“Liability insurance” pays for injuries and property damage that you (or someone driving your car) causes to someone else. Specifically, “bodily injury” liability coverage pays the costs of damages to other people caused by a crash. These include medical expenses, lost wages, disability, rehabilitation, and “pain and suffering.” “Property damage” liability coverage pays for damage you cause to someone else’s vehicle and other property such as lamp posts, buildings and landscaping. A great many drivers have only the minimum coverages under North Carolina law: $30,000 per person and $25,000 in property liability losses.
“Collision” coverage pays for damage to your vehicle caused by a collision or single-car accident. It covers the lesser of either repair cost or the actual cash value of your car. When the repair cost exceeds the value of the car, the car is “totaled” and all you receive is the value of the car less any deductible.
“Comprehensive” coverage pays for some other risks to your car not resulting from a wreck. Depending on the terms of your policy, these may include fire, hail, falling objects, wind, water, vandalism, theft, collisions with animals, earthquakes, and civil disorder such as rioting. Like collision coverage, comprehensive will pay the cost of repair or cash value, less the deductible.
Particularly in liability insurance, there are often tragic gaps between the amount of liability insurance a driver has and the harm they cause in a wreck. You can insure yourself against these gaps in coverage, but you have to make sure your policy has high enough limits.
“Uninsured motorist” coverage (“UM”) provides protection if you are injured in a wreck when the other car has no insurance. Like liability insurance, NC law requires a minimum of $30,000 of UM, but that is not enough. You should decide how much higher the UM limit should be and ask your insurance company for a quote.
“Underinsured motorist” coverage (“UIM”) pays the gap between the harm you suffer and the amount of coverage which the driver who caused the wreck has. If someone in your car is seriously hurt, the medical bills alone could exceed $250,000. If the other driver has only the legal minimum liability policy ($30,000), a large UIM limit on your policy will protect you and any injured passengers from a large shortfall.
Another important add-on to your automobile policy is “medical payment benefits” (“Med-pay”). This pays for medical expenses due to a wreck and has no deductible.
By carefully reviewing your policy and asking your insurance company for options to increase your liability, UM, UIM and Med-pay limits, you can avoid tragic shortfalls in coverage. Rather than the false sense of security that the legal minimum policies provide, you can drive your car secure in the knowledge that your are insured for the actual risks you and your passengers face in the event of a wreck.