1. What is liability coverage?
Liability coverage insures you against the cost of injury and damage you cause to another
in an automobile accident. It's made up of two policies, bodily injury liability, and
property damage liability. Auto liability insurance is required in virtually every state.
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2. What is bodily injury coverage?
It's the part of liability coverage that insures you against the injury you cause to
others in an auto accident. It consists of two figures. One limits the cost of injury
coverage per person injured, and the second limits the total dollar amount of injury
coverage (for everyone injured.) This is a very important policy.
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3. What is property damage coverage?
It's the part of liability coverage that insures you against the cost of damage to
another's property caused by you in an automobile accident. "Property" includes
other cars, houses, fences, telephone poles, etc.
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4. What is medical payments coverage?
This policy pays the medical bills of the covered driver, family members, and passengers
when injured in an accident, regardless of who was at fault. This coverage is required in
some states, but not in others.
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5. What is personal injury protection (PIP)?
Personal injury protection is similar to medical payments coverage, it usually covers a
broader range of events, including medical bills, lost wages, loss of services, etc. It is
required in most no
fault states.
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6. What is uninsured motorist coverage
This policy covers the cost of injury or damage caused by another driver who is not
insured. It covers the policy holder, authorized drivers, and any passengers. It usually
consists of separate limits for bodily injury and property damage. This policy is required
in some states.
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7. What is underinsured motorists coverage?
This policy pays for injuries and damage caused to the policy holder by a driver with
inadequate insurance. It typically pays the difference between the at-fault driver's
liability limit and the holder's policy limit. There are separate limits for property
damage and bodily injury liability. This coverage is sometimes combined with uninsured
motorist coverage under one policy, and may be required in some states.
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8. What is collision coverage?
This policy helps pay for repairs or fair market replacement cost if your car is damaged
in an accident caused by you or an authorized driver. This policy is always optional.
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9. What is comprehensive coverage?
This policy covers the cost of repairs to or replacement of your vehicle should it be
stolen, vandalized, struck in a hit-and-run, or damaged by an "act of God."
Covered events vary from policy to policy but usually include fire, flood, and falling
objects. This policy is always optional.
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10. What is a deductible?
It's the amount of money that you agree to pay before a certain auto insurance policy
kicks in. Deductibles are designed to cut down on insurance costs by eliminating small or
frivolous claims. The higher the deductible you're willing to pay, the lower the premium
you earn. Collision and comprehensive policies almost always carry deductibles, and
sometimes PIP and medical payments policies do too.
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11. What is rental car reimbursement coverage?
It's an optional policy endorsement that helps pay the cost of renting
a car while your auto is being repaired for a covered event. (This means you usually need
to carry collision and comprehensive to qualify.) Your premium is decided by the amount of
reimbursement you want per day.
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12. What is emergency roadside assistance insurance?
It's an optional policy that covers the cost of towing or immediate roadside repair (like
fixing a flat or jump-starting the battery). It does not cover the costs of any repairs
done at a garage or service station, however.
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13. What is SR-22 insurance?
The SR-22 is actually a form name that high-risk drivers may be required to file with the
state before they purchase car insurance. It requires the provider to notify the state
should the policy be terminated or canceled. DUIs, multiple speeding tickets, and driving
without insurance or valid license are all reasons a SR-22 may need to be filed. The
requirement usually lasts for three years after the initial event.
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14. What are split limits and combined single limits of
liability?
Split limits of liability provide for separate coverage limits for bodily injury and
property damage. A combined single limit policy has one coverage limit for the total cost
of injuries and damage. Split limits of liability are much more common.
15. What is an umbrella policy?
It is additional liability coverage that goes "over" your auto liability limits.
An umbrella policy may also increases other coverage's, like homeowner's liability or boat
liability. Carrying an umbrella policy is a good idea for drivers with considerable assets
to protect.
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16. What is gap insurance?
This optional policy insures the driver of a new car for the difference between the car's
financed value and its fair market value. Should the car be "totaled" during the
first few years after purchase, the owner will be covered for the amount still owed on the
car, rather than it's market value (which is often much lower). Because it covers only the
difference (the gap) in value, this is a relatively inexpensive policy. Learn more about auto gap insurance.
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17. What is no fault insurance?
No fault insurance covers the injury-related expenses of the policy holder in the event of
an accident, regardless of who was at fault. Thirteen states currently impose no fault insurance
laws.
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