What is car insurance?

Car insurance is a contract between you and an insurance company that protects you against financial loss if you are in an automobile accident. Auto insurance policies contain a variety of coverages that can be purchased depending upon your needs and wants. Simply stated, you agree to pay the premium, and in return, the insurance company agrees to pay for certain expenses as defined in your policy.

Do you need car insurance in order to drive legally in Pennsylvania?

Drivers must purchase and maintain car insurance in order to legally drive in Pennsylvania. Under PA law, it is called maintaining “financial responsibility” on your vehicles. A lapse in insurance coverage may result in the suspension of your vehicle registration privilege for three months unless the lapse of insurance was for a period of fewer than 31 days and the owner or registrant proves to the Department of Transportation (PennDOT) that the vehicle was not operated during this short lapse in coverage.

What type of car insurance coverage is required in PA?

• Medical Benefits — This pays medical bills for you and others who are covered by your policy, regardless of fault. The minimum limit is $5,000 of coverage. Higher limits are not required but are recommended for your best protection.
• Bodily Injury Liability — If you injure someone in a car accident, this coverage pays their medical and rehabilitation expenses and any damages for which you are found liable. The minimum limit is $15,000/ $30,000. The $15,000 pays for injuries to one person, while the $30,000 represents the total available for one accident.
• Property Damage Liability — If you damage someone’s property in an accident and you are at fault, this coverage pays for it. The minimum limit is $5,000 of coverage. Again, higher limits are not required but are strongly recommended for optimal protection.
• Limited or Full Tort — You can choose to have full or limited tort coverage. Limited tort coverage offers you savings on your premiums. You are still able to recover all out-of-pocket medical and other expenses; however, you are not able to recover certain damages - such as payments for pain and suffering - unless the injuries meet one of the exceptions to limited tort as defined in Act 6 of 1990, title 75, section 1705 (d). With full tort coverage selection, you retain unrestricted rights to bring suit against the negligent party.

What are the optional auto insurance coverages companies offer?

• Uninsured Motorist (UM) — This applies to you and your passengers for bodily injury if you are hit by an at-fault uninsured motorist. This does not cover damage to property.
• Underinsured Motorist (UIM) — This coverage applies to you and your passengers for bodily injury if you are hit by an at-fault motorist who does not have enough insurance to cover your claim. This does not cover damage to property.
• Stacking of UM or UIM — This allows you to either multiply the amount of uninsured or underinsured motorist coverage by the number of vehicles on your policy or to receive uninsured or underinsured motorist coverage from more than one policy under which you are insured. It costs extra to stack uninsured or underinsured motorist coverage.
• Funeral Benefit — This pays, up to a certain dollar amount, money for funeral expenses if you or a family member dies as a result of an auto accident. Income Loss — This coverage pays a portion of your lost wages when injuries sustained in an auto accident keep you from working.
• Collision — This benefit pays to repair damage to your car as a result of an accident. Most banks or lenders require you to buy this coverage to receive a car loan. Under Pennsylvania law, the insurance company applies a $500 deductible unless you request a lower amount. Generally speaking, the higher your deductible, the lower your premium.
• Comprehensive — Generally, this pays for theft or damage to your car from hazards including fire, flood, vandalism, or striking an animal. Most banks or lenders require you to buy this coverage to receive a car loan. There are various levels of deductible that may be purchased.
• Extraordinary Medical Benefits — This coverage pays for medical and rehabilitation expenses that exceed $100,000. It provides a maximum of $1 million of coverage.
• Accidental death benefit — This benefit is paid to the personal representative of an insured if the bodily injury from a motor vehicle accident results in death within 24 months of the date of the accident.
• Rental reimbursement coverage — This pays for an individual’s expenses, up to the limit on their policy, to rent a vehicle if they have a covered comprehensive or collision loss.
• Towing coverage — This reimburses an individual, up to the limit on their policy, for towing and labor costs for a covered disabled vehicle. This coverage is usually only available if comprehensive and collision is carried on the vehicle.
• Gap coverage — This will pay the difference between an insurance company’s payment for a totaled vehicle and the balance of a vehicle loan. This coverage is traditionally only available when an individual is purchasing a new vehicle.
• New car replacement — This covers the cost of a new car of the same make and model, minus the applicable deductibles if your car is totaled in a covered loss.