Personal auto insurance typically provides coverage if you let friends or extended family members drive your vehicle. However, if the person uses your car for business purposes, most personal auto policies exclude such use and require you to obtain commercial or supplemental coverage.
A personal auto policy (PAP) typically includes liability, medical payments, uninsured/underinsured motorists, and physical damage coverage. It may also include a few other provisions.
Medical Payments
Whether you own a car or rent one, your auto policy offers protection from legal liability, injury to family members, and damage or loss to your vehicle. A standard auto insurance policy comprises six parts: liability, personal injury protection (PIP), medical payments, uninsured/underinsured motorist coverage, and physical damage coverage.
Medical or Med Pay covers your and your passengers’ medical expenses after a crash, regardless of who is at fault. It also typically pays for funeral costs and lost wages. Unlike PIP or no-fault coverage, Med Pay doesn’t cover psychiatric care or rehabilitation.
Some states offer PIP, which is more comprehensive than Med Pay and may include rehabilitative services and a loss of income component. It is also offered in states where Med Pay isn’t available. Adding PIP to your policy is an inexpensive way to add more coverage to your auto insurance. It’s an option for anyone who regularly has people in their household use their car.
Comprehensive Coverage
It protects your vehicle from damage caused by hail, falling objects, and even water or fire. It can also help with expenses associated with a rental car while your vehicle is repaired or replaced.
While not required by law, many lenders require it if you finance or lease your vehicle. It’s an intelligent coverage, especially given the rising costs of repairing or replacing vehicles.
While personal auto insurance doesn’t typically cover business-related activities, it can be combined with commercial auto policies to provide the additional protection your company needs.
Collision Coverage
In cases where your vehicle is damaged from hitting another car or object, such as a guard rail or tree, collision coverage reimburses you for repairs minus the deductible. This is optional, but nearly four out of five drivers include it in their coverage policies.
Collision coverage is not required by law, but if you lease or finance your vehicle, the lienholder will require you to maintain full coverage insurance, including liability and collision. Additionally, dropping collision might not be financially wise if you own your vehicle outright and it is an older model worth less than your policy’s deductible amount.
The collision coverage cost can vary by age, driving record, gender, location, and your car’s value. The higher the value of your vehicle, the more expensive your premium will be. However, you can often reduce your rates by choosing a higher deductible.
Uninsured/Underinsured Motorist Coverage
Uninsured motorist coverage (UM) and underinsured motorist coverage (UIM) reimburse you when you are hit by a driver who doesn’t have car insurance or who doesn’t have enough. This coverage usually comes with a limit for medical bills per person and another for property damage, and it may also include your passengers in the accident.
Typically, suppose an accident is caused by a driver who doesn’t have auto insurance or whose policy limits aren’t high enough to cover your expenses. In that case, you can file a lawsuit against the negligent party. However, this process is lengthy and complicated, and you need to win the lawsuit to get enough compensation to cover your losses.
While personal auto insurance might be sufficient if you use your vehicle for commuting or running errands, it won’t provide the same level of protection if you rent or loan out your car to others for commercial purposes. To address this need, some insurers now offer supplemental policies that extend coverage to drivers who use their vehicles for ride-sharing services.
