By Richard Paton, Boston MA
Auto insurance is available in many different forms, and many people will require every coverage that is offered, while some only require the basics. At a minimum, you may be required to have a certain type of coverage based on the laws of your individual state. Each state has its own laws regarding auto insurance, and drivers under those laws will have an obligation as to the type of auto insurance they must carry.
The most commonly required coverage is that of liability insurance. This section of the policy pays others if cause injury or property damage in an accident. There is no other protection financially for you or your vehicle under this coverage, in other words, this section does not make payments to the insured, only to the people that an insured may cause harm to.
The Bodily Injury section of a liability policy pays for injuries caused to others as a result of a crash that you cause. Most states set a specific limit for this coverage that you must maintain. Often called “financial responsibility laws” or “compulsory auto insurance laws”, these are designed to make sure that if someone is injured on the roadway, there is enough money available to compensate them for their damages.
If you fail to maintain coverage, there are likely fines and penalties that will apply, but more importantly, you risk your own assets, as you may become personal responsible to pay a judgment against you if you are sued.
Currently every state except Virginia and New Hampshire has some form of financial responsibility laws. In those states without the requirement, motorists run the risk of having to sue an individual for damages, and find that there are no assets available to pay on a judgment. This could leave the injured party left uncompensated and the responsible party with years of substantial debt obligation.
One way to protect you against this kind of insurance issue is to purchase Uninsured Motorist Coverage. This essentially replaces provides coverage when an “at fault” driver fails to do so. This protects an injured party from a situation where they are left uncompensated due to a lack of insurance. Their own insurance company steps in and the injury claim is made against their own policy.
A similar idea is Underinsured Motorist coverage. This is designed to deal with situations where the “at fault” driver has inadequate limits on the policy. This section will pay over and above whatever is available under the “at fault” driver’s policy.
These two coverages are actually required as part of the mandatory insurance laws of some states, suggesting that a certain number of uninsured motorists are on the highways.
Personal Injury Protection is another important coverage that you might consider. This type of auto insurance pays for medical bills for you and the people in your car at the time of an accident, but it pays regardless of liability. This is often referred to as “no fault” insurance because it pays regardless of who is at fault. It is an important coverage to have on your policy and may be required under the laws of your state.
Another section of an auto policy is the physical damage part. This covers damage by collision, as well as damage by other causes of loss.
The collision coverage part pays for damage caused when your vehicle collides with another vehicle or some other object. It is subject to a deductible and there is usually no specified dollar limit, but the policy will pay either for repairs to your car or for the market value of your car if it is a total loss.
The other section of the physical damage part is comprehensive coverage. This also pays to repair or replace your car, but it pays for specific causes of loss such as fire or theft. This section is also subject to your deductible.
