A basic auto insurance policy, as well as motorcycle, contains six types of coverage. California Law requires all registered vehicles to be insured with liability and property damage.
1. Bodily injury liability. Liability coverage limits (that’s for the damage you do to others) are written as three numbers, such as 15/30/5. That translates to $15,000 in bodily injury coverage per person, $30,000 in bodily injury coverage per accident and $5,000 in property-damage coverage per accident.
States require certain levels of minimum liability insurance because it’s coverage that pays for damage you do to others — including bodily injury and property damage. It also pays for your legal bills if you cause an accident (the above example is California’s).
Bodily-injury liability applies to damages you cause to others. It covers their medical bills and lost wages. Property-damage liability pays to repair or replace property that you destroy. This includes other cars or property, such as fences. It can also pay for “pain and suffering” damages if someone sues you after a car accident — but only up to your liability limits.
However, your financial responsibility may exceed your liability limits. If you cause $65,000 worth of damage and have an insurance limit of $40,000, you’re responsible for the remaining $25,000 and could be sued for it.
2. Property damage liability. This coverage pays for the damages to the car and possessions of the other party in an accident that is your fault. This includes not only the labor and parts costs associated with car repair, but also replacement for valuables inside the car that were destroyed. This coverage would also be for damages caused by hitting a stationary object like a fence or tree.
3. Medical payments. Medical payments (MedPay) coverage pays for the medical expenses suffered by you and your passengers after an accident. You’re also covered if you’re driving someone else’s car (with their permission) or from injuries suffered if a car hits you. MedPay will pay no matter who caused the accident, although if someone else is at fault your insurer may subrogate against them, meaning it will seek damages from the other party. MedPay may be secondary to any private health insurance you already have.
4. Collision. Collision coverage pays to repair your own vehiclein the event of an accident. To keep your premium costs down when you buy collision coverage, you can raise your deductible. Collision coverage is generally sold with a deductible of $250 to $1,000. The higher your deductible, the lower your premium. But remember, you’ll have to pay that amount out of your pocket.
5. Comprehensive. Comprehensive coverage pays for damage to your car that isn’t due to car accidents. That includes theft, fire, vandalism, natural disasters and collisions with animals (such as hitting a deer).
6. Uninsured/Underinsured motorists coverage (UM/UIM). Uninsured motorists (UM) coverage pays for your medical bills if an uninsured driver strikes your car. Similarly, underinsured motorists (UIM) coverage kicks in when someone causes an accident but doesn’t have enough insurance to cover all medical bills. In that case, the at-fault person’s insurance pays out to its maximum and then your UIM coverage pays for the remaining bills, up to your own limit.