Financial Answer Center

Here is a summary of the insurance coverage you may be purchasing.

• Bodily Injury Liability. This component pays for medical bills, loss of income, and compensation for pain and suffering for others who may have been injured or die in an accident that you are responsible for. It also pays your legal defense costs in the event of a lawsuit for an accident that you caused. A minimum amount of this type of coverage is usually mandatory; most people increase their liability limits beyond the minimum.
• Property Damage Liability. This component pays for the damage you do to another person's property or car, along with your legal defense costs. This type of coverage is also usually mandatory.
• Personal Injury Protection (PIP). This will pay for doctor, hospital, and funeral costs for you and your passengers as a result of an accident, no matter who is at fault.

SUGGESTION: Depending on your state of residence, you may have the option to waive personal injury protection (PIP) coverage if your medical insurance and life insurance companies allow you to designate them as the primary carrier. A word of caution! Before you drop your PIP coverage with your auto insurance carrier, check with your insurance agent or your benefits coordinator to make sure auto accidents will be covered by your medical insurance policy.

• Uninsured and Underinsured Motorist. This will pay for the cost of injuries or death in an accident caused by an uninsured, underinsured, or hit-and-run motorist. This type of coverage is usually mandatory.
• Collision. This will pay for physical damage to your car. This coverage may be required by the lender and is recommended, especially with a new car.
• Comprehensive. This will pay for damage resulting from theft, fire, vandalism, or other perils, except for those that collision will pay for. This coverage is not mandatory, unless you are leasing, but is recommended, especially with a new car.

You can also get additional insurance coverage for things like rental reimbursement, towing, and labor, and you can also purchase an umbrella liability policy.