Auto Insurance: 6 coverage levels available on a standard policy

Before purchasing insurance for your vehicle, it is a good idea to learn about the coverage levels available. Here are the six most common coverages on a basic auto insurance policy. They are normally priced separately by the insurance company.

1. Property Damage Liability. If you damage someone’s property in an auto accident, this coverage level pays for the costs of repairing such damage. ‘Property’ covers an extensive range of structures, but the most common payout is on damage to another person’s vehicle.

2. Bodily Injury Liability. This covers you in the event that you injure another person in a car accident and need to pay their medical bills. It is always recommended to insure more than the minimum legislative requirement because causing serious injury to another person in a car accident could result in being slapped with a heavy lawsuit. The idea here is to ensure you have enough liability insurance to prevent loss of important assets including property and investments.

3.Personal Injury Protection (PIP). This coverage level is similar to the above in that it covers you in the event that you injure another person in an auto accident and need to pay their medical expenses. The difference between this and bodily injury liability insurance is that PIP covers broader expenses associated with the injury including lost wages and counselling. It is a shrewd idea to pay the extra money for PIP if you have it.

4.Collision Coverage. If your vehicle comes into contact with another car or object (e.g a tree) and it is damaged or destroyed, this will cover the costs of repairing it or replacing it. Collision coverage usually works on a deductible basis, meaning the policyholder will need to pay the first $X of expenses of any claim, where ‘X’ ranges between $250 and $1,000 on most policies. This is paid out regardless of whether or not you caused the collision.

5.Comprehensive. The word comprehensive is misleading in auto insurance terms- it does not provide a blanket level of coverage. Instead, comprehensive insurance covers your expenses in the event that your vehicle is lost or damaged because of something other than a collision. This encompasses theft, fire, vandalism and natural disasters. It is frequently offered with a $100-300 deductible, meaning that policyholders can avail of a lower premium.

6. Uninsured/Underinsured Motorist. The name is self-explanatory here – uninsured motorist coverage pays for expenses if you, a family member, or your designated driver is involved in an incident with an uninsured motorist. Underinsured motorists are an extension of the above, whereby you are covered in the event of an accident with a driver who has insufficient insurance to pay for your total loss.


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