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Understanding car insurance coverages

Bodily injury. Collision. Liability. Um, WHAT? Auto insurance coverages can be … confusing. Yet it's important to know what covers what.

To help you feel confident about your car insurance, we've translated complicated insurance lingo into easy-to-understand descriptions. See how Esurance can protect you, your car, and your wallet.

How coverages work

Basic car insurance coverages typically fall into three categories:

  • Coverages that protect your car (of course)
  • Coverages that protect you and your passengers (medical)
  • Coverages that protect your wallet (liability)

Some are required. Some are optional. All are extremely important to consider.

Coverages that protect your car

When your car's out of commission, it can feel like your whole life is out of commission. The following "car coverages" are designed to help you get back on the road — and back to normal — as quickly as possible.

Collision coverage, together with comprehensive coverage, is a key component of what's often referred to as "full coverage." While your property damage coverage helps others repair their cars, collision is there to assist you. If you've caused an accident, collision helps to either repair damage or replace damaged parts of your car.

Comprehensive and collision coverages are not state-mandated coverages, but they may be required by a loan or leasing company.

More on comprehensive and collision

This coverage is for all those unpredictable elements that spring up on the road or in your driveway. Comprehensive coverage, also known as "comp" or "other than collision," can help pay for repairs (or replacement, if your car's totaled) after your car's damaged by a natural disaster, vandalism, theft, fire, or a falling tree branch.

While no one can doubt the importance of collision and comprehensive coverages, none of them spring into action until the car gets to a repair shop. In the meantime, there's still the matter of towing and other roadside service fees, which can rack up, FAST. This is where emergency roadside assistance comes in.

ERS (called towing and labor coverage in some states) can be purchased on policies that have comprehensive and collision coverages. It can be a big help to those stranded by mechanical failure or in need of maintenance like tire changes, gas fill-ups, battery jumps, etc.

More on emergency roadside coverage

This coverage reimburses you for the cost of your rental car if your insured vehicle is in the shop or is unavailable due to an accident. You need to have comprehensive and collision on your policy in order to add rental car coverage. In certain states, Esurance offers CarMatch Rental Coverage®, which covers the rental cost of a vehicle comparable in size and body type to your regular ride.

More on rental car coverage

A car's value depreciates over time. But if you financed or leased a vehicle and have an accident that's declared a total loss, you might end up owing MORE to your financing or leasing company than the car is worth.

This is where loan/lease gap insurance can be a real saver.

Insurers don't determine your actual cash value (ACV) settlement based on what you owe, but rather on what the car is worth just prior to the accident. Let's say you owe $20,000 on your new car, but it's only worth about $16,000. If your car is totaled, you might get a settlement check of $16,000 but still owe an additional $4,000 on your loan or lease.

Loan/lease gap insurance helps bridge this divide between the ACV and what you still owe.

More on insurance for your loaned or leased car

Coverages that protect you & your passengers

Medical coverages can help pay for … well, medical expenses for you and your passengers after a covered accident. And medical expenses can be … well, expensive.

Medical payments coverage, also known as medical and funeral services payments, can help cover accident-related medical expenses (including funeral expenses) for you, other drivers on your policy, and passengers. If you're ever hit by a car as a pedestrian or cyclist, it can also over coverage.

More on medical payments coverage

Personal injury protection can help cover medical expenses for you and your passengers after an accident, regardless of fault. Offered (or required) in no-fault states, PIP is a complex coverage that varies widely by state. It covers hospitalization, rehabilitation, other medical expenses, and (sometimes) lost wages up to the limits you select.

More on PIP coverage

Coverages that protect your wallet

Liability can help pay for damaged property, medical care, and lost wages for other drivers and passengers if you're found at fault in an accident.

Each state sets its own minimum limits that drivers must have on their car insurance policies. These minimums are typically expressed in a 3-tier system: 25/50/15, for example. Here's what these numbers mean:

  • 25: The max amount (in thousands) the insurance company will pay toward injury-related expenses per person
  • 50: The max amount the insurance company will pay toward injury-related expenses per incident
  • 15: The max amount the insurance company will pay for property damage for each incident

This might seem confusing but don't worry. When you buy your policy, you won't be able to select limits below your state's legal requirements. You can always set limits that are higher.

BI and PD liability are the basic building blocks of a car insurance policy. Bodily injury insurance covers medical expenses and lost wages for injured drivers or passengers, while property damage insurance covers the repairs or replacement of damaged cars and other property (e.g., a garage, fence, porch, etc.).

Liability insurance can also help defray legal fees if you're sued for further damages.

More on bodily injury and property damage coverage

In the states with no-fault insurance, insured drivers are typically paid for medical expenses by their own insurers, regardless of who caused the accident. Nonetheless, BI liability coverage is still required in no-fault states because if injuries are bad, the at-fault driver may be sued by the injured party. If that happens, your BI coverage can help cover your liability expenses.

Property damage liability works the same in no-fault states as it does in other states. In other words, the driver found at fault is responsible for any damage caused by the accident.

There are 2 types of uninsured and underinsured motorist liability coverage: bodily injury and property damage. Both will financially protect you from drivers with minimal or no coverage. Some states require drivers to have some form of this coverage. In other states, it's an option.

  • Uninsured motorist bodily injury liability coverage can help pay for medical expenses and lost wages of policyholders, authorized drivers, and passengers when the accident-causing driver is uninsured.
  • Underinsured coverage works similarly to uninsured insurance, except this coverage steps in when the at-fault driver's liability limits aren't enough to cover your post-accident expenses.
  • Uninsured/underinsured motorist property damage coverage helps pay for your car's repairs if the at-fault driver doesn't have enough of the required property damage coverage or if they are uninsured.

More on uninsured/underinsured motorist liability

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