What kind of coverages do I have under my auto insurance policy?

Under an auto insurance policy, the following are the coverages available to California drivers:

1) Liability: coverage to protect against claims alleging that one’s negligence or inappropriate action resulted in bodily injury or property damage.

2) Collision: coverage for an insured’s vehicle that is involved in an accident, subject to a deductible. This coverage is designed to provide payments to repair the damaged vehicle, or payment of the cash value of the vehicle if it is not repairable (totaled). Collision coverage is optional; however if you plan on financing a car or taking a car loan, the lender will usually insist you carry collision for the finance term or until the insured’s car is paid off. Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW) is the term used by rental car companies for collision coverage.

3) Comprehensive: provides coverage, subject to a deductible, for an insured’s vehicle that is damaged by incidents that are not considered Collisions. For example, fire, theft (or attempted theft), vandalism, weather, or impacts with animals are types of Comprehensive losses.

4) Uninsured Motorist/Underinsured Motorist coverage: also known as UM/UIM, provides coverage if an at-fault party either does not have insurance, or does not have enough insurance under their policy limits to cover your damages. This coverage is often overlooked, but it is very important. According to the Insurance Research Council, almost 20 percent of California motorists do not have any insurance, making California the seventh-highest state in the nation when it comes to uninsured motorists. Unfortunately, this number goes up significantly during recessions. Uninsured motorist coverage (UM) and underinsured motorist coverage (UIM) is coverage you buy from your own insurance company. It pays for your past and future medical expenses, pain and suffering, loss of earnings, and your property damage.  The best thing about it is that it covers both you and your passengers, and it covers you whether you are a driver, passenger, or pedestrian.  It’s very comprehensive and will cover you and your loved ones in most cases.  And it shouldn’t cost much more than you already pay if you don’t have it on your policy.  California law does not require that you have uninsured/underinsured motorist coverage, but it is definitely something your insurance policy should have. If you do not have uninsured motorist coverage and get into an accident caused by an uninsured motorist, then you’re most likely going to have to pay for your damages (i.e. medical expenses, car repairs, rental car bill, etc.) out of your own pocket.

5) Loss of Use: Also known as rental coverage, provides reimbursement for rental expenses associated with having an insured vehicle repaired due to a covered loss.

6) GAP Insurance: Also known as Loan/lease payoff coverage, or GAP coverage, was established in the early 1980s to provide protection to consumers based upon buying and market trends. Due to the sharp decline in value immediately following purchase, there is generally a period in which the amount owed on the car loan exceeds the value of the vehicle, which is called “upside-down” or negative equity. Thus, if the vehicle is damaged beyond economical repair at this point, the owner will still owe potentially thousands of dollars on the loan. The escalating price of cars, longer-term auto loans, and the increasing popularity of leasing gave birth to GAP protection. GAP waivers provide protection for consumers when a “gap” exists between the actual value of their vehicle and the amount of money owed to the bank or leasing company. In many instances, this insurance will also pay the deductible on the primary insurance policy. These policies are often offered at auto dealerships as a comparatively low cost add-on to the car loan that provides coverage for the duration of the loan. GAP Insurance does not always pay off the full loan value however. These cases include but are not limited to: 1. Any unpaid delinquent payments due at the time of loss; 2. Payment deferrals or extensions (commonly called skips or skip a payment); 3. Refinancing of the vehicle loan after the policy was purchased; or 4. Late fees or other administrative fees assessed after loan commencement. Therefore, it is important for a policy holder to understand that they may still owe on the loan even though the GAP policy was purchased. Failure to understand this can result in the lender continuing their legal remedies to collect the balance and the potential of damaged credit.

7) Towing coverage is also known as Roadside Assistance coverage, covers the cost of a tow that is related to an accident.

8) Personal Property: Personal items in a vehicle that are damaged due to an accident are not covered under an automobile insurance policy. Any type of property that is not attached to the vehicle should be claimed under a homeowners or renters policy. However, some insurance companies will cover unattached GPS devices intended for automobile use.

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