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As an immigrant, you may be navigating the rules of the road in the United States for the first time. With buying a car and registering it also comes purchasing an auto insurance policy. There are many different factors that you should consider when determining how much coverage you need. A simple lapse in judgement could result in major liability concerns if you ever get into an accident.
In this article, you will learn what is included in an auto policy and what to look for in each section. The types of coverage include: liability coverage, medical payments coverage, uninsured motorist coverage, and coverage from damages to your own vehicle. In addition, the article will discuss the coverage for motorcycles, motor scooters, and recreational vehicles. You will learn what no-fault insurance is and how to determine what your auto insurance needs are..
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What is a Personal Auto Policy?
A personal auto policy (PAP) is a packaged insurance policy that provides coverage for losses resulting from legal liability, injury to the insured or members of the insured’s family, and damage to or loss of the automobile. A PAP covers several cars and people.
A car has to be owned by an individual that is eligible for coverage. A partnership or corporation’s car fleet is not eligible for a personal auto policy. The car also has to be a specific type: passenger vehicles that weigh less than 10,000 pounds, cars, pickups, and vans are included as long as they are not used for delivery purposes.
Motorcycles, motor homes, golf carts, snowmobiles, and similar types of vehicles can be included in a PAP by using an endorsement as long as they are owned by an individual.
What is Included in a Personal Auto Policy?
A PAP consists of six different parts:
Part A: Liability
Part B: Medical Payments
Part C: Uninsured Motorists
Part D: Damage to Your Auto
Part E: Duties After an Accident or Loss
Part F: General Provisions
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Liability coverage is mandatory coverage and considered to be the most important part of a PAP policy. With liability coverage, the insurance company has to pay the loss of what the insured is legally responsible for because of an accident, up to the policy limits.
The minimum coverage for most states is $25,000 per accident, but this can be increased. Insurance companies also pay for the legal costs for defense. However, they will stop paying if the payment covering the full limit of liability has been made. Legal defense costs are paid in addition to the limit of the liability.
Liability coverage can be written on a split-limit basis such as 100/300/50, which means $100,000 coverage for bodily injury to one person, coverage up to $300,000 total for all persons injured in a single accident, and a coverage of up to $50,000 for property damage, all based on a single accident.
The coverage can also be written as a single limit, which can be applied to both property damage and bodily injury. The liability coverage is also provided for the use of any auto or trailer by the insured or family member related by blood, marriage, or adoption, who resides in the house of the insured. Individuals other than the named insured are covered as long as they had the right to use the auto.
Liability coverage extends to anyone that is liable for the operation of the vehicle, such as an employer of any person operating the covered vehicle. The coverage also extends to anyone that is liable for the operation of the non-owned auto by the named insured.
A covered vehicle is one that is listed in the policy on the date the insured becomes the owner, provided that the vehicle meets the eligible vehicle description. A newly acquired car is automatically covered for 30 days, but the insurance company has to be notified within the 30-day period to extend the coverage. A newly acquired vehicle is covered on the broadest coverage that applies under a written policy.
A trailer that is owned by the insured is also considered a covered automobile. Liability coverage would lessen the resulting loss from a trailer. Any automobile that is being used as a substitute, such as a rental car, will be covered under the PAP. The coverage also includes a trailer not owned by the insured.
There are certain exclusions that are not covered:
- Intentional acts that cause bodily injury or property damage
- Damage to property owned or being transported by an insured
- Damage to borrowed or rented property
- Injuries to employees in the course of employment where workers’ compensation applies
- Liability where the auto is used as a delivery vehicle
- Any person employed in the automobile business
- Business use of commercial vehicles
- Liability resulting from any person using the vehicle without permission
- Nuclear liability
- Liability from motorcycles or other self-propelled vehicles with fewer than four-wheels
- Vehicles that are owned or furnished for the regular use of the insured other than the covered vehicle
- Liability arising from autos owned or furnished for the regular use of family members
- Liability does not apply to an automobile that is being used in racing competition
- Other provisions
There are supplementary payments by the insurance company in addition to the obligated payments. Examples include: the cost of bail up to $250, premiums on appeal bonds, interest on a judgement, and loss of earnings up to $200 a day while attending a hearing at the insurance company’s request, and other expenses that are incurred at the request of the insurance company.
Out-of-state coverage will be adjusted to meet the liability requirements if an accident occurs in a state that has higher limits than those in the state of residence. The coverage also applies to compulsory insurance law of states.
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Medical Payments Coverage
Medical payments coverage is optional coverage and usually ranges from $1,000 to $10,000 per person with no maximum per accident. The coverage includes medical expenses and funeral expenses for the insured and any family member or another occupant of the insured vehicle that suffers bodily injury as a result of the accident.
Coverage is available if the insured is occupying any motor vehicle or a pedestrian that is struck by a motor vehicle.
There are certain exclusions for the medical payments coverage:
- Vehicles with fewer than four wheels
- Autos that are used to carry persons or property for a fee
- Autos owned or furnished for the regular use of the insured
- Autos owned or furnished for the regular use of the family members
- Autos that operate without a reasonable belief that the user is entitled to operate
- Non-owned trucks that are being used in business.
Uninsured Motorists Coverage
Uninsured motorists insurance is optional coverage. It is an agreement that pays an insured the amount they would have collected from an insurance company of a negligent driver if the driver had auto insurance. The coverage applies when the insured is injured by a vehicle that is uninsured.
The insured persons under the uninsured motorists are the named insured, family members, and anyone occupying the insured vehicles. Exclusions for the uninsured motorists include the exclusion for liability, and other things such as the injured person settling with the negligent party without the insurance company’s consent, and coverage for punitive or exemplary damages.
Generally, the coverage pays for bodily injuries and may pay for property damages too, depending on the state where the accident took place. The coverage pays what the uninsured driver's insurance would have paid.
Most states have laws requiring motorists to carry liability insurance, but those laws are ignored by the masses. Part C coverage does not cover underinsured motorists. You may only receive what you can collect from underinsured motorists if you add an underinsured motorist endorsement, which allows you to collect any additional claim amount, up to your policy limit.
Coverage From Damages to Your Automobile
Part D is an optional coverage as it covers physical damage. It is an open perils coverage and is implemented through two separate agreements: comprehensive and collision. Coverage is typically subjected to a deductible, which helps to reduce premiums.
Comprehensive coverage is for losses that result from something other than collisions, such as the breaking of glass, falling objects, fire, theft, storm damage, and damage from a collision with animals. Collision coverage applies regardless of who is at fault. Physical coverage also applies to non-owned vehicles such as rental cars.
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Motorcycles, Motor Scooters, and Recreational Vehicles
Coverage for motorcycles and motor scooters are written under a PAP with an endorsement that is called the miscellaneous type vehicle. The endorsement will amend the definition of a covered auto to include a motorcycle. However, the endorsement does not provide coverage for non-owned motorcycles. Recreational vehicles are covered by the miscellaneous vehicle endorsement as well.
Under this type of insurance, parties involved in an accident who sustain bodily injury would collect from their own policy regardless of who caused the accident
3 Steps to Selecting Your Automobile Insurance Coverage
The first step is to obtain the appropriate amount of liability, uninsured, and underinsured motorist protection. Most states usually have a minimum required amount of liability to be covered by the law.
The second step is to evaluate whether or not your car will require collision and comprehensive coverage. Usually, fully ensuring a lower valued vehicle will not be cost effective.
The last step is to evaluate the amount of deductible for collision and comprehensive coverage you’d like to elect in order to obtain the most efficient coverage. Increasing the deductible may help to reduce the premium.
Make Sure Your Auto Insurance Policy is Right For You
Electing your auto insurance policy can be overwhelming. There are so many terms to know and options to select. If you need assistance, be sure to reach out to your insurance provider. They’ll walk you through what you need to know in relation to their specific policies. However, you’ll need to determine how much comprehensive and collision coverage you need depending on the car you drive. Make sure that you appropriately cover yourself in order to avoid any liability issues.