I expect the answer to this question for many people is - plenty. In a country where litigation is big business, auto insurance is complex and expensive. Understanding what you are paying for helps you to take control and make informed decisions. It may also lead to a more affordable auto insurance premium for you.
You can't take it all in at once, so let's stick to stuff that goes together logically.
Liability insurance is an important one. If you cause an accident, it is liability cover that pays for medical expenses and damage. Along with liability insurance you usually see three numbers which represent thousands of dollars e.g. 25/50/15. They represent the amount in thousands you are insured for if you are the cause of the accident and have to cover personal injury protection (PIP), bodily injury (BI) if you hurt others, and property damage (PD). You will be offered a minimum set by the state but have the option to purchase more. Purchase is the operative word. It will cost you more!
Property Damage (PD) covers the cost of repairing property and this could be more than just the vehicles involved. I always used to wonder how people came to hit lamp posts when there are such big spaces between them. But, having spoken to someone who was in a car that hit one, I now know that there appear to be more poles than spaces as you speed towards them from a bad angle. If you hit one, you pay to fix it from your PD cover.
Personal Injury Protection (PIP) covers your medical expenses and other expenses such as loss of wages and will even pay the expenses, for someone to do such things as housework and childcare as you recover if that was your usual role, but only up to the limit insured for. Bodily Injury (BI) covers injuries when you are responsible.
Medical Payments Cover (MP or Med Pay) is optional in some states. You need to find out what the situation is in your state. Its purpose is to cover medical expenses should there be no health insurance. It seems redundant considering the other liability cover, but this needs to be discussed fully with your insurer. If it is optional, what you need to consider is whether or not you need this and if so how much of it. Costs can spiral if you are responsible for the medical expenses of a person who has no health insurance. But the more insurance you take, the more expensive it is.
Tort when referring to auto insurance refers to a situation where someone has to be found to be at fault. The person at fault pays, well their insurance does if they have any sense. No-fault is the approach to insurance taken in a few states. The idea here is that no one is at-fault and each person approaches their own insurance company to cover costs. In theory it is a good idea, but as mentioned above, when people see litigation as an option, it doesn't always work as it was intended.
So, if you have read this all the way through, you now know a little more. Armed with this information, you can negotiate from a more secure position when you come to renew your insurance and hopefully end up with affordable auto insurance at last.
