Optional Auto Insurance Coverage

By: Christian Rios

There are a many forms of automobile insurance outside oftypical, state mandated liability coverage: Medical Payments Insurance,Personal Injury Protection (referred to as "PIP" - covers a broaderarea, such as lost wages, funeral expenses, and pain and suffering), Collision,Comprehensive, Gap Insurance, Uninsured and Under Insured Motorist.

Medical Payments Insurance - This type of insurance coveragepays for medical bills (for you or anyone else) up to a certain amount arisingfrom the use of your vehicle regardless of fault. Theoretically, because itpays regardless of fault, the insurance would cover your medical expenses ifyou were to crash your car into a fencepost. This type of insurance is usuallysold in increments of $1,000 to $5,000. The coverage extends to your immediatefamily members (who reside in your household) while they are passengers inanother person's car, and would cover medical expenses regardless of the other driver'sown insurance policy. Medical Payments Insurance is also referred to as"MedPay".

Personal Injury Protection - "PIP" insurancecovers the "named insured" along with members of his or her householdwho are related by blood, marriage, adoption, and/or foster and step children.PIP covers medical expenses for injuries sustained in an auto accident up tothree years after the date of the incident. In addition to medical expenses,PIP can also cover lost wages, funeral expenses, and loss of services (paymentto others for work you can't do). Similar to MedPay, Personal Injury Protectionwill cover your medical expenses regardless of driver fault.

Collision - This optional form of insurance pays for damageto your car in an auto accident even if you're the at fault driver (such ascrashing your car into a tree or a telephone pole). Collision insurance wouldalso cover repairs to your car when you are involved in an accident and theother driver does not have liability coverage. Although collision does coverrepairs to your car regardless of the situation, there are limits to the amountof repairs: your insurance company is only required to pay the differencebetween the salvage value of your car and the pre-accident cash value of yourcar. Let's say your car is worth $10,000 and the salvage value is $1,000. Inthis example, your insurance company is only required to pay up to $9,000 inrepairs, regardless of what you think the value of your car is. Collisioninsurance does have an optional "replacement cost coverage" for newor vintage cars. This additional coverage provides for the replacement cost ofthe new or vintage car. Although not required by any state, lenders and leasingcompanies will typically require clients to carry Collision Insurance.

Comprehensive - This type of insurance is very similar toCollision Insurance; the major differing factor is that Comprehensive coversdamage to your vehicle by an "unknown entity" or "an act ofGod". In addition to an auto accident, areas of coverage include thefollowing: vandalism, hurricane, flood, theft, and fire. Your insurance companyis only required to pay up to the fair market value of your car minus yourpolicy's deductible. Although not required by any state, lenders and leasingcompanies will typically require their clients to carry Collision Insurance.

Gap Insurance - This insurance pays for the differencebetween what one owes on a vehicle, and what the insurance company claims yourcar is worth. For example: you owe $15,000 on a car and you somehow manage tototal the car in an accident. Your insurance company determines your car isonly worth $13,000, so that is all they will pay. You're now stuck paying off a$2,000 loan for a car that no longer exists. Gap insurance would normally coverthat $2,000 difference. There are some limitations and restrictions for GapInsurance. For example: Gap Insurance is typically unavailable on older carsand not all insurance companies will offer it. It's best to check with yourinsurance company to get the full details on Gap Insurance coverage.

Uninsured and Under Insured Motorist - Just like thetitle states, this type of insurance covers you and your vehicle in case theother driver is not properly insured and he or she is determined to be atfault. Not all states require this type of insurance, but a handful do. It'srecommended that you purchase this coverage because if you are involved in afender-bender with an uninsured motorist, it is highly unlikely you willreceive any payment for damages to you or your vehicle if the other driver isat fault and uninsured or under insured. UM/UIM is generally affordable and canbe purchased in varying amounts of coverage.

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