AUTOMOBILE INSURANCE DETAILS

Liability Coverages

Most automobile liability policies contain three major parts: liability for bodily injury

(commonly called BI), liability for property damage (PD) and uninsured/underinsured motorists coverage (usually referred to as UM/UIM).

Bodily injury coverage pays for injury to other persons for which you are legally responsible because you were at fault in an accident in which they were hurt. The insurance protects you against their claims for such things as medical expenses, lost wages and pain and suffering.

While it does NOT pay for injuries for you or anyone else driving your car, it does pay if the accident was caused by a member of your family residing with you or a person using your car with your consent. It will also protect you and members of your family if driving someone else’s car with their consent, should their insurance not be in force, or in case damages exceed the amount available under the owner’s policy.

In Rhode Island, you must carry minimum limits of bodily injury liability - $25,000 per person and $50,000 per accident. This means you have coverage up to $25,000 for damages incurred by any one person and up to $50,000 in any one accident should more than one person be involved. You many elect to purchase higher limits, based on your wish to protect your assets from lawsuits above these minimum amounts. Suggested limits are $50,000/$100,000.

Property Damage liability coverage pays for damage to property for which you are legally responsible for in the case of an at-fault accident. Property of others usually involves damage to another car, but it also could be a telephone pole, lawns, fence, or even a building. This coverage pays not only when you are driving but also when others are driving with your permission. The minimum limit required in Rhode Island for property damage is $25,000 per accident. Again, a higher limit is available for additional premium.

Uninsured Motorists coverage protects you. It pays if a hit-and-run driver or a driver who does not have auto insurance injures you. This coverage, in effect, takes the place of what the other driver should have purchased but did not. Coverage is also provided for under-insured drivers – those who have insurance, but not enough to cover your claim. This coverage, too, has policy limits. It covers bodily injury and property damage (property damage is subject to a deductible of $200). After payment to you for damages, your insurance company may sue the other driver for the money paid to you because of the other driver’s negligence. In Rhode Island, you may decline to purchase uninsured/underinsured motorist coverage if you choose to buy only minimum limits of bodily injury and property damage liability as required by law.

Bodily Injury, Property Damage Liability, and Uninsured/Underinsured Motorist Coverage are the basic coverages contained in liability policies and are mandatory under the laws of Rhode Island (with the exception as mentioned for UM). Other coverages, including those covering the automobile itself, are available at your option.

Coverages Other Than Liability

Apart from liability insurance, which must be purchased under the laws of the State of Rhode Island, there are a number of other coverages that may be purchased under an auto policy.

Physical Damage to the Automobile

1. Collision coverage pays for damage to your car as the result of colliding with another object, such as a tree or another automobile. While optional under the policy, it may be required by your lending institution or the company from which you may be leasing the car. It is relatively expense coverage. Sometimes it is not worthwhile to pay for collision coverage. The automobile policy only requires the company to cover your financial losses, not to replace your vehicle. Under certain circumstances, the repair costs on an older automobile may exceed the value of the car. In such cases, insurers will “total” the car and pay you what the car is worth rather than fixing it. In extreme cases, the worth of the car may not be as much as the premium you are asked to pay for the collision coverage on the vehicle. Companies require you to purchase this coverage with a deductible. A “deductible” is the amount of money you agree to pay as part of a claim before your insurer is committed to pay the remainder of the claim. For example, if you carried a $500 deductible on your collision coverage and had an $800 loss, you would have to pay the first $500 to repair the auto and the insurance company would pay the remaining $300. If the loss is below $500, the company pays nothing if you carry a $500 deductible. You can buy deductibles in varying amounts, with the cost decreasing as the deductible increases. Thus, a policy with a $250 deductible would cost less than a $100 deductible, but more than if you bought a $500 deductible. If you obtain a loan to purchase the automobile, the bank or other lender uses the car as collateral for your loan; thus, they require that you insure the vehicle itself against loss.

2. Comprehensive coverage pays for damage to your auto from almost all other causes, including fire, hail, windstorm, vandalism, flood and theft. It also pays for broken glass, such as windshield damage. Comprehensive coverage is less expensive than collision and many consumers choose to carry it. The lending institution carrying the loan on your automobile will probably require you to carry comprehensive.

Other Optional Coverages

1. Medical payments coverage pays for the medical and funeral expenses for you or others injured or killed while in, on, or alighting from the automobile. It also covers you or

members of your family residing in your household if struck by an auto while a pedestrian or in, on or alighting from a non-owned auto. Medical expenses are paid even if you cause the accident. Reimbursement only is paid for those expenses incurred within two years following the accident.

2. Rental reimbursement coverage pays the cost of renting a car while yours is being repaired. The amount paid per day of rental is limited as is the number of days payment will continue. These will vary by company.

3. Towing and labor coverage pays the cost of towing your car, should it become disabled. It will also pay for repairs made to the auto at the place of disablement. Note that the car must be disabled for coverage to apply. Coverage is generally limited per disablement.

You should be aware that these coverages might duplicate coverage you already have through other policies. For example, medical payments coverage may duplicate medical benefits available to you through your health insurance. If you are a member of an auto club, you probably already have coverage for towing.