Auto Insurance Coverage Series
Auto Insurance consists of different coverage parts rolled into one contract. Liability coverage is typically required in order to put a car on the road. Most states have financial responsibility laws that establish a minimum limit of liability for two components, bodily injury and property damage. This post is specific to the bodily injury portion.
Bodily injury is defined as “bodily harm, sickness or disease, including death that results”. Of course, the policy does narrow it down to bodily injury resulting from an auto accident in which an insured is legally responsible for bodily injury to other parties.
This coverage includes defense expenses that are incurred to defend an insured in a lawsuit. These expenses are actually paid in addition to the limit of insurance shown on your declarations page. That is very valuable in and of itself. However, there are limitations and exclusions to the coverage.
The first limitation is the coverage will only protect people considered to be an “insured”. This term is also defined in the policy and in general includes the named insured on the declarations page, resident spouse, resident family members (blood, marriage, adoption, ward of state) and people using your vehicle with your permission. It also can protect people or organizations that have vicarious liability for the actions of an insured, such as an employer or a charitable organization.
Secondly, the coverage applies to vehicles on the declarations page, newly acquired autos (with limitations), substitute vehicles and trailers.
All of this is subject to exclusions of which notable ones are listed below:
- Vehicles used as a taxi or other type of public conveyance
- Vehicles that are owned but not listed in the policy
- Operating a vehicle without permission
- Intentional acts
- Vehicles with fewer than 4 wheels
- Vehicles designed mainly for off road use
- Vehicles that are furnished to you for regular use (company cars or vehicles owned by other family members)
- Persons in the Auto business (garage test drives, valet parking)
- Coverage is available in the US, territories, possessions, Puerto Rico and Canada (not worldwide)
LIMITS OF INSURANCE
Limits of insurance are usually done one of two ways. You can purchase a split limit (max per person/max per accident) or as one number called a combined single limit or CSL. Split limits are more common but a number of insurance companies offer the combined single limit. The CSL will cost a bit more because the the only maximum that applies is the per accident amount. This can be very handy if one person injured needs more than the per accident number.
Liability coverage is usually priced on the driver and how they drive the vehicle. Typical rating categories are pleasure use, to and from work and business use. These categories impact the rate because of frequency of use. More companies are introducing pay as you go models where they track your driving activity and use that as a means of determining your rate. These programs seem to vary by company but could be a good alternative for some people.
1) Consider a combined single limit when offered
2) If the use of your vehicle changes, factor that into your insurance, especially if you use it less
3) Buy the limit you can afford not the limit you think matches your assets
4) If you have another vehicle you can use on a regular basis, that you do not own, talk to your agent or broker for potential gaps in coverage.
Insurance is a legal contract. Good advice is not expensive. Shop Prepared!