While different states have different mandates for auto insurance, most basic car policies consist of six types of coverage. Here’s what you need to know about each.
While different states mandate different types of insurance and there are several additional options (such as gap insurance) available, most basic auto policies consist of: bodily injury liability, personal injury protection, property damage liability, collision, comprehensive and uninsured/underinsured motorist.
Note that each type of coverage is priced separately, so there is variability in policy limits and pricing.
Bodily injury liability
Bodily injury liability coverage applies to injuries that you, the designated driver or policyholder, cause to someone else. You and family members listed on the policy are also covered when driving someone else’s car with their permission.
It’s very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money. It’s recommended that policyholders buy more than the state-required minimum liability insurance, enough to protect assets such as your home and savings.
Medical payments or personal injury protection (PIP)
This coverage pays for the treatment of injuries to the driver and passengers of the policyholder’s car. At its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.
Property damage liability
This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else’s property. Usually, this means damage to someone else’s car, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures your car hit.
Collision coverage pays for damage to your car resulting from a collision with another car, an object, such as a tree or telephone pole, or as a result of flipping over (note that collisions with deer are covered under comprehensive). It also covers damage caused by potholes.
Collision coverage is generally sold with a separate deductible. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you’re not at fault, your insurance company may try to recover the amount they paid you from the other driver’s insurance company and, if they are successful, you’ll also be reimbursed for the deductible.
This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object. Comprehensive covers events such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer. It will also pay to repair your windshield if it is cracked or shattered.
Comprehensive insurance is usually sold with a separate deductible, although some insurers may offer the glass portion of the coverage without a deductible.
Uninsured and underinsured motorist coverage
Underinsured motorist coverage reimburses you, a member of your family, or a designated driver if one of you is hit by an uninsured driver or a driver who doesn’t have sufficient insurance to pay for your total loss. This coverage also offers protection in the event a covered driver is the victim of a hit-and-run or if, as a pedestrian, you are struck by an uninsured or underinsured motorist.
Auto insurance is required in New Jersey. Whether you are buying a new insurance policy or renewing your current policy, you must make many decisions about the coverage you need and how much you can pay. The Standard Auto Insurance Policy provides a number of different coverage options and the opportunity to purchase additional protection. The Standard Policy is the type of policy chosen by most New Jersey drivers.
It is important to understand your needs. Do you rent or own your own home? Do you have assets to protect (including income from a job)? Will your own health insurance cover auto accident injuries? How much insurance coverage can you afford? These are some of the questions you should ask yourself before choosing a specific coverage plan.
Getting basic car insurance coverage is easy, but first, you have to know what basic coverage consists of. Most likely, you want a cheap car insurance policy and to get the pain of dealing with it over with as quickly as possible. Take my money, give me a proof of insurance and leave me alone mentality when it comes to car insurance is typical.
Not everyone knows all the car insurance terms and lingo.
As a matter of fact, probably a good chunk of people have no idea what coverage they have on their vehicle right now.
Basic car insurance coverage is often referred to as whatever the state forces you to purchase. Plan on buying a policy with Personal Liability and, depending on in which state you reside, PIP coverage and Uninsured Motorist.
Personal Liability Insurance
The foundation of all car insurance policies is the personal liability coverage. This is what protects you when you injure someone in a car accident and or damage their car or property. The minimum coverage required is determined by each state. But many insurance agents say the state minimum liability limits are really not enough. Preferred limits of liability are 100/300/100.
How Does It Work?
The coverage you select is the maximum allowed to pay out. What comes as a surprise to many people is liability coverage does not apply to you.
It is in place to protect other drivers on the road who are injured or have damage to their vehicles caused by your car.
Three coverage limits are listed on a typical personal liability car insurance policy. All three are often listed together as three numbers separated by slashes with no other pertinent information describing the coverage.
Example Liability Limits 100,000/300,000/100,000 or 100/300/100
- Bodily Injury Liability Limit Per Person: The first limit listed in the example is $100,000. The dollar amount is the maximum your policy will pay out to a single person injured in an accident you caused.
- Bodily Injury Liability Limit Per Accident: The second limit listed in the example is $300,000. This is the maximum amount of money which can be paid out per accident. So multiple people would have to be injured in order for more than the 100,000 to payout. Multiple serious injuries could max out a low limit fast. This is a key factor in why state minimum car insurance limits are too low.
- Property Damage Liability: The third limit of $100,000 is for property damage. It includes coverage for any inanimate object belonging to someone other than you. Hit and damage a car, damage a guardrail, or drive into a house are all examples of property damage. As you can imagine, the cost of property damage can add up quickly. It is important to have enough coverage to provide proper protection.
Uninsured motorist is a mandatory requirement in some states. A minimum amount will be required depending on the state in which you live.
Many insurance agents will recommend matching personal liability limits and uninsured motorist limits. Uninsured motorist is the coverage you can draw from if an uninsured driver damages your vehicle or causes someone in your vehicle injury. Underinsured motorist applies if you have damages which exceed the other driver’s limits and you carry higher limits.
Example of Uninsured Motorist 100,000/300,000 or 100/300
It works similarly to personal liability, the $100,000 is the max allowed for a single person and the $300,000 is the max allowed for the accident. Uninsured motorist can seriously come in handy. The process to take someone to court and sue them personally for damages because they did not have car insurance can be lengthy. And remember, a lot of the people driving without car insurance often do not have the means to pay thousands of dollars in damages.
PIP and Medical Coverage
PIP is short for Personal Injury Protection. It is similar to medical coverage but provides a little more protection. The key factor that makes PIP different from medical coverage is that it pays out for expenses related to injuries such as loss of income and rehabilitation costs.
The state minimum requirement for medical coverage usually falls somewhere between $3,000 and $50,000. Medical coverage is an important part of car insurance and even if it is not a minimum requirement, you should think about selecting this coverage.
Not So Basic Coverage
- Comprehensive Coverage: Windshield damage, fire, theft, vandalism, flood, and deer are the most common comprehensive claims. Any physical damage claim that does not involve a collision would be covered under comp.
- Collision Coverage: Hit an inanimate object, also known as an object that does not move by its own will? Collision coverage is the coverage which provides compensation for these fender benders.
- Roadside Assistance: Need a tow or help with a lockout? Roadside assistance is a handy coverage for many insured drivers.
- Car Rental: It provides a defined dollar amount towards to cost of renting a car when your vehicle is being repaired due to a covered loss.
What is ‘Automobile Liability Insurance’
Automobile liability insurance is financial protection for a driver who, while operating a vehicle, harms someone else or their property. Automobile liability insurance only covers injuries or damages to third parties and their property, not to the driver or the driver’s property. The two components of automobile liability insurance are bodily injury liability and property damage liability. Automobile liability insurance does not have a deductible.
BREAKING DOWN ‘Automobile Liability Insurance’
Bodily injury liability of an automobile liability insurance policy covers an at-fault driver, so they don’t have out-of-pocket expenses for others’ emergency and ongoing medical expenses, loss of income and funeral costs. It also helps cover the policyholder’s legal fees when the accident results in a lawsuit. Property damage liability helps cover costs, such as repairing a home or retail establishment damaged by a vehicle crash and repairing the vehicles of other drivers involved in the accident. Automobile liability insurance has two limits for each of these components; one is per person and one is per accident.
Automobile liability insurance is required by state law, but each state sets its own minimum standards for how much coverage drivers are required to carry. For example, as of 2014 in New York, all drivers must have liability insurance that covers will pay at least $25,000 for injuries to one person, $50,000 for injuries to multiple people, $50,000 for death to one person, $100,000 for death to multiple people and $10,000 for property damage. In any state, drivers can purchase more liability insurance than the state’s required minimums, and it’s often smart to do so since medical bills can be very expensive.
Coverage Beyond Automobile Liability Insurance
For protection against damage to the vehicle itself from causes ranging from accidents to storms, auto owners can also purchase comprehensive insurance and collision insurance. Comprehensive insurance helps pay to replace or repair your vehicle if it’s stolen or damaged in an incident that’s not a collision. Comprehensive typically covers damage from fire, vandalism or falling objects (like a tree or hail). Collision insurance, meanwhile, helps pay to repair or replace your car if it’s damaged in an accident with another vehicle or object, such as a fence or a tree. These two types of insurance are optional for vehicles that are owned free and clear. If the vehicle is financed, the lender may require this additional coverage. The lender wants to protect the vehicle’s full value since it serves as collateral for the loan.
How do you know what types you need? Is it required by your state? Are there ways to save money and still have the right amount of coverage? Below we detail 5 types of coverages and provide a few scenarios where you would benefit from having a non-required coverage added to your policy along with some tips to save some money depending on your vehicle and budget.
1. Liability Insurance
Liability insurance covers you in the event you are in a covered car accident and it is determined the accident is a result of your actions. Liability insurance will cover the cost of repairing any property damaged by an accident as well as the medical bills from resulting injuries. Most states have a minimum requirement for the amount of liability insurance coverage that drivers must have. If you can afford it, however, it is usually a good idea to have liability insurance that is above your state’s minimum liability coverage requirement, as it will provide extra protection in the event you are found at fault for an accident, as you are responsible for any claims that exceed your coverage’s upper limit. You wouldn’t want to run the risk of having to pay a large amount of money because your policy limit has been exceeded.
2. Collision Coverage
If there is a covered accident, collision coverage will pay for the repairs to your car. If your car is totaled (where the cost to repair it exceeds the value of the vehicle) in an accident, collision coverage will pay the value of your car. .
If your car is older, it may not be worth carrying collision coverage on it, depending on the value. On the other hand, if you have a more expensive car or one that is relatively new, collision insurance can help get you back to where you were before any damage to your car. Note: If you have a lienholder, this coverage is required.
3. Comprehensive Coverage
What if something happens to your car that is unrelated to a covered accident — weather damage, you hit a deer, your car is stolen — will your insurance company cover the loss? Liability insurance and collision coverage cover accidents, but not these situations. These situations are covered by Comprehensive (other than Collision) coverage.
Comprehensive coverage is one of those things that is great to have if it fits in your budget. Anti-theft and tracking devices on cars can make this coverage slightly more affordable, but carrying this type of insurance can be costly, and may not be necessary, especially if your car is easily replaceable. Note: If you have a lienholder, this coverage is required.
4. Personal Injury Protection
While Comprehensive coverage may be something you don’t need to purchase, Personal Injury Protection (PIP) is something you should. The costs associated from an accident can quickly add up, and in order to cover those costs Personal Injury Protection is available. With this coverage, your medical bills along with those of your passengers will be paid, no matter who is at fault for an accident. Note: This coverage is not available in all states.
5. Uninsured /Underinsured Motorist Protection
While state laws mandate that all drivers should be insured, this is unfortunately not always the case. Another issue that can arise is that while a driver may have liability insurance, many states have relatively low minimum coverage requirements that may not be enough to cover all of the expenses of an accident. So, if someone is legally responsible for damages related to an accident, you won’t receive any payment if they do not have coverage or you will receive less than you need to cover the cost of damages if your damages exceed their coverage amount. This is the type of situation where Uninsured and Underinsured Motorist Protection would help with expenses.
From accidents to injuries, having a commercial vehicle for your business comes with many risks. However, for many businesses having a company vehicle is crucial, which means having the right protections in place are just as crucial as having the vehicle itself.
Let us introduce you to Commercial Auto Insurance. The insurance that protects your business from vehicle-related accidents, so you can sit back and enjoy the ride.
Read on to understand if this insurance is right for your company.
What Is Commercial Auto Insurance?
Business Automobile Liability Insurance is for businesses that own and operate vehicles. This insurance helps companies cover the costs of repairing or replacing company vehicles within the boundaries of the insurance policy.
Every business that uses vehicles to transact business needs Commercial Auto Insurance. Companies using their personal vehicles for business-related purposes may find that their personal insurance does not cover business-related risks. Personal Auto Insurance on a vehicle used for business purposes may not have enough insurance, leaving the company financially responsible for losses.
Business Automobile Liability Insurance was purposefully designed to help protect businesses from the unknown. With higher coverage limits than personal auto insurance, it helps safeguard businesses and improves a business’ chances of continual operations.
Commercial insurance contracts create partnerships between companies and insurers. Under these contracts, insurers are required to pay for physical damages based on the terms of the insurance policy and up to the limits of the insurance coverage. Insurers can’t cancel Commercial Auto Insurance if a business files a claim against the insurance policy.
Businesses can purchase Commercial Auto Liability coverage for their cars, trucks, heavy-duty trucks, and semi-trucks.
Depending on the coverage selected, this insurance covers vehicles the business owns, contracts with, and leases. It also helps cover injured employees should an accident happen.
What Are the limits on Commercial Auto Insurance?
Limits are boundaries built into the coverage of an insurance policy. Businesses can choose the amount of their insurance coverage limit, which will determine the premium payment each month, semi-annually, or annually. Typical coverage limits available for Commcercial Auto Liability coverage are $500,000 and $1,000,000.
Businesses that are in industries that place drivers at a greater risk of experiencing an accident or incurring damage to their company vehicle benefit from purchasing a policy with a larger limit. With more insurance coverage, these companies have a higher limit for their insurers, before they are required to cover some of their liability costs.
How Much Does Commercial Auto Insurance Cost?
There are many factors insurers consider when they rate Commercial Auto Insurance. For instance, they consider the industry a business belongs to when they determine the cost of insurance. The following are additional factors insurance companies consider when determining the rate a business pays for Commercial Auto Liability coverage:
- Employee driving records
- Items being transported
- The value of the vehicle
- The type of vehicle
- Amount of coverage
- Type of coverage
- Other risks
With risks being the driving force behind the cost of Commercial Auto Insurance, insurance companies examine a business’ potential for risk to determine the cost of coverage.
If you own a vehicle of any kind, you probably know that insurance is required by law. Plans vary widely depending on your vehicle, how you use it and what province you live in.
Auto insurance requirements by province
Car insurance requirements in Canada depend on which province you live in and who you buy your insurance from.
If you live in British Columbia, Saskatchewan or Manitoba, your provincial government requires basic auto insurance that covers injury to yourself and passengers. Additional coverage is available from your insurer.
British Columbia and Manitoba
Purchase ICBC Autoplan insurance in British Columbia and MPI Autopac insurance in Manitoba from your Co-operators Financial Advisor. For more complete coverage, including insurance for theft or damage to your car, ask us about your coverage options.
Ask your local Financial Advisor for SGI insurance in Saskatchewan, which includes basic vehicle damage (with a deductible), personal injury and liability coverage up to $200,000. We also offer extended Third Party Liability coverage, and physical damage coverage at a lower deductible to reduce the amount you would pay if you have a claim.
If you live in Quebec, the provincial public automobile insurance plan covers you for injury or death due to an automobile accident, no matter who is at fault or where in the world the accident happened. However, under the Automobile Insurance Act, you also have to have third-party liability insurance of at least $50,000 for property damage. This protection, available from private insurers such as The Co-operators, covers any property damage caused to another party.
In all other provinces and territories (Alberta, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Ontario, Prince Edward Island or the Yukon) all car insurance is available only from private insurance companies like The Co-operators.
Find a Financial Advisor
Get an Auto insurance quote
Learn more about insurance requirements in each province and territory.
What your auto insurance plan must include
While insurance plans vary by province, these are the most common types of insurance you must have before you can use your vehicle. Make sure you check the following when you compare auto insurance quotes:
Liability: If you are in a car accident and are held legally liable for other people’s injuries, or for damage to another person’s vehicle or property, your insurance company will pay up to the total amount listed on your policy. You are responsible for amounts above that limit.
Accident Benefits: This covers medical expenses not covered by a provincial health plan, plus loss of income as the result of an auto accident. In some provinces, you may be entitled to additional benefits if you are someone’s caregiver. Accident Benefits are paid regardless of who was at fault in an accident. Not available in Quebec.
Uninsured Automobile: Protects you and your family if you are injured or killed by a hit-and-run driver or by an uninsured motorist. It also covers damage to your vehicle caused by an identified uninsured driver. Not available in Quebec.
Direct Compensation Property Damage (DCPD): Available only in New Brunswick, Nova Scotia, Ontario, P.E.I. and Quebec, this covers the cost of loss or damage to your car in an accident for which you were not entirely responsible. To qualify, the other driver has to be identified, insured and found to be at least partially at fault. In some provinces, you can no longer sue another person for damage to your car.
Your insurance company will look at the degree to which you are responsible for the accident and your deductible to determine how much compensation you will receive. You will be paid if you were partly or not at all responsible for the accident. Be sure to review your car insurance policy for specific details, restrictions and exclusions.
You may want additional coverage to be sure you’re fully protected in case of an automobile accident, theft or damage. Here are some coverage options to consider:
Collision: You’re covered for the cost of repairs or replacement of your car in the event of a collision where you are partially or totally at fault.
Specified Perils: This covers you for specific perils such as fire, lightning, theft*, windstorm, earthquake, hail, explosion, riot and others.
Comprehensive: With this option, you’re covered for any threat or danger other than collision, including theft*, damage or loss caused by vandalism, projectiles, and falling or flying objects such as stones kicked up by a truck in front of you. The important thing to remember is that this coverage applies to your vehicle only, not you or your passengers.
*Comprehensive and Specified Perils do not insure your car against theft if a member of your household steals your car, or if an employee whose job involved using or maintaining the car steals your vehicle.
All Perils: This is the most complete Loss or Damage coverage available. All Perils combines Collision and Comprehensive coverage and protects against theft by a person who lives in your household or an employee who steals your vehicle.
The most popular combination is Collision and Comprehensive coverage.
Optional coverage with endorsements
For extra protection, add the following to your insurance policy:
Accident Forgiveness: If you have this coverage on your policy, your first accident won’t affect your insurance rates, provided you have been licensed and accident-free for six years. Not available separately in Quebec; already included in provincial coverage plan.
Loss of use: If your car is damaged in an accident, stolen or destroyed, this endorsement covers the costs of temporary transportation such as renting a car or taking a bus. You’ll be covered up to the maximum amount specified in your policy until your car is recovered, repaired or replaced, or your claim is settled.
Legal liability for damage to non-owned automobiles: This endorsement will cover you if you damage a car you don’t own while it was in your care and control, such as a rental car.
Family protection endorsement: Receive additional benefits if you’re involved in an accident with a driver who doesn’t have enough coverage to pay a claim for injury or death. This only applies if the other driver has less insurance coverage than you.
Limited waiver of depreciation: This coverage protects against the loss of value or depreciation of a new car if, as a result of an accident, your car is beyond repair and must be replaced. This coverage is only available during the first two years of a vehicle lease or ownership. You could receive an amount up to the price you paid for the vehicle or the manufacturer’s suggested price. You can only add this endorsement if you have insured your vehicle with Collision and Comprehensive coverage, Collision and Specified Perils coverage or All Perils coverage.
Additional coverage: You can also buy insurance for a stereo or other components installed in your vehicle.
To learn more about car insurance, visit the Insurance Bureau of Canada.