About Auto Insurance Policies by ramhood1


									About Auto Insurance Policies
As you may have noticed, insurance policies are not easy to understand. Even the best
policies, which claim to be written in "easy to read" format, can be confusing and
sometimes downright unintelligible. Often the parties to an insurance dispute have to let the
court determine what a policy really means.
However, the basic concepts behind an auto insurance policy are not complicated. Frankly,
everyone who drives a vehicle or owns an insurance policy should have at least a general
familiarity with what is inside that lengthy document. The following summary, while very
general, should help.
Most auto insurance policies have two general coverage parts. Part One includes Liability
Insurance, and Part Two includes Coverage for your Vehicle.
                                      Liability to Others
In Oregon, Washington and Idaho, as in most states, every driver is required to have
liability coverage. This coverage provides that if you are at fault in causing injury to
another person or damage to someone else's property, your insurance company will
pay for that injury or damage.
How much the insurance company must pay depends upon how much coverage you
purchase. Naturally, higher limits of coverage cost more money.
The amount of coverage will show on the front page of your policy (called the
"declarations page") and can be written as either single limit coverage or split limit
coverage. Each state has a minimum amount of liability coverage that is required, but
you always have the option to purchase more, and it is frequently a very good idea to
do so.
     Single limit coverage will be in one dollar amount, such as $50,000. That figure
         represents the total amount of money the insurance company will pay for any
         combination of bodily injury to others damage to the property of others caused in
         an accident which is your fault.
     Split limit coverage will look something like this: $25,000/$50,000/$10,000. The
         first number represents the maximum the company will pay for injury to ANY
         ONE PERSON in an accident which is your fault. The second number represents
         the total amount the company will pay for bodily injury to ALL PERSONS in the
         accident (there could be two or thirty people injured). The last number represents
         a separate amount for damage to the property of others in the accident.
Let's look at two examples, comparing a $50,000 single limit policy to a
$25,000/$50,000/$10,000 split limit policy, to see how each type of coverage would
pay. Assume in each example that the accident is your fault.
         Example One: You hit a Honda Accord and injure the driver. The Honda
         sustains $8,000 damage, and the driver's injuries have a settlement value of
         $40,000. The single limit policy will pay $48,000 (since the total damage is under
         $50,000) and the split limit policy will pay $33,000 (the maximum for one injury is
         $25,000, plus the property damage).

       Example Two: You hit a Mercedes Benz and injure the driver and two
       passengers. The Mercedes sustains $12,000 damage, and each of the
        individuals has $16,000 in injuries. (Total of $60,000) The single limit policy will
        pay $50,000 (its policy limit). The split limit policy will pay $58,000 ($16,000 to
        each of the three individuals and the policy limit maximum of $10,000 property
        damage for the Mercedes).
Another very important feature of your liability policy is that if you cause an accident and
the other driver brings a lawsuit, your insurance company will hire a lawyer to represent
you at no cost to you. The amount the company pays to the lawyer will be in addition to
the amount of coverage you have for payment of damages, as shown on your
declarations page.
                         Personal Injury Protection and Med Pay
Your liability coverage may include Personal Injury Protection ("PIP") or Medical
Payments ("Med Pay") benefits. Some states, such as Oregon and Washington, require
PIP coverage in a policy unless you specifically reject it. Other states do not require or
offer such coverage, but make available Med Pay for an additional charge. Idaho offers
Med Pay coverage, but you may have to ask your agent for it.
PIP provides a source of payment for YOUR medical bills and some of YOUR wage
loss following an auto accident. Similarly, Med Pay provides some coverage for YOUR
medical bills. These are called "no fault" coverages because they pay even if the
accident is your fault.
                     Uninsured and Underinsured Motorist Coverage
Some states, again Oregon and Washington, for example, require that auto insurance
policies have Uninsured and Underinsured Motorist Coverage unless you specifically
reject it. In Idaho and many states, this coverage is not required but it is available. You
may have to ask your agent for it.
Uninsured motorist coverage protects YOU in the event you are injured through the
fault of someone else and they do not have any insurance. For example, if you are
rearended by someone who is uninsured, you can bring a claim against your own
insurance company under your uninsured motorist coverage and you are entitled to
collect the same recovery as if the at-fault driver had insurance.
Underinsured motorist coverage is similar. Assume that the at-fault driver had a
$50,000 single limit policy but your injuries have a reasonable settlement value of
$80,000. If you have $100,000 in underinsured motorist coverage, then you will collect
the $50,000 from the at-fault driver's insurance company and the additional $30,000
from your own company.
In our opinion, purchasing adequate amounts of uninsured and underinsured motorist
coverage is one of the best ways you can protect yourself and your family. Talk to your
insurance agent about it.
The second part of an auto policy covers your car in the event it is damaged or
destroyed in a collision or otherwise. There are two types of coverage you can
purchase, called collision and comprehensive. You are not required to purchase these
coverages. However, if you take out a loan to purchase a car, or you are leasing a
vehicle, the lender will require that you purchase these coverages on the car to protect
the lender in case the car is damaged or stolen.
                                     Collision Coverage
If you purchase collision coverage, the insurance company will pay to repair your car if it
is damaged in a collision, regardless who caused the accident. If the repairs would
exceed the value of the car, they may consider the vehicle a total loss and pay you the
fair market value of your vehicle.
Collision coverage will have a deductible, which is a portion of the repairs which you
must pay. For example, if the cost to repair your vehicle is $3,000 and you have a $500
deductible, you will pay $500 and the insurance company will pay $2,500.
                                Comprehensive Coverage
If you purchase comprehensive coverage, the insurance company will pay to repair your
car if it is damaged other than in a collision, or if it is stolen. Examples of when
comprehensive coverage would apply are:
     Fire
     Theft of the vehicle
     Hail damage
     Vandalism
     Broken windshield
Comprehensive coverage usually has a deductible also, and the coverage is less
expensive than collision. Generally you may purchase comprehensive only and not
collision (but not the other way around). Insurance agents often recommend keeping
comprehensive coverage on an older vehicle, even after it is no longer cost effective to
keep collision coverage.
                                A GENERAL WARNING!!!
As we said, insurance policies are complicated. The above outline will give you a
general idea how coverage works. However, many fact situations arise that raise
complicated questions. For example, you are driving a rented car, or a friend's car. Or
you are a passenger in someone's car, or you are a pedestrian, or your son is hit on a
bicycle. You will need to determine:
     Who is covered?
     What is the limit of coverage?
     Are there exclusions which would allow the insurance company to deny
     Are there other insurance policies that may provide coverage? (Sometimes the
         answer may not be obvious.)
In these more complex situations, you need to seek expert advice. You will want to talk
to your insurance agent. You should seek the advice of an attorney.

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