Dealing with auto insurance is a fact of life for most vehicle owners. It's also not uncommon for people to look at their car insurance options and wonder what the heck they're dealing with. These four concepts are essential for understanding your insurance.
Covering Injuries and Damage
The main goal of having insurance is to protect against possible sources of expenses from liability, physical injuries, and property damage. When covering injuries to other people, you'll see the term "third-party" used in policies. This refers to anyone besides you and your passengers. Third-party coverage is a baseline auto insurance issue, and coverage of your injuries and damage to your property is the next tier up.
Kinds of Coverage
Policies are typically divided up into 5 types. You may seek a policy that is termed liability, collision, comprehensive, personal injury or uninsured/underinsured motorist. Do note, however, that you can mix elements of all 5 types of coverage available.
You can seek coverage for liability, which is when you only want insurance for other parties' expenses if you've been found at fault for an accident. A collision policy covers you, other motorists, and pedestrians in an accident. Comprehensive covers non-accident events, such as a tree limb falling on your car and is what most people mean when they discuss "full coverage." Personal injury coverage insures you and your passengers for medical expenses. As the name implies, uninsured/underinsured motorist coverage insures you against accidents where a third-party was at fault but can't afford to pay in full for medical expenses, destruction of property, or the replacement or repair of your vehicle.
Some U.S. states use what's known as a no-fault auto insurance system. This means that non-catastrophic incidents will be resolved between the two insurance companies, and your carrier may elect to compensate you and seek a settlement on its own against the other carrier. You do, however, retain the right to pursue a claim or sue if your injuries can be demonstrated to be catastrophic. This helps to streamline the system when dealing with cases where no one was hurt and two vehicles need to be repaired or replaced.
Most carriers assess the value of a car based on its current Kelly Blue Book price. This is a guideline for car sales. If the cost of accident repairs exceeds the value of the vehicle, your insurer will "total" the car. They will cut you a check for the value of the car rather than fixing it.
For more information, contact a local auto insurance company.