What Is Auto Insurance?

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Six Basic Coverages

• Bodily injury (BI) liability coverage pays, up to the coverage limits, for damages due to injury or death of others in an accident for which you or the operator of your vehicle are legally liable. In some, but not all states, this coverage applies to family members who are injured while occupying your vehicle. It also pays your legal defense costs. This coverage is required in all states.
  
  
• Property damage (PD) liability coverage pays, up to the coverage limits, for another individual’s vehicle or property that has been damaged in an accident for which you or the operator of your vehicle is legally liable. This coverage is required in all states.
  
  
• Medical payments coverage pays, up to the coverage limits, for reasonable and necessary physician, hospital and funeral expenses for you and your passengers injured or killed in an accident, regardless of who is legally liable. Payments are usually limited to expenses incurred within a specified period of time after the accident. This optional coverage is available in states without no-fault coverage. It may also be an excess coverage in those states that require no-fault.
  
  No-fault coverage, sometimes referred to as personal injury protection (PIP), pays lost wages and certain other expenses in addition to the expenses covered by medical payments coverage. It is mandatory coverage in approximately half the states.
  
  
• Uninsured motorist (UM) coverage pays, up to the coverage limits for injuries for you, your family and occupants of your vehicle caused by an uninsured motorist. In some states it pays for damages to your vehicle. It also covers pain and suffering.
  
  Underinsured motorist (UIM) coverage pays, for bodily injury to you, your family and occupants of your vehicle resulting from the negligence of someone whose liability insurance limits are insufficient. The definition of an underinsured motorist varies from state to state.
  
  
• Collision coverage pays, subject to a deductible, for damage to your vehicle caused by a collision or rollover. This coverage is usually required if you have a vehicle loan.
  
  
• Comprehensive coverage pays, subject to a deductible, for damage to your vehicle from some cause other than collision such as theft, fire, vandalism, flooding, hail or collision with a bird or animal. This coverage is usually required if you have a vehicle loan.
  
  

Non-Owned Coverage

Optional Coverages

• Rental reimbursement pays, up to a specified amount for rental vehicle charges while your vehicle is being repaired for damage covered under your policy. If you prefer not to incur the cost of renting a vehicle yourself and cannot be without a vehicle while yours is being repaired, you might consider this coverage.
  
  
• Towing and labor covers costs incurred for services rendered at the place of breakdown or for towing to a repair shop. For example, it covers the delivery of gas but not the cost of the gas. If you lock the keys in the vehicle or need a tire changed, this would also be covered. These services are often included in auto club memberships, which can result in unnecessary duplicate coverage.
  
  
• Umbrella liability (a separate policy) provides an additional $1 million or more liability coverage beyond your other liability insurance. Because this is often secondary coverage — paying after you exhaust other coverage — umbrella insurance costs less than you might expect. This secondary liability coverage applies to your auto, homeowners, renters or boat liability coverage. The umbrella policy also provides primary liability coverage against claims such as libel and slander.