When you look at your auto insurance policy, you may see lots of words and numbers that seem very confusing. What do these coverages mean? What do the numbers represent? A standard auto insurance policy will typically include a few main coverages, a few optional coverages, and deductibles. In addition, the coverages will typically have a number accompanying them, which represent that coverage’s limit amount (amount that the insurance company will pay out.)
Liability to Others
State law requires that we have liability coverage on our auto insurance policy, but not much else. Liability coverage is what is paid out to others in the event of an accident in which you are at fault. It will be listed on your policy as “Bodily Injury” and “Property Damage.” Bodily injury and property damage coverage allows you to select the amount of coverage that you want. Each state will have a “State Minimum Limit (SML)” which is rarely sufficient in the event of an accident. The limits of liability options will typically look something like:
| Bodily Injury:
(each person/each accident) |
Property Damage: |
| $25,000/50,000 or 25/50 (SML)
$50,000/100,000 or 50/100 $100,000/300,000 or 100/300 $250,000/500,000 or 250/500 |
$25,000 or 25
$50,000 or 50 $100,000 or 100 |
The first number in the set ($25,000) means that in the event of an accident, your insurance company will pay up to $25,000 for the person in the other vehicle’s injuries. The second number in the set ($50,000) means that the insurance company will pay up to $50,000 if multiple people are injured. Bodily injury is then accompanied by property damage options. The limit that you choose for property damage will determine how much the insurance company will pay out for the damage to other person’s vehicle.
Uninsured/Underinsured Motorist
Uninsured motorist coverage is optional in most states, but it is highly recommended that you opt for this coverage. When this coverage is selected, the insurance company will you when you are in an accident in which you are not at fault, and you sustain injuries or damage to your vehicle by a party that either has no insurance, or does not have high enough coverage limits to pay for your medical expenses or to repair the damage to your vehicle. If you elect not have this coverage, and the at fault party does not sufficient insurance, you will be responsible for paying for any losses sustained from that accident from your own pocket. The coverage limits are similar to liability coverages, and will typically look something like:
| Bodily Injury:
(each person/ each accident) |
Property Damage: |
| $25,000/50,000 or 25/50
$50,000/100,000 or 50/100 $100,000/300,000 or 100/300 $250,000/500,000 or 250/500 |
$25,000 or 25
$50,000 or 50 $100,000 or 100 |
This coverage also requires that you select a deductible, which will be paid by you for repairs to your vehicle. The standard deductible for uninsured motorist property damage is $250. However, you may select a higher deductible if you prefer.
Comprehensive
Comprehensive coverage covers the cost of damages to your vehicle when you are involved in an accident that is not caused by a collision. Comprehensive coverage covers losses such as theft, vandalism, hail, or hitting an animal. You may choose the deductible that you prefer, which typically range anywhere from $0-$2,000. The deductible is the amount that you will pay, and the insurance company will cover the rest.
Collision
Collision coverage covers the cost of damages to your vehicle when you are in an accident with another vehicle. This coverage also applies if you are in a collision accident with an object. This coverage is applicable whether you are at-fault or not at fault. However, if you are not at fault, it is preferable that the at-fault party’s insurance pays for damages to your vehicle.
Optional Coverages
There are several optional coverages on an insurance policy. Not all insurance carriers offer these optional coverages, and those that do, the coverage terms and limits may vary. A few coverage options that you may see are Roadside Assistance, Rental Reimbursement, Loan/Lease Payoff, or Custom Equipment Coverage.
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