Common Clauses in Car Insurance
There are many car insurance companies in the United States, and they cover various things. The common insurance coverage and terms can be categorized into the following nine types. By carefully reading and understanding the meaning of each, it can help you decide whether to buy a certain type of coverage, skip it, or purchase a higher limit. However, different states have different laws, and some coverage options are required by law. The following are common coverage options in Oregon.
The following image is an example of common insurance terms and conditions:
Bodily Injury Liability or "BIL"
Covers the costs of injuries or death that you are liable for in an accident. This can include medical expenses, funeral costs, lost wages, and even pain and suffering (as determined by a court). If you are sued for bodily injury, BIL also covers your legal fees.
It's important to note that BIL does not cover your own injuries or death:
If the other driver is at fault, their insurance will cover your injuries or death.
If you are at fault, your insurance may cover your injuries or death under Personal Injury Protection (PIP), or you may need to rely on your health insurance. If you haven't purchased PIP, you'll be responsible for paying your own medical bills.
Bodily Injury Liability typically has two parts: a per-person limit and a total limit per accident. For example, if you have coverage of 100K/300K, and you cause an accident that injures five people, your insurance would cover up to $100,000 per person, but no more than $300,000 for the entire accident.
Liability for property damage
Also known as "Property Damage Liability." This clause pays for other people's property damage caused by an accident that is your fault. Like the previous clause, this one does not cover damage to your own property.
Uninsured (or underinsured) bodily injury
Usually referred to as "Uninsured and Underinsured Motorist Bodily Injury." If the responsibility for the accident lies with the other party, but they are unable to compensate you (or your family) for the losses caused by bodily injury, your insurance company will compensate you under this clause. This clause, like "Bodily Injury Liability," usually includes "per person payment limit" and "total payment limit for a single accident."
Uninsured (or underinsured) property damage
Usually referred to as "Uninsured and Underinsured Motorist Property Damage." If the responsibility for the accident lies with the other party, but they are unable to compensate you for your property damage, your insurance company will compensate you under this clause.
Whether it is bodily injury or property damage, there may be several reasons why the other party cannot compensate you for your losses:
The other party is an illegal immigrant and cannot obtain a driver's license or buy insurance.
The other party is a legal resident but does not have insurance, or has insurance with a very low limit that is not enough to cover your losses.
The other party's insurance company is poorly managed and has gone bankrupt (it is recommended not to buy insurance from small insurance companies that you have never heard of).
The other party caused the accident and fled the scene.
Personal injury medical expenses
Usually referred to as "Personal Injury Protection" or "PIP." If you are responsible for the accident and have also been injured (or died), this clause pays for your medical (or funeral) expenses but does not cover other costs such as lost wages. As explained above, if you are responsible for the accident, "Bodily Injury Liability" pays for the other party's bodily injury losses and does not compensate you for your own bodily injury losses.
In addition to PIP, there are currently 12 states in the United States with "No-Fault Insurance" laws, which means that "regardless of whose fault it is, your insurance company is required to compensate you for the losses caused by bodily injury." These 12 states are: Florida; Hawaii; Kansas; Kentucky; Massachusetts; Michigan; Minnesota; New Jersey; New York; North Dakota; Pennsylvania; Utah. If you live in one of these states, please contact your insurance company for details.
The deductible is the amount that is not covered by insurance. It is agreed upon in advance by the insurer and the insured. If the loss is within the specified amount, the insured will bear the loss on their own, and the insurer will not be responsible for compensation.
Collision coverage pays for the damage to your car in the event of a collision, such as hitting a utility pole or another vehicle, and covers the cost of repairs or even replacement if necessary. If the collision is your fault and causes damage to someone else's property, refer to "Property Damage Liability."
Collision coverage typically includes a deductible, which is the amount you pay out of pocket before your insurance company pays the remaining cost. If your deductible is $0, the insurance company will cover all the costs associated with repairing or replacing your car. If your deductible is $1,000, for example, the insurance company will only cover the amount that exceeds $1,000. A lower deductible is better, but it will also result in a higher premium.
Comprehensive coverage, also known as non-collision coverage, pays for damage to your car caused by anything other than a collision, such as a falling tree branch (a common scenario depicted in insurance commercials), fire, theft, vandalism, or flood. Comprehensive coverage also includes a deductible.
Roadside assistance, also known as tow and labor coverage, pays for services such as towing and labor costs if your car breaks down on the road, if you have a flat tire, or if you lock yourself out of your car. The coverage for this is usually relatively low.
Transportation expense coverage, also known as rental reimbursement, covers the cost of renting a car while your car is being repaired or replaced after an accident or theft.
Some may wonder after reading the above explanations - is it possible to only buy liability insurance?
Liability-only insurance covers losses and injuries caused by human error and is usually a legally required type of insurance.
Full coverage, on the other hand, typically refers to liability insurance plus collision and comprehensive insurance, which adds protection for losses resulting from unexpected events that damage one's own car.
For example, if your car is vandalized or hit by a falling tree branch or flooded in a storm, liability-only insurance won't cover it, but full coverage with comprehensive insurance will. However, "full coverage" is actually a relatively vague concept; it does not usually include roadside assistance or rental reimbursement, among other things.
Many insurance brokers and online quoting systems do not ask whether you want liability-only or full coverage but instead allow you to select individual coverage types and limits. If you choose collision and comprehensive coverage, it will be considered "full coverage."
How do you decide whether to buy full coverage or just liability insurance?
Refer to the terms and explanations above and consider whether you need collision and comprehensive coverage. In general:
If you have a loan, the bank typically requires you to buy full coverage to protect their own interests and ensure they can recover any losses if the car is involved in an accident.
If you don't have a loan and your car is old (worth less than $5,000), it may not be necessary to buy full coverage, especially if the deductible is high. Liability insurance alone should be sufficient.
Finally, we would like to share with everyone the common factors that affect car insurance premiums:
Accident history. The more accidents, the higher the premiums.
Driving experience. The longer the driving experience (and without accidents), the lower the premiums.
Age. Premiums decrease after age 25. Young people in their teens and early twenties have much higher premiums because this group has a higher likelihood of accidents. Getting married and having children usually means more responsible driving and lower premiums.
Location. The worse the traffic and public safety conditions in the area, the greater the likelihood of accidents and the higher the premiums. Urban areas generally have higher premiums than rural areas.
Many companies, industry associations, organizations, veterans, and student groups, as well as alumni, may offer various discounts that can reduce premiums.
The more expensive the car, the more expensive the collision coverage.
Safety measures. If the car has anti-theft systems or even safety measures such as dashcams, the premiums may be lower.
Remember: Safety first on the road!
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