We all see the commercials for car insurance bundles and deals, but when was the last time you actually reviewed your insurance policy and declarations page? Most of us think of our car insurance as just another monthly bill without really paying attention to what is covered by the policy (or not!). This article is a brief introduction to the basic coverages available on your insurance policy, and why they would be useful to you in the event of an injury or accident.
This is your basic insurance coverage that is required by the State of Ohio. Liability coverage will pay for the other driver’s vehicle damage and medical bills if you cause an accident. Remember that insurance will only pay up to your policy limits, which means that if you cause more damage than what is covered by your policy, you could be on the hook for any additional damages. Currently, Ohio requires a minimum of 25/50/25 in insurance coverage, meaning up to $25,000 per person and up to $50,000 to be paid out per accident for medical bills and damages, and an additional $25,000 for property damage.
In most cases, $25,000 is sufficient to repair a vehicle. However, if someone has severe injuries (think: ER visit, surgery or permanent injury), the $25,000 medical limit will not go very far in covering those bills. This could leave you (and your assets) exposed to cover the difference. For this reason, it’s worth the extra few dollars per month to increase your liability insurance coverage so that if you cause an accident, your assets are protected and you won’t have to pay someone else’s medical bills out of pocket.
While liability coverage is used to fix the other person’s vehicle, collision coverage can be used to fix your own vehicle when it is damaged from a collision with another vehicle or an object (such as hitting a tree, guardrail or telephone pole). Often this is a requirement for your insurance policy, especially if you are leasing or financing your vehicle.
Comprehensive coverage is similar to collision coverage but will apply when your vehicle is damaged from something other than a collision. This would cover incidents such as a car fire, theft, falling tree branches, weather damage or damage caused by riots/vandalism, among other situations. This coverage may also be required if you are leasing or financing and is separate from the collision coverage.
Medical Payments Coverage
Medical payments coverage (“MedPay”) is an elective coverage that you can add on to your policy. MedPay can be used to cover out-of-pocket medical costs, including health insurance copays and deductibles, prescription costs, or medical bills that are otherwise not covered by health insurance, regardless of who caused the motor vehicle accident. It can be used strategically to keep your medical bills out of collections while you are still treating or waiting to settle your claim.
When your vehicle is totaled in an accident, you are entitled to be reimbursed the value of your car at the time of the accident. This generally falls along the lines of the Kelley Blue Book value, taking mileage, prior damage, current economic conditions, etc. into consideration. However, this can be problematic when you are paying on your car loan and owe more than the depreciated value of your car. If so, you could be on the hook to pay that gap or difference in value out of pocket. If you elect gap coverage on your vehicle, your insurance company will step in and pay the remainder of your auto loan after the total loss payment has been applied. This is a great add-on to your insurance policy, especially if you lease your vehicle, have a long-term auto loan or made a small down payment and have a large remaining loan balance.
Uninsured Motorist/Underinsured Motorist Coverage
This coverage, often known as UM/UIM coverage, is another elective coverage that can sometimes be overlooked when reviewing your insurance policy. The general thought is, “If I’m in an accident, the other person’s insurance will cover me.” But what if they don’t have insurance? What if they do have insurance, but it is the state minimum coverage and the $25,000 isn’t enough to cover your medical bills? Or what if you were in a hit-and-run and have no clue who the driver that hit you is? For these reasons, the uninsured/underinsured motorist coverage is so important to have on your policy. This way, no matter what the other driver’s situation is, you will be protected and your medical bills can be taken care of.
These are the basic insurance coverages available on a car insurance policy. It is so important to review your policy to make sure you are well protected in the event of an accident, regardless of who caused it. You don’t want to wait until after the accident happens to find out you don’t have enough coverage to fix your vehicle or pay your medical bills. And reviewing your policy is a great way to make sure you aren’t overpaying for your insurance too! For example, if you’ve paid off your car loan you can save a few bucks by removing the gap coverage from your policy. It will be worth your time to call your insurance agent and make sure that your policy is up to date with your current lifestyle and needs.
Author: Alynnah Satterfield, Personal Injury Paralegal