In dealing with personal automobile and commercial auto policies, many people need a quick primer on what the individual coverages actually mean. Here is a VERY brief overview of standard policy options, and what they mean. Please note that your policy will be much more detailed. YOU NEED TO READ YOUR POLICY AS IT MAY VARY.
1. Bodily Injury Liability – If covered, then the insurance will pay for losses if you are at fault in an accident and are legally responsible for others’ injuries. It does not cover your own injuries. This may include passengers in your car, drivers and passengers of the other car(s) and pedestrians involved in an accident. The policy is usually listed as per person / per accident. This means that any individual in the accident can collect up to the per person amount, but if there are several people in a common accident, they are capped by the per accident amount. Also, beware that there may be a family member limit on the policy which is lower than the per person amount. This coverage is mandatory. Presently minimum limits on this policy is $25,000 for purchased vehicles, and $100,000 for leased vehicles. If this is a commercial vehicle, then you MUST notify the insurance company that the vehicle is for commercial purposes.
2. Property Damage Liability – This means that the insurance company should pay for losses if you are at fault in an accident and are legally responsible for damage to another’s property. This is mandatory in Texas.
3. Uninsured/Underinsured Motorist Bodily Injury (UM/UIM BI)- If you are not at fault in an accident, and the other driver has no insurance (or not enough) then this coverage should provide for medical expenses for you and your passengers. Although this coverage is optional, it should not be avoided. Given the cost of the insurance versus the expense if you are in an accident with an underinsured motorist, it is strongly recommended.
4. Personal Injury Protection (PIP) – This should pay for expenses resulting from an auto accident for you or your passengers, regardless of fault. Eligible expenses generally include medical, funeral, disability and lost wages to the extent that they can be documented. This coverage is optional, but is strongly recommended.
5. Uninsured/Underinsured Motorists Property Damage (UM/UIM PD) – If you are not at fault in an accident this coverage should protect your vehicle if your vehicle is damage by a driver who does not have any and in some case not enough insurance.
6. Medical Payments Coverage (MPC) – This optional coverage should pay for medical, dental and funeral expenses for you or your passengers, regardless of who is at fault. It is similar to PIP, but does not cover lost wages.
7. Comprehensive (comp) – This coverage should cover repair to your vehicle from damage caused by covered risks such as theft, vandalism and hail. This is typically required for financed and leased vehicles but not for purchased and paid for vehicles. If your car has any significant value, it may be a smart purchase.
8. Collision – This covers repair of your vehicle from damage caused in an accident, regardless of fault. It is typically required in financed purchases. If your car has any significant value, it may be a smart purchase.
9. Rental Reimbursement – This coverage helps pay for the cost of a rental car while your vehicle is being repaired as a result of a covered loss. This coverage is optional, but strongly recommended, especially if you use your car to get to/from/during work.
10. Towing – This coverage should pay to have your vehicle towed if it is disabled. This coverage may be duplicative of an auto club policy or a vehicle warranty.
11. Gap – This coverage applies if your vehicle is a total loss, and you owe more than your vehicle is worse. Although this is optional, it should be considered a mandatory purchase for any financed vehicle in which there is a possibility that you may owe more than the . Put simply, if you owe more than your car is worth, and it is totaled, you still have to pay the difference unless you have this coverage.