Most states require that every registered vehicle carry some sort of auto insurance. But even if there were no such requirements, all drivers would be wise to think carefully about how much and what kind of insurance coverage they need. According to the U.S. Department of Transportation, 6.9 million vehicle crashes were reported to police in 2004. Before you buy insurance, learn about the basics so you get what you need.
If you are at fault in a car accident, liability insurance pays for the damages that you cause to someone else. It does not pay for your own damages. There are two kinds of liability insurance: bodily injury and property damage. Bodily injury expenses include medical bills, rehabilitation expenses, and lost wages. Property damage expenses include the repair or replacement of any items belonging to another person that you damage or destroy.
Liability insurance usually covers the following people:
The following vehicles are usually covered by liability insurance:
Collision insurance pays for property damage to your own vehicle resulting from a collision.
Comprehensive coverage pays for property damage to your vehicle resulting from anything other than a collision, such as theft, a break-in, or malicious mischief.
Uninsured or underinsured motorist (UM) coverage pays for your injuries if you are struck by a hit-and-run driver or by someone who does not have adequate insurance -- either because they have no coverage or because they do not have enough coverage to pay for your injuries. Normally, this type of coverage is limited to bodily injury and does not cover property damage to your vehicle. Vehicle damage would be covered by the collision coverage of your own policy.
Under no-fault coverage insurance, each person's own insurance company pays for his or her medical bills and lost wages -- up to a certain dollar amount -- 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:
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 lets an injured driver get compensated for medical and income losses above what the PIP benefits have paid, as well as compensation for pain and 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 no-fault law in your state. In some states, you can always file a liability claim for all damages in excess of your PIP benefits. In others, you must meet a monetary threshold, a serious injury threshold, or both, before you can file a liability claim.
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