Automobile insurance is a type of insurance that provides insurance coverage for cars, trucks, motorcycles, and other street-legal vehicles. Automobile insurance primarily provides financial protection in the event of an accident and against any liability that may also result from accidents or other incidents involving a covered vehicle.
In legal terms, auto insurance is a contract between a person seeking insurance coverage and an insurance provider in which an individual agrees to pay a monthly premium. In exchange for a premium payment, the insurance provider agrees to pay for any losses in the event of an accident, as long as those losses are covered by the specific auto policy entered into by the individual and the provider.
In most states, an individual is required to carry auto insurance by law. In those states, fees or penalties are imposed for driving without auto insurance. Auto insurance coverage is largely determined by the following:
- What policies the insurance provider offers;
- What policy was purchased by the consumer; and
- The specifics of the policy that was purchased.
There are six basic types of coverage that automobile insurance provides:
- Liability Coverage: Liability coverage protects the driver who harms another driver or their property while operating the insured vehicle.
- Liability coverage is mandatory in most states, and there is generally a minimum amount that must be carried.
- Automobile liability insurance provides both body damage liability and property damage liability;
- Uninsured and Underinsured Motorist Coverage: Uninsured, or underinsured, motorist coverage is insurance coverage that helps protects an insured party if they are involved in an accident with a driver who either has no auto insurance coverage or not enough coverage;
- Comprehensive Coverage: Comprehensive coverage is a form of insurance coverage that helps an individual involved in an incident that is not a collision.
- Comprehensive coverage will help pay to replace or repair a covered individual’s vehicle if it has been stolen, damaged in an event that is not a collision, or damaged from things such as fire, theft, vandalism, or falling objects.
- It is important to note that financing or leasing a vehicle generally requires that the lessor obtain and maintain comprehensive coverage but is generally optional otherwise;
- Collision Coverage: Collision coverage is insurance coverage that helps cover repair or replacement costs if the insured party’s car has collided with an object or another vehicle or if their vehicle rolled over.
- Collision coverage protects an insured’s own vehicle, whereas property damage liability coverage would pay for any damage done to the other driver’s vehicle;
- Medical Payments Coverage: Medical payments coverage is a type of insurance coverage that can be part of an auto insurance policy and could cover an insured, or the insured’s passenger’s medical expenses in a car accident that results in injuries.
- Medical payment coverage is optional and not available in all states but is a requirement in others; and
- Personal Injury Protection: Personal injury protection, also called “PIP” coverage, is a component of an auto insurance policy that covers medical expenses related to an auto accident, regardless of which driver was at fault.
- PIP coverage will often include lost wages and is only available in some states, while others require PIP as a policy add-on.
What Types of Vehicles Does an Auto Insurance Policy Cover?
As mentioned above, an auto insurance policy can cover any motor vehicle, depending on the type of auto insurance policy. Most auto insurance policies cover accidents in “automobiles,” typically defined as four-wheeled motor vehicles. However, this is not always the prevailing definition in the auto insurance policy.
For example, some auto insurance policies will cover a wider range of motorized vehicles, including:
- Motorized wagons, scooters, ATVs, and bicycles;
- Basic automobiles, such as motorcycles, cars, trucks, and buses;
- Mobility scooters for disabled people;
- Farm equipment, such as tractors or other motorized farm equipment,
- Watercraft, such as ships, boats, or underwater vehicles; or
- Aircraft, such as airplanes or helicopters.
What Types of Automobile Insurance Policy Terms Can Affect Auto Insurance Coverage?
Any policy term that attempts to define what is considered to be an “automobile” can affect auto insurance coverage. Examples of the more notable automobile insurance provisions to look out for include the following:
- Any words that accompany the term automobile, such as passenger, recreational, or commercial;
- Any list of vehicles that are considered to be excluded vehicles, such as vehicles with an MSRP over a certain amount; or
- Any provisions that use the term car or truck in place of the broader word automobile.
In most cases, a court will try to interpret an auto insurance policy as literally as possible. As such, if the policy specifically states “compact vehicles and other passenger cars,” the court would likely say that commercial trucks aren’t covered.
However, if the terms included in the automobile insurance policy are broad or unclear, many courts will give the benefit of the doubt to the policyholder and hold the insurance company responsible for creating a badly worded policy.
What Is The Difference Between Collision And Liability Insurance?
Once again, collision insurance is automobile insurance that covers the repair or replacement of a vehicle resulting from an accident, regardless of an individual’s fault. Collision insurance pays for the damage to an insured’s vehicle, while liability insurance pays for the other driver’s property damage or bodily injury.
Additionally, collision insurance is usually only required when an insured person has a lien on their vehicle. This means the insured still makes payments on their vehicles, and the bank still owns the vehicle. Liability insurance is required for any car that a person may own.
Collision insurance will most likely require the insured to pay a deductible before the car is repaired. As such, the insurance company will generally give the insured a choice regarding how much they will have to pay in the event of an accident. However, the lower the deductible, the higher the insured’s monthly payments.
If an individual has collision coverage, their insurance company will repair the car and proceed with any injury claims against the other driver’s insurance company on the insured’s behalf. This process is called subrogation. Although an individual’s insurance company will attempt to demand enough money to pay the insured back for their deductible, they are not legally obligated to do so. In these cases, the insured may wish to proceed with a legal claim against the driver privately.
If the other driver is clearly at fault in an accident but has no liability insurance, collision insurance will cover the damage to the innocent insured party’s car. It is important to note that even if an insured party has uninsured or underinsured motorist coverage, it may not cover all of the repairs. As such, if an insured party gets into a single-vehicle accident, such as hitting a tree, collision insurance will cover the damage to their car because no one else was involved.
Companies will typically use the following factors to determine the amount of coverage a policy provides, as well as the premium that the insured will pay for their collision coverage:
- The price of the insured’s car;
- The durability of the insured’s car;
- How accessible the parts are and whether the car is difficult to repair; and
- Whether or not the car is a specific type that is frequently stolen or involved in incidents.
What if My Automobile Insurance Denies Coverage or Fails to Promptly Pay?
When a motor vehicle accident occurs, the amount paid out will typically depend on the nature and extent of the damage and whether the mechanic used new or refurbished parts. Once again, an auto insurance policy is a contract that is entered into between a consumer purchasing the insurance and an insurance provider.
As such, the insurance provider is legally obligated to promptly pay the car’s market value before the accident minus the salvage value of the damaged vehicle. Importantly, the insurance provider will never pay more than the car’s cash value.
However, if the insurer fails to make payments as outlined in the insurance agreement promptly, then the insured party may be able to sue them for breach of the insurance contract. Additionally, the insured may also be able to sue them for damages associated with their failure to make prompt payments, such as lost wages.
Do I Need A Lawyer For Help With Issues With Automobile Insurance?
As can be seen, insurance policies differ widely from one policy to another and are often complicated documents to understand. Further, most states do not allow an individual to sue their insurance company directly unless the insurance provider denies a claim in bad faith.
As such, if you have an issue with your auto insurance carrier refusing to cover a vehicle under your policy, you should immediately contact an experienced insurance attorney.
An experienced products and services attorney specializing in insurance can examine the specific terms used in your insurance policy and compare them with the applicable laws in your state. Finally, if necessary, an experienced insurance lawyer can help you bring a bad-faith lawsuit against your insurance company.
