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What is Auto Insurance?
Auto insurance provides financial protection to family members for both property and liability. Auto insurance is often referred to as a (PAP), Personal Auto Policy. A motor vehicle owner typically pays insurers a monthly fee, often called an insurance premium. The insurance premium an insured pays is determined by a variety of factors. These factors include the type of vehicle, the age and gender of any covered drivers, their driving history, and the location where the vehicle is primarily driven and stored.
What is a Personal Auto Policy?
The PAP provides four types of insurance coverage. They include:
- Part A – Liability protection
- Part B – Medical payments coverage
- Part C – Uninsured Motorist Coverage
- Part D – Coverage for damage to your auto
- Liability Protection
Part A of the PAP provides bodily injury and property damage liability protection to any insured who is legally responsible for an automobile accident. As with other liability policies, the insurer agrees to pay defense costs until the limit of liability has been exhausted by payment of judgments or settlements.
The liability limits are selected by the policyowner and apply to each covered accident. The most common PAP is written with split limits. In Texas, the state minimums are 30/60/25. The first limit is the maximum amount that will be paid to any one person for bodily injury; the second limit is the aggregate that will be paid for all bodily injury claims; and the third limit applies to aggregate property damage claims. An insured should have sufficient coverage to cover their net worth if they or their children happened to be negligent in an accident.
- Medical Payments Coverage
Part B of the PAP provides payment for the reasonable and necessary medical expenses of an insured as a result of an automobile accident. Benefits are paid regardless of fault. The benefits limit, typically in the range of $1,000 to $10,000 is selected by the policy owner and applies separately to each person insured in an accident. The insured’s under part B include the named insured, spouse, and any family member while occupying either a motor vehicle designed for use on public roads or a trailer or when struck as a pedestrian by such a vehicle or trailer. Any other person who in injured while occupying a covered auto is also insured.
- Uninsured Motorist Coverage
Part C of the PAP provides uninsured motorists coverage. Under part C, the insurer agrees to pay compensatory damages that an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury and property damage sustained by an insured and caused by an accident. The coverage applies to claims for medical expenses, lost wages, and pain and suffering but does not include punitive or exemplary damages. Many states require a minimum amount of uninsured motorist coverage to meet their state’s financial responsibility law. In Texas there is no requirement. A policyholder can purchase an amount of coverage as high as the liability limits that apply under part A.
- Coverage For Damages To Your Auto
Part D is the portion of the PAP that provides coverage for physical damage to the covered auto and to certain other nonowned automobiles. There are actually two coverage’s: (1) collision and (2) other than collision. Other than collision is also know as comprehensive coverage. The policyowner can elect both coverage’s or only comprehensive. Collision coverage cannot be purchased alone. Deductibles that can be selected by the policyowner apply to each coverage. Frequently, a lower deductible is purchased for comprehensive coverage than is purchased for collision coverage. The reason for this is the significant cost savings by selecting a larger deductible for collision coverage. Collision coverage is defined as the upset of the covered auto or any nonowned auto or their impact with another vehicle or object. Comprehensive coverage is a loss not caused by collision, it must be a result of other than collision. Together these two coverages give an insured “all-risks” coverage on an insured automobile, subject to the various policy exclusions. The PAP has a specific list of sources of loss that are considered other than collision. These are:
- Missiles and falling objects
- Theft or larceny
- Explosion or earthquake
- Hail, water, or flood
- Malicious mischief or vandalism
- Riot or civil commotion
- Contact with a bird or animal
- Breakage of glass. However, the policyowner can consider this part of the collision loss if it is caused by collision.
Contact us at Melliand Insurance to help custom a policy for your specific needs.