Basic coverage and definitions that you need to know


Auto insurance is mandatory in all states in the US and if you have to drive around legally anywhere in the US, you will need auto insurance coverage. Any standard auto insurance policy will have different types of coverage. The premium will be charged based on the coverage you choose. In order to arrive at the right type of coverage you must ideally contact your insurance carrier or your insurance agent. Make a list of things that you would want in your policy and the insurance provider will be able to suggest the right type of coverage.

Very often it has been noticed that most people are either over insured or underinsured. Both these have their own disadvantages. Hence, it is important to have adequate coverage. Each state has its own minimum coverage which is mandatory. However, that will never be sufficient in case you want to file a claim. So, you should ideally have the minimum prescribed coverage as well as the extra coverage that you will require.

Bodily injury liability – This coverage offers protection in case you injure or even kill someone while you were behind the wheel. The amount of coverage that you will need will also depend on the type of car you drive. In case, you are involved in a serious accident, you should have adequate coverage to protect the assets in case a lawsuit is filed. This type of coverage is required legally.

Damage to property liability – This coverage pays for the damage you cause to the other person’s property and it will also provide for legal assistance. This type of coverage is also required legally.

Medical costs, no-fault or personal injury protection – This type of coverage will usually cover medical costs of the driver as well as the passengers who are involved in the accident (up to a specified limit) regardless of who was at fault at the time of the accident.

Uninsured motorist coverage –This type of coverage (UMBI) will pay for  the bodily injuries that you or the persons in your vehicle sustain due to an accident caused by an uninsured driver or in the event of a hit and run case. As per the law, this coverage will have to be offered with liability insurance.

The uninsured motorist property damage (UMPD) coverage will pay for damage caused to your car, by an identified uninsured motorist.

Comprehensive insurance – This type of insurance covers damage to your vehicle due to other reasons other than a collision. It includes damage caused due to theft, vandalism, fire, flood, storm etc.

Collision insurance –This type of coverage will pay for damage caused to your car due to collision with an object or another vehicle, regardless of who was the at-fault driver.

Rental car reimbursement – This coverage will pay for the cost of renting a vehicle in case your car is damaged in an accident. Sometimes serious damages to the vehicle cannot be fixed within 24 hours. This type of coverage is very useful as your work will not be disrupted as it will take care of the reimbursement of rentals until such time when your car is fixed.