I recently had a client very hung up on the fact that her insurance company had mistakenly taken her full coverage off her policy and left her with liability insurance only. She was very concerned with the implications that would have on coverage for injuries relating to the use of her car. Did you know that full coverage is not actually a thing? It occurred to me that when you don’t deal with insurance for a living, it is confusing as heck, so here’s a short primer on coverages types and what they do.
Why You Need Liability Coverage
Liability coverage (property and injury) – if you cause a crash and injure someone else and/or damage their vehicle, your liability coverage will cover those damages for the person you injured. Your liability insurance is important because it protects you from the injured party coming after you directly to pay for their damages. If a person’s damages are more than your coverage limit, you may be at risk that they will come after you personally for payment. The moral of that story is make sure your liability limits are sufficient to protect you and your assets if you cause a crash.
Types of Liability Coverage
UM coverage (property and injury) – this coverage will protect you if you are in a crash and it is someone else’s fault, but that person has no auto insurance whatsoever. All North Carolina policies have this coverage.
UIM coverage (property and injury) – this coverage comes in to play when you are hit by someone with LESS insurance than you. So, for example, if your insurance provides for $50,000 to pay claims and you are hit by someone who only has $30,000 to pay claims, then your carrier can jump in and help if your claim is worth more than $30,000.00. Typically your liability amount and your UIM amount are the same. So if you have $50,000 in liability coverage, you will also have $50,000 in UIM coverage.
Collision (property only) – this coverage protects your car if you are in a crash and it’s your fault. This coverage can also help if you are hit by someone else and their insurance company is dragging their feet. You will have to pay your deductible, but it might be worth it to get the process moving faster
Comprehensive coverage (property only) – this coverage protects your car if something other than a crash happens…like a tree branch falls on it, you hit a deer, or you get caught in a hail storm.
Medical Payments coverage – this is coverage that can help pay medical expenses if you are in a crash. It’s especially helpful if you have no health insurance or a high deductible plan. If you have $1,000 in medical payments coverage, they will pay up to $1,000 in bills, no matter who is at fault for the crash.