Auto Insurance FAQs
Answers to frequently asked questions

Copyright © 1999

This article answers to the following questions:

Who is usually covered under an auto insurance policy?
Which vehicles are normally covered under an auto insurance policy?
What kinds of damage are normally covered under an auto insurance policy?
What is uninsured motorist coverage?
What are the limits on my ability to collect under an uninsured motorist provision?
What is collision coverage?
What is comprehensive coverage?
What is no-fault automobile insurance?
My auto insurance rates have been going up. How can I cut the costs?

Most states require that every registered vehicle or licensed driver have some vehicle liability insurance. But even where it's not required by law, most drivers have some liability coverage. Before you buy auto insurance, you must decide how much coverage you need and what types of coverage are appropriate for you. And of course, you'll want to find ways to cut your insurance costs.

Who is usually covered under an auto insurance liability policy?

An auto insurance liability policy usually covers the following people:

· Named insured--the person or people named in the policy, no matter what car they are driving.
· Spouse--even if the spouse of the named insured is not named on a policy, liability insurance almost always covers him or her, unless the couple does not live together.
· Other relative--anyone living in the household with the named insured related to the insured by blood, marriage or adoption, usually including a legal ward or foster child.
· Anyone driving the insured vehicle with permission--someone who steals the car is not covered.

Which vehicles are normally covered under an auto insurance liability policy?

· Named vehicles--an accident in a non-named vehicle is covered only if a named insured (see above) was driving.
· Added vehicles--any vehicle with which the named insured replaces the original named vehicle, and any additional vehicle the named insured owns during the policy period (you may be required to notify the company of the new or different vehicle within 30 days after you acquire it).
· Temporary vehicles--any vehicle, including a rental vehicle, that substitutes for an insured vehicle that is out of use because it needs repair or service, or has been destroyed.
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What kinds of damage are covered under an auto insurance liability policy?
Liability insurance covers medical costs for diagnosis and treatment of injuries, property damage, loss of use of damaged property, expenses incurred (such as the cost of renting a replacement vehicle) and lost income.
In addition, an injured person is entitled to a certain amount of general damages, also referred to as pain and suffering.
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What is uninsured motorist coverage?

If you have an accident with an uninsured vehicle or hit-and-run driver, the place to turn for compensation for your injuries is the uninsured motorist (UM) coverage of your own vehicle insurance policy. Normally, UM coverage does not include property damage to your own vehicle. Damage to your vehicle caused by an uninsured motorist would be covered by the collision coverage of your own policy.

Most UM coverage will pay up to your policy's UM limits for injuries caused to:
· you or a relative who lives with you, while a driver or passenger in the vehicle named in your UM insurance policy or any other vehicle, or while a pedestrian
· anyone else driving your insured vehicle with your permission, and
· anyone else riding in the vehicle named in your insurance policy, or in any other vehicle you are driving but which you do not own.

What are the limits on my ability to collect under an uninsured motorist provision?

UM coverage usually limits your ability to collect--and the amount you receive--as follows:

· If your accident involves a hit-and-run driver, you must notify the police within 24 hours of the accident.

· If your accident involves a hit-and-run driver, the driver's car must have actually hit you-being forced off the road by a driver who disappears is not sufficient.

· Your UM coverage will be reduced by any amounts you receive under other insurance coverage, such as your personal medical insurance or any applicable workers' compensation coverage.

· If you or a relative are injured by an uninsured motorist while you are in someone else's car, your UM coverage will be secondary to the UM coverage of that other car's owner.

What is collision coverage?

Collision coverage pays for property damage to your vehicle resulting from a collision.

What is comprehensive coverage?

Comprehensive coverage pays for property damage to your vehicle resulting from anything other than a collision, such as a theft or a break-in.

What is no-fault automobile insurance?

No-fault coverage insurance eliminates injury liability claims and lawsuits in small accidents. It does so by requiring that each injured person's own insurance company pay for his or her medical bills and lost wages--up to certain dollar amounts--regardless of who was at fault.
About half the states have some form of no-fault law, often referred to in policies as Personal Injury Protection (PIP). The advantage of no-fault insurance is prompt payment of medical bills and lost wages without any arguments about who caused the accident. But most no-fault insurance provides extremely limited coverage:

No-fault pays benefits for medical bills and lost income only. It provides no compensation for pain, suffering, emotional distress, inconvenience or lost opportunities.

No-fault coverage does not pay for medical bills and lost income higher than the PIP limits of each person's policy. PIP benefits often fail to reimburse fully for medical bills and lost income.

· No-fault often does not apply to vehicle damage; those claims are paid under the liability insurance of the person at fault, or by your own collision insurance.
When no-fault benefits aren't enough

All no-fault laws permit an injured driver to file a liability claim, and lawsuit if necessary, against another driver who was at fault in an accident. The liability claim permits an injured driver to obtain compensation for medical and income losses above what the PIP benefits have paid, as well as compensation for pain, suffering and other general damages.

Whether and when you can file a liability claim for further damages against the person at fault in your accident depends on the specifics of the no-fault law in your state.

Some states have "add-on" no-fault laws that put no restrictions on your right to file a liability claim in addition to your PIP claim. In these states, you can always file a liability claim against the person at fault for all damages in excess of your PIP benefits.

Other no-fault states have different types of thresholds that an injured person must reach before being permitted to file a claim for full compensation against those at fault for an accident. Some states have a monetary threshold only, some a serious injury threshold only, and still others have both. States with both requirements permit a liability claim if an injured person meets either one.

My auto insurance rates seem to keep going up. How can I cut some of the cost?

Here are a few suggestions for ways to reduce your premiums:

· Shop around for insurance. Just because your current company once offered you the best deal doesn't mean it's still competitive.

· Increase your deductibles.

· Reduce your collision or comprehensive coverage on older cars.

· Find out what discounts are available from your company (or from a different company). Discounts are often given to people who use public transit or carpool to work, take a class in defensive driving (especially if you are older), own a car with safety features such as airbags or anti-lock brakes, install anti-theft devices, · are students with good academic records or have no accidents or moving violations.

· Find out which vehicles cost more to insure. If you're looking to buy a new car, call your insurance agent and find out which cars are expensive to repair, targeted by thieves or involved in a higher rate of accidents. These vehicles all have higher insurance rates.

· Consolidate your policies. Most of the time you will pay less if all owners or drivers who live in the same household are on one policy or at least are insured with the same company.

Article reprinted with permission from