Automobile Insurance Information - General

The standard personal auto policy

The first page of the standard personal auto policy states the "agreement." In general, it states that if the policyholder pays the premium, the insurance company will pay a covered claim up to the policy limits. This page also gives definitions that explain the meaning of specific words that appear in the policy.

The remaining parts of the personal auto policy, Parts A-F, discuss coverages and insurance company agreements.

Part A—Liability Coverage

Liability coverage comes into play when another person suffers bodily injury or property damage as a result of you operating your car and for which you are held legally responsible. Most states require a basic amount of coverage, but you must decide how much more, if any, you should have. Remember that if you are sued and the court awards injured persons more than the limits of your insurance, you will have a legal responsibility to pay them.

Part B—Medical Payments Coverage

Medical payments coverage helps pay your medical bills if you are injured in an auto accident, regardless of which driver is at fault. This coverage also protects you if you are injured by a vehicle while you are walking or when you are a passenger in another car. If your state has "no-fault" auto insurance, your injuries may be covered by personal injury protection rather than medical payments coverage. Be sure to discuss this important coverage with your insurance agent.

Part C—Uninsured Motorist Coverage

Some drivers do not carry automobile insurance, even though laws require it. Uninsured motorists coverage comes into play when a negligent, uninsured driver injures you in a car accident; you'll be covered up to your limit of coverage. Again, ask your insurance company representative for information.

Part D—Coverages for Damage to Your Auto

These optional coverages compensate you when your auto is damaged. There are two types:

Collision-pays for car repairs if your car is damaged by impact with another vehicle or object, regardless of which driver is at fault.

Comprehensive-also referred to as "other than collision," this insurance covers loss caused by such things as fire, theft, vandalism, windstorm, water, or animals.

Your insurance does not pay for routine maintenance, such as wear and tear or road damage to tires. It may not pay for loss or damage to add-on electronic equipment, but these items may be covered by your homeowners policy-check with your insurance agent for details.

Part E—Duties after an Accident or Loss

This part tells you what your responsibility is in case of an accident or loss. First and foremost, you must notify the insurance company promptly. Be prepared to give information about how, when, and where the accident happened or the loss occurred. You should also furnish the names and addresses of any injured persons or witnesses to the accident.

Part F—General Provisions

The general provisions explain the nine conditions that apply to your insurance coverage:
1. Bankruptcy. Your coverage applies even if you declare bankruptcy.
2. Changes. Any changes to your coverage must be made by an endorsement issued by the insurance company.
3. Fraud. If you give wrong information on your application, you may be denied coverage when you file a claim-especially if you intentionally misrepresent important facts.
4. Legal action against the insurance company. You cannot sue the insurance company unless you meet your obligations under the policy.
5. Right to recover payment. If your insurance company pays you for a loss that someone else caused, it has the right to recover its payment from that person.
6. Policy period and territory. The policy period-usually six months or one year-is shown on the declarations page. The territory is usually the United States, its territories or possessions, and Canada.
7. Termination. These are the conditions under which your policy can be discontinued-for example, nonpayment of premiums, or because your driver's license was revoked.
8. Transfer of your interest in this policy. Unless you have the permission of the insurance company, you cannot transfer or assign the policy to some other person.
9. Two or more auto policies. If the company has issued you more than one auto policy that applies to the same accident, the limits are dictated by the policy that has the highest limit. In other words, you cannot add the limits of one policy to those of another to increase the total amount the company will pay. This is often modified by state laws-ask your agent for information regarding your state.

Other Coverages

In addition to the coverage you select under the basic policy, you may wish to consider some of the other available coverages. Some common coverages are explained below. Ask your agent for information regarding all additional coverages available.
Personal injury protection (PIP)
This coverage may be purchased as required by your state's no-fault law or as an additional endorsement to your present coverage. If you have an accident, this coverage pays your medical expenses, up to the limits of the policy, regardless of who is at fault.

Underinsured motorists

Similar to uninsured motorists coverage, this applies when you have an accident with someone who bought less liability insurance than you.

Rental reimbursement

This coverage helps pay for a rental car if your auto is damaged in an accident.

Towing and labor

This pays for emergency road service and towing of your car when it is disabled.

Extended nonownership liability endorsement

This extends your personal auto coverage to a car that you drive regularly, such as a company car.

Sound receiving and transmitting equipment

This coverage is available for permanently installed cellular telephones, citizens' band radios, mobile radios, and scanners. Radar detectors are excluded and coverage is unavailable.

Tapes, records, or other devices

This covers these items when they are in your covered auto. It does not cover equipment borrowed from other people.

Familiarize yourself with the terms of your auto insurance coverage. This knowledge will help assure that you have adequate insurance, and that you will know how to proceed if you have an accident or loss.