A car insurance policy consists of six different parts; four of which consist of types of coverage and the remaining two consisting of general provisions and the duties of a policyholder following a loss or accident. When policies are issued, a declarations page and policy form will be included which lists the types of coverage, insuring agreement, exclusions and conditions.
Breakdown of the Six Parts of Auto Insurance Policies
The following breakdown of an auto insurance policy is based on four types of coverage and may not apply to certain motorists. Not all policies will cover the losses described and may not be needed by all motorists. Policies are broken down into the following 6 parts:
Liability - Provides coverage for property damage or bodily injury that is caused by the policyholder in which they are found legally responsible for; damages must result from an automobile accident. For instance, if an insured were to strike another person's vehicle and cause damage and bodily injury to the occupant of the other automobile, damages will be paid to cover expenses up to the limits stated on the policy; this also covers another's property such as fences, poles, etc.
Medical Payments - Also known as Personal Injury Protection (PIP) in some states; this provides protection for the insured, family members and passengers who sustain injuries while occupying the policyholder's vehicle regardless of fault. This will pay for reasonable expenses for medical care and funeral services up to the policy's limit; compensation can be obtained within three years of the date of the accident.
Uninsured Motorists - Compensates policyholders and occupants of their vehicle for bodily injuries sustained following an accident caused by a driver who does not carry liability coverage, are underinsured or are victims of a hit-and-run driver up to the limits stated on the policy. This will also cover the insured and policyholders if they are struck as pedestrians by an insured motorist; in some states Uninsured Motorist can be purchased for property damage by adding an endorsement.
Physical Damage - Commonly referred to as Comprehensive and Collision (comp and collision) provides coverage for physical damage sustained by the policyholder's vehicle following a traffic accident regardless of who was at fault. Items also covered include but are not limited to theft, vandalism, collision with an animal, falling objects, fire, and the upset of an automobile. A deductible usually applies to this type of coverage which would need to be paid by the insured after filing a claim or will be deducted from the amount being paid if the vehicle is declared a total loss. The insurer can choose from two methods of payment; compensate for the amount needed to repair or replace the vehicle or give actual cash value, whichever is less.
Duties After an Accident or Loss** - Policyholders have certain duties which must be performed following an accident or loss. Under Uninsured Motorists, the insured must notify the police promptly if they are a victim of a hit-and-run. Under Physical Damage, policyholders must take reasonable steps to protect the automobile from sustaining further damage; in addition, a stolen vehicle must be reported to the police. Following a loss, the carrier must be permitted to inspect the automobile prior to repair or disposal.
General Provisions - Establishes coverage conditions and describes obligations of the policyholder and provider. Such conditions include; losses are only covered during the policy period shown on the declarations page within the policy territory. Legal action may not be taken by an insured against a carrier until all of the policy's terms have been complied with or until the insurer agrees in writing that the policyholder has an obligation to pay whether such obligation has been determined by a judgment after trial. Policy terms may not be changed or waived without a written endorsement and premium adjustments will take effect on the date of the change. Termination provisions state that policies cannot be terminated by the insurer after being in effect for 60 days except for nonpayment, misrepresentation to obtain the policy or suspension or revocation of the primary operator's driver's license. A 10 day notice must be given for cancellation due to nonpayment and a 20 day notice must be given for nonrenewal. In addition, the insured may cancel the policy at any time with a notice to the carrier of the desired cancellation date.
The information provided is a brief explanation of the six parts of auto insurance policies; policyholders should take the time to understand their policy and the declarations page to fully understand the terms and conditions; any questions should be addressed with the insured's carrier for clarification. Not all policies will cover the above mentioned losses; some types of coverage are optional and would have to be purchased in addition to the state's legal requirements in order to obtain protection.