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Auto Insurance Coverage Explained

When you look at your auto insurance policy, you’ll see terms such as "Comprehensive Coverage", "Bodily Injury Liability", "Named Insured", and "Personal Injury Protection" among others. All the terms and numbers on your declarations page can get confusing very quickly. However, these terms don’t have to be confusing, if you take the time to learn what they mean.

Most states require minimum coverage that includes bodily injury liability and property damage coverage. Property damage is self explanatory, but many people are confused by bodily injury coverage. Bodily injury liability is insurance coverage that pays for any injuries and/or deaths as a result of an accident that you cause. The limit that you purchase for this coverage is the amount that the insurance company will pay. For example, if you have coverage limits of $50,000 per person and $100,000 per accident, but only cause $20,000 in injuries, it will be covered by the insurance company.

Some states require personal injury protection due to their "no-fault" insurance system. This coverage simply allows for your medical costs to be covered by your insurance in the event of an accident, no matter who is at fault. If you need $10,000 in medical expenses, but only have personal injury protection coverage of $5,000, the insurance will only pay up to your limit and the rest will be at your expense.

A "named insured" on your policy is simply someone who is directly named and insured under the policy’s provisions. If you have full coverage, anyone who drives your vehicle is covered, but if you share a car with a family member, they need to be named directly in the policy.

Comprehensive vs. Collision Coverage

These coverage types are not required by most states, unless you have a loan or lease on your vehicle. They can often be confused, so here is the difference for you:

•    Comprehensive Coverage: pays for damages to your vehicle caused by theft, break-in, weather, and other non-accident related occurrences.
•    Collision Coverage: pays for damages when your car is involved in an accident with an inanimate object or on its own. For example, if you hit a telephone pole and need your front end replaced, your collision coverage will take care of it.

These are some of the most common terms in auto insurance that are easily confused or misunderstood. Hopefully with this education, you will be able to make better choices and understand your auto insurance coverage better than before.