A car insurance policy is made up of several sections and reading one can often be difficult and confusing. If you are aware of the basic sections of coverage, it is much easier to understand how the policy is structured, and what coverage applies. Under some sections, you, the policyholder, are paid in the event of a claim and under other sections, someone else is paid in the event of a claim.
Collision and comprehensive coverage is a section that will make payments to the policyholder. This section is designed to pay for damage to the automobile, and often includes the extra cost of towing and a rental vehicle during the repair period. In the event of a claim, the policyholder will take the car to a repair shop, obtain an estimate and send it to the insurer, or the insurance company will send an appraiser to write a repair estimate for your collision shop to use. The insurance company will then issue a check to you so that you can pay for the repairs. The deductible shown on your policy will be subtracted from any payments made to you.
Another section that may issue payments to the policyholder in the event of a claim is the medical payments section, or Personal Injury Protection (PIP) section. This part pays for medical bills of those injured in the car. Often these payments are made directly to the health care facilities, but the insurance company may also reimburse you for costs you have already paid for. In some policies, there is a PIP deductible. If your policy has such a deductible, you will have to pay that amount out of pocket before the insurer will pay for any medical bills.
Under the liability section of coverage, the insurance company issues a payment to someone else if there is a claim. For example, if you cause an accident that injures someone in another car, they will have a claim for medical bills as well as pain and suffering. In many states, the law requires that their own insurance has to pay their own medical bills, but the pain and suffering part is always your responsibility if you are at fault, and the liability coverage protects you in this regard. The insurance company will evaluate the injured person’s claim, and negotiate a settlement with them or their attorney. No deductibles apply to this coverage with respect to most personal auto insurance policies.
Each part of your car insurance policy will have sections that are mandatory under the laws of your state, and some that are optional. Additionally, the mandatory parts will have minimum limits of coverage that you must maintain. These will vary by state and the laws that govern these coverage issues are often referred to as “compulsory auto insurance laws”. If you are shopping for an insurance policy on the Internet, be sure that you are dealing with an agent or broker that is licensed to do business within your state, and that they provide you with the coverage that is necessary given the laws of your state.
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