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What's in a Policy?
Insurance policies use terms that may be unfamiliar to the average driver. It is useful to understand what these terms mean so you can make better, more informed decisions about your coverage.
Coverages — Your auto insurance policy is divided into different coverages based on the type of claim that will be paid to you or others. (A claim is a request to an insurer for payment or reimbursement of a loss covered by the terms of an insurance policy.) These coverages are:
Personal Injury Protection — Otherwise known as “PIP,” this is your medical coverage for injuries you (and others) suffer in an auto accident. PIP pays if you or other persons covered under your policy are injured in an auto accident. It is sometimes called “no-fault” coverage because it pays your own medical expenses no matter who caused the auto accident. PIP has two parts — (1) coverage for the cost of treatment you receive from hospitals, doctors and other medical providers and any medical equipment that may be needed to treat your injuries and (2) reimbursement for certain other expenses you may have because you are hurt, such as lost wages and the need to hire someone to take care of your home or family. You may purchase both parts of PIP coverage or medical treatment coverage only, depending upon your needs.
Liability — This coverage pays others for damages from an auto accident that you cause. It also pays for a lawyer to defend you if you are sued for damages that you cause.
There are two kinds of liability coverage: Bodily Injury and Property Damage.
Bodily Injury Liability Coverage — Pays for claims and lawsuits by people who are injured or die as a result of an accident you cause. (See pages 8 and 9 for lawsuit options). It compensates others for pain, suffering and economic damages, such as lost wages. This coverage is typically given as two separate dollar amounts: (1) an amount paid per individual and (2) an amount paid for total injuries to all people injured in any one accident that you cause.
Property Damage Liability Coverage — Pays for claims and lawsuits by people whose property is damaged as a result of an auto accident you cause.
These coverages can sometimes be purchased as a combined single limit, which offers a maximum limit of protection per accident of bodily injury and property damage liability combined.
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