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SaveFrequently Asked Questions about Automobile Insurance
Q: What is liability insurance?
A: If a driver is at fault in a car accident, liability insurance pays for the damages that he/she caused to someone else. It does not pay for his/her own damages. There are two kinds of liability insurance: bodily injury and property damage. Bodily injury expenses include medical bills, rehabilitation expenses, and lost wages. Property damage expenses include the repair or replacement of any items belonging to another person that are damaged or destroyed.
Virtually every state requires some level of liability coverage. To find out what your state requires, ask your attorney.
Q: Who is usually covered by automobile liability insurance?
A: Liability insurance usually covers the following people:
Named insured. This is the person or people named in the policy, no matter what car they are driving.
Spouse. Even if the spouse of the named insured is not named on a policy, liability insurance almost always covers him or her, unless the couple does not live together.
Other relative. This refers to anyone living in the household with the named insured who is related to the insured by blood, marriage or adoption, usually including a legal ward or foster child.
Anyone driving the insured vehicle with permission. Someone who steals the car is not covered.
Q: Which vehicles are normally covered under an auto insurance liability policy?
A: Liability insurance usually covers the following vehicles:
Named vehicles. An accident in a non-named vehicle is covered only if a named insured (see above) was driving.
Added vehicles. This includes any vehicle with which the named insured replaces the original named vehicle, and any additional vehicle the named insured owns during the policy period (you may be required to notify the company of the new or different vehicle within 30 days after you acquire it).
Temporary vehicles. A temporary vehicle is any vehicle, including a rental vehicle, that substitutes for an insured vehicle that is out of use because it needs repair or service, or has been destroyed.
Q: What is uninsured or under insured motorist coverage?
A: Uninsured or under insured motorist coverage (Uninsured Motorist coverage) pays for your injuries if you are struck by a hit-and-run driver or by someone who does not have adequate insurance either because they have no coverage or because they do not have enough coverage to pay for your injuries. Normally, this type of coverage is limited to bodily injury, and it will not pay for damage to your vehicle or for other types of property damage. To get that kind of coverage, you will have to add collision coverage to your policy.
Q: Who is usually included in my uninsured/under insured motorist coverage?
A: Most Uninsured Motorist coverage will pay up to your policy's Uninsured Motorist limits for injuries caused to:
- you or a relative who lives with you, while a driver or passenger in the vehicle named in your Uninsured Motorist insurance policy or any other vehicle, or while a pedestrian
- anyone else driving your insured vehicle with your permission, and
- anyone else riding in the vehicle named in your insurance policy, or in any other vehicle you are driving but which you do not own.
Q: What are the limits on my ability to collect under an uninsured/under insured motorist provision?
A: Uninsured Motorist coverage usually limits your ability to collect and the amount you receive as follows:
- If your accident involves a hit-and-run driver, you must notify the police within 24 hours of the accident.
- If your accident involves a hit-and-run driver, the driver's car must have actually hit you being forced off the road by a driver who disappears is not sufficient.
- Your Uninsured Motorist coverage will be reduced by any amounts you receive under other insurance coverage, such as your personal medical insurance or any applicable workers' compensation coverage.
- If you or a relative are injured by an Uninsured Motorist while you are in someone else's car, your Uninsured Motorist coverage will be secondary to the Uninsured Motorist coverage of that other car's owner.
Q: What is collision coverage?
A: Collision coverage will pay for the repairs to your own vehicle if you are the one who is at fault in the accident. (Ideally, if the other party is at fault in the accident, their property damage liability insurance will pay for the repairs to your car.) Collision coverage is usually the most expensive type of auto insurance. Before choosing this kind of coverage, assess the value of your car to make sure it is worth the amount you will be paying in premiums. An insurance company will usually give you only the actual cash value of your car and not the amount that you will have to spend to replace your car. If you have an older car that does not have a very high actual value, it will probably not be worth it for you to carry this kind of coverage.
Q: What is comprehensive coverage?
A: Comprehensive coverage pays for damage to your car that was caused by events other than a car accident. Covered events can include theft, fire, vandalism, natural disasters even hitting a deer. Comprehensive coverage, like collision coverage, usually insures only the actual value of your car and not the replacement value. Before choosing this kind of coverage, check the value of your car. If your car has an extremely low value, paying the high premiums of comprehensive coverage may not be the most advisable.
Q: How do I determine the actual value of my car?
A: The actual value of your car is the amount that your car was worth at the time that it was damaged or destroyed. Unless your car is brand new or a collector's item, this value is usually less than the replacement value that is, what it would cost to repair damages to your vehicle with materials of similar kind and quality. You can find the actual value of your car by going to a library or bookstore and referring to a Kelley Blue Book.
Q: What is no-fault automobile insurance?
A: About half of the states in the U.S. have some form of law that requires drivers to carry insurance that will pay for their medical bills and lost wages up to certain dollar amounts regardless of who was at fault in an accident. The intent of laws is to eliminate injury liability claims and lawsuits in small accidents. The advantage of insurance is prompt payment of medical bills and lost wages without any arguments about who caused the accident. But most insurance which is often referred to in policies as Personal Injury Protection (PIP) provides extremely limited coverage:
- pays benefits for medical bills and lost income only. It provides no compensation for pain, suffering, emotional distress, inconvenience or lost opportunities.
- coverage does not pay for medical bills and lost income higher than the PIP limits of each person's policy. PIP benefits often fail to reimburse fully for medical bills and lost income.
- often does not apply to vehicle damage; those claims are paid under the liability insurance of the person at fault, or by your own collision insurance if you carry it.
Ask your attorney to find out whether your state is a no-fault state.
Q: When Benefits Aren't Enough
A: All laws permit an injured driver to file a liability claim, and lawsuit if necessary, against another driver who was at fault in an accident. The liability claim permits an injured driver to obtain compensation for medical and income losses above what the PIP benefits have paid, as well as compensation for pain, suffering and other general damages.
Whether and when you can file a liability claim for further damages against the person at fault in your accident depends on the specifics of the law in your state. Some states have "add on" laws that put no restrictions on your right to file a liability claim in addition to your PIP claim. In these states, you can always file a liability claim against the person at fault for all damages in excess of your PIP benefits. Other states have different types of thresholds that an injured person must reach before being permitted to file a claim for full compensation against those at fault for an accident. Some states have a monetary threshold only, some a serious injury threshold only, and still others have both. States with both requirements permit a liability claim if an injured person meets either one. Your attorney can best help you understand and navigate these "no fault" laws.
Q: My auto insurance rates seem to keep going up. How can I cut some of the cost?
A: Here are a few suggestions for ways to reduce your premiums:
- Shop around for insurance. Just because your current company once offered you the best deal doesn't mean it's still competitive.
- Increase your deductibles.
- Reduce your collision or comprehensive coverage on older cars.
- Find out what discounts are available from your company (or from a different company). Discounts are often given to people who:
- use public transit or carpool to work
- Take a class in defensive driving (especially if you are older)
- Own a car with safety features such as air bags or anti lock brakes
- Install anti theft devices
- Are students with good academic records, or
- Have no accidents or moving violations.
- Find out which vehicles cost more to insure. If you're looking to buy a new car, call your insurance agent and find out which cars are expensive to repair, targeted by thieves or involved in a higher rate of accidents. These vehicles all have higher insurance rates.
- Consolidate your policies. Most of the time you will pay less if all owners or drivers who live in the same household are on one policy or at least are insured with the same company.
Copyright 2003 Nolo, Inc.