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How to Understand your Car Insurance Policy
Figuring out how to improve your coverage often starts with understanding what your policy includes and what it does (and doesn't) cover. Below, you'll find the most important terms on your policy and what they mean.
- Bodily Injury: This coverage pays for medical costs and your legal defense if others are injured by your car. It's usually presented as two numbers, such as 100,000/300,000, with the first number (100,000) being the maximum your insurance company pays per person and the second being how much they'll pay per accident.
- Property Damage: This coverage protects you from the cost of repair or replacement of other vehicles, buildings, and structures.
- Medical Payments: Also called Medical Expenses, this covers medical payments for you, the policyholder, or your passengers in case you're injured in an accident.
- Personal Injury Protection (PIP): In some states, like Florida and New York, PIP provides similar coverage to Medical Payments coverage but also includes wages lost due to injury or the cost of childcare/household services if a crash-related injury keeps you from performing these tasks.
- Uninsured Motorist: Typically, this coverage is offered as both Uninsured Motorist Property Damage (UMPD) and Underinsured Motorist Bodily Injury (UMBI). These cover you if you're in an accident with an uninsured driver, paying your and/or your passengers' medical expenses (UMBI) or the repair/replacement cost of your vehicle (UMPD).
- Underinsured Motorist: This coverage is less common than Uninsured Motorist but provides you with supplemental coverage when a driver who crashes into you is underinsured. If your medical expenses or damages are higher than the other driver's insurance limits, this coverage kicks in to cover your additional costs.
- Collision: If your car is hit by another vehicle or damaged by any stationary objects, such as potholes, guardrails, or poles, collision coverage pays for the repair or replacement of your car regardless of who is at fault. This part of your insurance is also subject to a deductible, or the amount you pay before your insurance pays (ex. a $5,000 claim with a $1,000 deductible will get you $4,000 from your insurance company).
- Comprehensive: If your car is damaged by unexpected forces such as an animal, tree branch, weather events, or even vandalized or stolen, comprehensive coverage pays for the repair or replacement of your car. Like collision, your comprehensive coverage is subject to a deductible.
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