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Understanding the basic parts of your auto insurance policy document can
help you buy the correct amount of insurance for your situation.
There are five parts of a typical auto insurance policy contract:
- Declarations - contains the personal
facts for drivers in your household such as name and address,
make and model
of your vehicle(s),
vehicle identification number(s), auto insurance policy number and policy
duration. It also contains the basic type of coverage you
purchased and your auto insurance policy limits and deductibles.
- Coverage Parts/Insuring Agreement -
outlines the coverage options and coverage
limits
on your auto insurance policy. Includes liability, medical, collision
and comprehensive limits. This section details what your
insurance company
will payout in coverages and coverage limits you
selected.
- Exclusions - details what is not
covered by highlighting your auto insurance policy's limitations.
- Conditions - lists the legal responsibilities
of both the insured and the insurer, including
premium
payment obligations, steps to filing a claim, and procedures
for resolving disagreements.
- Definitions - defines
terms and outlines the rights of the policyholder and the
insurance company.
Some general definitions include:
Collision Coverage - covers loss
to your vehicle caused in a collision with another
vehicle or object.
Comprehensive Coverage - covers damage
to your vehicle caused by an event other than a collision.
Examples include fire, theft, vandalism, and falling objects.
Liability - covers injuries and property
damage costs caused to others in the accident in an accident
in which you were found to be at fault.
Bodily injury coverage
pays for things like medical costs and lost
salary to others;
while property damage pays for repairs to other people's
property you damaged in the accident (other than your own
car). Liability coverage is the basic building block of
any auto insurance policy, and minimum liability limits vary from state
to state.
Below are some common extra coverage items that are available
to you:
- Medical Payments -
covers you and your passengers for medical and
funeral expenses incurred in an auto accident, regardless
of
fault. It will also cover injuries sustained by you while
you're
operating someone else's car (with their permission),
in addition to injuries you or your family members incur
when
you are pedestrians.
- Personal Injury Protection - This is
the name usually given to no-fault benefits in states that
have enacted mandatory or optional no-fault auto insurance
policy laws. Personal Injury Protection (PIP) usually includes benefits
for medical expenses, loss of income from work, essential
services, accidental death, funeral expenses, and survivor
benefits.
- No-Fault Insurance -
Many states have enacted auto accident compensation laws
permitting auto accident victims to collect directly from
their own insurance companies for medical and hospital
expenses regardless of who was at fault in the accident.
Although there are many legal variations of no-fault insurance,
most states still allow people to sue the negligent party
if the amount of damages exceeds a certain state-determined
threshold.
- Uninsured Motorists Bodily
Injury -
covers you if an accident occurs with
an uninsured or hit-and-run motorist who is determined to
be legally at fault.
- Uninsured Motorists Property Damage -
covers property damages caused by uninsured drivers.
State required minimums may not be enough to protect your
assets. Review your auto insurance policy often and thoroughly.
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