically this states that the company will pay each person up to $15,000 but a maximum pay out per accident of only $30,000. Some companies also offer a combined single limit which doesn’t state a value per person, but only a value per occurrence. An example would be $100,000 per occurrence. The state minimum is $15,000/$30,000 and is required by law. Also note that most leasing companies require at least $100,000/$300,000 of coverage.
- Property Damage
Covers just what it says, the damage done to the other party’s property. The state minimum is $5,000 and is required by law. The damage usually involves damage done to the other party’s car, but also includes damage to light posts, telephone poles, or if you hit a building.
- Optional Coverages:
- Medical Coverage (MED) provides medical payments to the policy owner and any other passengers in the car when there is an accident.
- Uninsured Motorist Liability Bodily Injury (UMBI) provides uninsured motorist and underinsured motorist protection for the policy owner. Both coverages are designed to compensate the injured policy owner when the negligent driver has an insufficient amount of liability insurance under his/her own policy. Typically, UMBI covers only bodily injury losses, but property damage losses are included in some states.
- Comprehensive and collision (Comp/Coll) covers damages to your car when it is involved in an accident.
What is a deductible?
The deductible is the amount of money you must pay "out of pocket" in the event of a loss before payment is made by your insurance company.
What is liability coverage?
If you are involved in an accident, liability coverage covers the costs related to the injuries and property of the other parties involved in the accident, up to the limits of your policy. This does not include your own medical expenses or the expenses of any of your passengers.
What is the minimum amount of auto insurance that I am required to carry?
Insurance requirements relating to minimum coverage differ from state to state. Liability is the only insurance required by law in California. The limits required in California are often referred to as "15/30/5" coverage and include:
- $15,000 bodily injury per person
- $30,000 maximum per accident
- $5,000 property damage per accident
Is minimum coverage sufficient?
In determining your coverage limit, one of the most important factors to consider is the overall value of your assets. If, for example, you own a business or a home, you may want higher limits of liability coverage to protect those assets. Another consideration is to protect future earnings. While there is no set formula, you always want to secure coverage in proportion to your assets, so in case an accident did occur, you have sufficient coverage to cover the loss. If you are at fault and severely injure another person, you may be held personally liable for the bodily injury and physical damages beyond the scope of your liability coverage.
Additionally, if you lease or finance your car, it's likely that your liability coverage limits may have to be higher, usually $250/500,000. You should check with the leaseholder to determine the appropriate level of your coverage. For our customers who own businesses we recommend a minimum of $1,000,000 in auto liability coverage. Most auto policies do not offer a liability limit this high so a personal umbrella may be needed.
Our main rule of thumb is to buy as much liability insurance as you can afford. PIA customer support agents are licensed, non-commissioned insurance professionals and can provide advice regarding general coverage limits.
What is uninsured motorist coverage?
By law, every driver in California is required to have minimum (or 15/30/5) coverage. If you are in an accident where the other driver does not have insurance, uninsured motorist coverage ensures that you will be reimbursed for medical costs and auto repairs, as allowed in your policy. Injuries caused by a hit and run driver are also covered as part of uninsured motorist coverage.
- Uninsured motorists bodily injury
Not required by law, but a necessity with the large number of uninsured motorists in California. This coverage pays for the injuries caused by someone who hits you who has no insurance. Again in the form of a split limit with the minimum of $15/$30,000. If you are hit by someone with no insurance, and you have this coverage, your insurance company will pay you for your injuries. If you do not have this coverage you will have to take the time and expense to sue the other party. Odds are that if they had no insurance in the first place, they probably don’t have anything else.
- Uninsured motorists property damage
Also not required by law, provides coverage for your vehicle if you are hit by someone who has no insurance. The maximum amount of coverage afforded by any policy, without collision, is $3,500. However you will only receive the fair market value of your car if that value is less than $3,500. Note this does not cover you for Hit & Run.
- Uninsured motorists collision deductible waiver
(only accompanies collision coverage) - Not required by law, will pay your deductible if you are hit by someone who has no insurance.
- Underinsured motorists bodily injury
Not required by law, covers you for your bodily injury bills if you are hit by someone who does not have enough insurance. In the form of a split limit or a single limit with some companies. Example if you purchase $15/$30,000 UM coverage, and you are hit by someone who only has $15,000 of bodily injury coverage but you have $30,000 of bills, the company will pay you up to $15,000 since you were hit by an underinsured motorist.
What is medical payment coverage?
Medical payment coverage covers medical/funeral expenses resulting from injuries sustained in an accident involving the covered car. Your expenses will be paid up to your limit, as well as the expenses of other passengers traveling in your car, regardless of who caused the accident. Medical payment coverage options range from $0 (none) up to $5,000.
- Medical Payment
Covers you and the people in your vehicle for a specified amount. It also covers you when you are around any car not just your own. Maximum is usually $5,000 per person in the vehicle. This is not meant to be any form of health insurance but only a supplement to your existing coverage, or to protect you in case one of your passengers has no health insurance.
What is comprehensive coverage?
Also known as physical damage "other than collision" coverage, comprehensive coverage includes coverage for losses by fire, theft, vandalism, and falling objects, as well as other events listed in your policy.
- Comprehensive
Not required by law, but is required if you purchase the vehicle through a loan or lease a vehicle. Covers the vehicle for anything other than collision, such as theft, vandalism, fire, lightning, stolen car, stereo, rocks thrown up from other vehicles that hit your windshield, and if someone keys or scratches you car. This also the coverage under which your vehicle is insured for damage resulting from hitting an animal. Check the cost to lower or raise the deductible. Remember the deductible is how much of the damage you have to pay before the insurance company will pay for the damage. The lower the deductible the higher the premium. However you will usually find that with Comprehensive coverage if you lower the deductible to $50 or $100 it will only cost you an additional $10-25 per vehicle per year. A much better option than a $500 deductible.
What is collision coverage?
Collision coverage covers loss to your (the insured's) vehicle caused by a collision with another vehicle or object. Collision coverage does not include coverage for bodily injury or property damage resulting from a collision.
- Collision
Not required by law, but once again required by banks and lease companies if the vehicle is purchased on borrowed funds. Covers the vehicle for everything other than comprehensive when you are in an accident regardless of fault. Also this is the section that covers you if you are the victim of a hit and run. Hit and run is not covered under uninsured motorists coverage. Check the cost to lower or raise the deductible. Remember the deductible is how much of the damage you have to pay before the insurance company will pay for the damage. The lower the deductible the higher the premium. Most people select a deductible of $500. A $250 deductible may cost you an additional 5% of the premium while a $1000 deductible will save you an additional 5% of the premium.
Towing
Pays for the cost to have your car towed after an accident. You must have Comprehensive and Collision coverage for this coverage to take affect.
Rental Car Benefit
Pay for the cost to rent a car following an accident. You must have Comprehensive and Collision coverage for this coverage to take affect.
Lease Gap Coverage
A very important coverage, pays the difference in the vehicles market value at time of loss, and the value stated in the lease. If you lease a car we highly recommend this coverage.
