Personal Automobile Insurance Policy: What's Covered

Your PAP covers you for many situations when you’d otherwise suffer a financial loss, because your insurance company pays for the often-significant costs associated with property damage and personal injuries. But don’t expect to receive a check from your insurance company every time you’re involved in an accident. You may never see a dime, because most insurance payments are made directly to the service provider (e.g., a hospital or garage) after you’ve submitted the bill to your insurance company. Don’t assume that you’ll automatically receive reimbursement for any bills you pay up front unless you’ve first contacted your insurance company and received approval for any anticipated expense.

You can expect your insurance company to foot the bill for certain losses, costs, and expenses, subject to any exclusions or limits imposed by your policy. Your PAP covers you for the following.

Injuries Suffered by You and Your Family

If you or a family member (as defined) are injured in an auto accident, your policy covers you for:

• Necessary medical expenses and funeral expenses within three years of the accident if the injuries occur to a pedestrian or the occupant of a car (medical payments coverage)
• Compensatory damages, meaning the amount required to compensate the injured party for actual losses arising from a bodily injury–including medical costs, lost wages, and pain and suffering–if the injuries are caused by a car driven by an uninsured motorist (uninsured motorists coverage)

Caution: You are not entitled to receive duplicate payments for medical costs or property damage under the different parts of your PAP. Your policy compensates you for losses to make you whole, not to reward or enrich you. Thus, if you qualify for payment under more than one coverage (liability, medical payments, uninsured motorists, or physical damage), you will still receive just one payment.

Tip: In a rare case, you or a family member may be covered under your PAP’s liability coverage for property damage or personal injury suffered in an accident caused by another family member, or by a nonrelative who is driving your covered auto.

Injuries Suffered by Other People

If a friend or stranger is injured in your auto accident, they are covered by your PAP:

• For all court-awarded damages when you, a family member, or your covered auto caused the injury (liability coverage)
• For compensatory damages if they were struck by an uninsured motorist while occupying a covered auto (uninsured motorists coverage)
• For medical and funeral expenses if they were occupying a covered auto when their injuries occurred (medical payments coverage)

Damage to Your Vehicles

Damage to your covered, borrowed, and rented vehicles (and to the vehicles family members borrow or rent) is covered by physical damage coverage. This part of your PAP provides you with collision coverage and comprehensive coverage (also known as “other than collision” or “OTC” coverage) as follows:

• Collision coverage compensates you for damage to the vehicle caused by an impact with another vehicle or object or a rollover
• Comprehensive coverage compensates you for damage to the vehicle caused by:
  • Missiles or falling objects
  • Fire
  • Theft or larceny
  • Explosion or earthquake
  • Windstorm
  • Hail, water, or flood
  • Malicious mischief or vandalism
  • Riot or civil commotion
  • Contact with a bird or animal

Unlike liability, medical payments, and uninsured motorist coverages, you may not be required by law to purchase either collision or comprehensive coverage (but check with your insurance agent or the insurance department in your state). However, if you purchase your auto with a car loan rather than cash, it’s likely that your bank or finance company will require that you purchase collision and comprehensive coverage to protect its financial interest in your vehicle. Even if your state or bank doesn’t force you to purchase collision and comprehensive coverages, in most cases common sense should. Damage to your car from natural causes can lead to a repair bill for thousands of dollars. The theft of your car leaves you with nothing to repair. If you’re trying to keep your premium low to save money but still want to purchase collision and/or comprehensive coverage, consider raising your deductibles, thereby lowering your premium amount.

Tip: Broken glass caused by a collision falls under both collision and comprehensive coverage.

Caution: The physical damage section of your policy also insures you for damage to auto equipment (e.g., hubcaps, jacks, and other items that typically come already installed when you buy a new car). If you read your policy, you’ll note that coverage does not extend to many common items (like radios, tape decks, and compact disc players) that are not permanently installed in your auto. Car phones and radar detectors are also excluded from coverage. If you wish, you may purchase an endorsement to your PAP to obtain coverage for any of these items.

Damage to Your Property (Other than Autos)

You are covered for damage to property (other than autos) when damage is caused by another family member to property you own that was not rented to, used by, or in the care of that family member when the auto accident occurred. Family members are also insured for damage to property suffered in a car accident caused by another family member as long as the damaged property was not rented to, used by, or in the care of that family member when the auto accident occurred (liability coverage).

Damage to Vehicles and Property Owned by Others

If a vehicle or other property owned by a friend or stranger is damaged in a car accident, they are covered by your PAP for all court-awarded damages when you, a family member, or your covered auto cause the damage (Liability Coverages).

Miscellaneous Expenses

Although personal injuries and property damage are the big-ticket items covered by your PAP, your policy will also pay:

• The costs of defending a lawsuit brought against you by someone injured or damaged in an auto accident
• Up to $250 for bail bonds for you, family members, and any other person using a covered auto, as long as the accident resulted in personal injury or property damage otherwise covered by the policy
• Appeal bonds and bonds to release attachments in any lawsuit defended by your insurance company
• Interest on judgments
• Up to $50 a day for loss of earnings caused by attendance at court hearings or at the request of your insurance company
• Other expenses incurred at the request of your insurance company
• Up to $15 per day (to a maximum of $450) for transportation expenses you incur from a loss to a covered auto covered by collision or comprehensive coverage
• Loss-of-use expenses that you are responsible for when a borrowed or rented auto is damaged and qualifies for collision or comprehensive coverage

Next week, we will go over what’s not covered. In the meantime, if you have questions, contact the Experts at Henssler Financial: experts@henssler.com or 770-429-9166.

Disclosures

The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.