Pocketmint

Last month, I promised you all an Auto Insurance Primer, in which I would “explain all the different types of coverage, demystify the jargon, separate the necessities from the ripoffs, and suggest strategies for lowering your premiums without taking on undue risk.”

That’s a tall order, so I’m going to separate it into two parts. Today we’ll break down all the types of coverage.

But first, we need to clarify one legal definition.

Collision means that your car hits, or is hit by, another vehicle, person, or object. So there must be contact between your car and something or someone else — another car, a pedestrian, a bicycle, a fire hydrant, a plate glass window, etc. Even a pothole is considered an inanimate object for collision purposes.

One exception: hitting an animal is, strangely, not considered a collision. So when a moose crashes through your windshield, don’t count on collision insurance. Animal-based damage falls under ‘comprehensive’, just like hail and tornado damage.

When you get an insurance quote, you’ll see up to eight different types of coverage: four primary types and up to four extras.

Auto Insurance: The Big Four

Liability Coverage

Pays for: others’ expenses due to a collision
When fault is: yours (or another person covered by your policy)

Liability Coverage is divided into two parts:

• Bodily Injury covers medical and funeral costs and compensation for lost wages, pain, and suffering.
• Property Damage covers the repair or replacement cost of cars and of buildings or other stationary objects.

Liability Coverage is often listed as three numbers divided by slashes, such as 25/50/10 or 100/300/100. Each of those numbers represents $1000 (so ‘25’ = $25,000). They refer to, in this order:

• the amount of Bodily Injury Coverage per person in the accident
• the total amount of Bodily Injury Coverage for any single accident
• the amount of Property Damage Coverage for any single accident

Uninsured/Underinsured Motorist Coverage

Pays for: your expenses due to a collision
When fault is: another person’s whose insurance is not sufficient to cover your bills, or a hit-and-run driver’s

UM/UIM Coverage is divided into Bodily Injury and Property Damage exactly the same way that Liability Coverage is, and uses the same three-number shorthand. (In some cases there may be only two numbers for Bodily Injury, and Property Damage is not included.) UM/UIM Coverage kicks in after the at-fault driver’s insurance, if any, is exhausted.

Collision Coverage

Pays for: damage to your car in collision situations, up to the value of your car
When fault is: anyone’s

Comprehensive Coverage

Pays for: damage to your car in all non-collision situations (examples: fire, hail or other weather, animals, theft, vandalism), up to the value of your car
When fault is: anyone’s

Auto Insurance: The Little Four

In addition, depending upon your state of residence and the insurance company, you may also see one or more of these options:

Medical Payments

Pays for: medical costs incurred as a result of collision for anyone on your policy
When fault is: anyone’s

Personal Injury Protection

Pays for: medical costs, and (depending upon the state) funeral costs, caregiving costs, and/or compensation for lost wages, incurred as a result of collision, for anyone on your policy
When fault is: anyone’s

Roadside Assistance

Pays for: the cost of towing your car and any on-the-spot labor, such as changing a tire
When fault is: anyone’s

Rental Reimbursement

Pays for: the expense of renting a temporary vehicle after a collision, up to a set daily amount
When fault is: anyone’s

Next, we’ll cover which insurance to buy and how much, and which offers you should ignore.

Did I miss anything? Ever seen car insurance of a sort not listed here? Are all the definitions clear?