Facts about Car Insurance

It is a given that all registered vehicles in the US have to have insurance or other proof of financial responsibility i.e. surety bond depending on a particular state’s requirements. But what is not always clear to most people is what the insurance policy covers in a car accident: the vehicle or the driver.

It depends on the type of insurance, the coverage, and the state. Typically, personal liability insurance will always follow the driver, no matter what vehicle the driver is operating. Liability insurance is designed to protect the driver from out-of-pocket expenses in case he or she causes injury to another party. The vehicle, on the other hand, may be excluded in the coverage if it is not listed in the insured’s policy or available for regular use. In such cases, the registered owner or insurer of that vehicle will have liability for any damage or injury caused. However, these are not hard and fast rules; it will depend on the policy.

Conversely, comprehensive or collision auto insurance follows the vehicle irrespective of who the operator was. The insurance will pay for damage to the insured vehicle for any reason although the policy may specify who the allowed operators (covered driver) can be for the policy to take effect. In general, family members of the policy owner are covered drivers, but not always. There are some insurers that will only cover the costs of repairing or replacing a damaged vehicle if it was being operated by the policy owner.

Insurance policies in general are difficult for most people to understand, so it may be a good idea to consult with a lawyer about the what, why, and wherefores of your coverage. You could get your agent to explain it to you, but unfortunately not all agents will dot the Is and cross the Ts for you unless you’re already making a claim, by which time it may be too late.