Optional Auto Insurance

Beyond the coverages required by law, most insurance companies offer a wide range of optional auto insurance coverages at additional cost. The most popular and valuable options are discussed here.

A. Bodily Injury Liability

Buying increased bodily injury liability limits is a good idea for consumers seeking to protect their assets in case of a lawsuit resulting from an auto accident. If you have assets that you wish to protect, you should seriously consider purchasing higher limits of bodily injury liability coverage -- $50,000/$100,000, $100,000/$300,000, $250,000/$500,000 or even higher. Some insurers offer policies with a combined single overall limit for both bodily injury liability and property damage liability, rather than separate limits, which would then pay up to a single maximum amount for all damages caused by one accident regardless of how many persons are injured (e.g., $60,000, $100,000, or $300,000).

B. Property Damage Liability

Although the requirement for third party property damage liability coverage is currently $10,000, many cars today are worth far more. Given the high cost of automobile replacement and/or repair, the purchase of property damage liability limits higher than the required minimum limit of $10,000 should be considered by insureds. Property damage limits of $15,000, $25,000, $50,000 and higher are generally available for an additional premium.

C. Additional PIP (No-Fault) Benefits

It is often smart to buy more No-Fault protection, over the basic $50,000 level of No-Fault benefits required by law. Because of No-Fault’s cost-effective design, extended No-Fault benefits represent a relatively inexpensive option.

For a modest additional premium, optional coverages are available that will pay more than the required basic No-Fault benefits, explained in Chapter II. Consumers now have two choices:

• You may purchase Additional PIP coverage, to raise the limit of No-Fault benefits available in case of an accident up to $100,000 or higher and, in the process, increase the potential maximum amounts of lost earnings payments, other necessary expenses or the death benefit, depending on the limit you select. Additional PIP also includes coverage for you and your family and, unlike basic No-Fault, extends to all out-of-state guest occupants in your car when driving anywhere in the United States, its territories and possessions, or Canada. For a minimal charge, you may also purchase additional personal injury protection solely to cover such guest occupants, without increasing the limit of No-Fault benefits.

• Insurers must offer Optional Basic Economic Loss (OBEL) coverage. If purchased, this coverage elevates the required $50,000 of basic economic loss coverage by an additional $25,000. When the basic limit of $50,000 has been reached on a claim, this $25,000 can be designated by the injured person to be applied specifically to payments for loss of earnings from work (wage loss), for rehabilitation, or to all elements of basic economic loss.

Neither of these two additional No-Fault coverage options lengthens the three-year limit within which wage loss benefits are payable.

The availability of these No-Fault options makes optional medical payments coverage (see below) no longer as important as it had been, because that coverage (except for funeral expenses) responds only if No-Fault does not cover the situation or after No-Fault benefits, when applicable, are first exhausted.

D. Supplementary Uninsured/Underinsured Motorists (SUM) Coverage

As discussed in Chapter II, one of the basic coverages that comes with your policy is bodily injury protection against the negligent actions of an uninsured or hit-and-run motorist. You have the option to expand this basic protection. For an additional premium, you can purchase Supplementary Uninsured/Underinsured Motorists (SUM) coverage of up to $250,000 per person per accident and $500,000 per accident, subject to the per person limit ($250,000/$500,000). Many insurers offer higher limits of SUM coverage. SUM coverage also covers accidents occurring out-of-state, which are not covered under the basic required Uninsured Motorists Coverage. However, the amount of SUM coverage may not exceed the bodily injury liability limits of your policy.

If you have an accident with another vehicle that is insured but has bodily injury liability limits lower than yours, or if such vehicle has no insurance at all, SUM coverage will be activated if it has been purchased. The amounts paid under SUM by your policy up to its SUM limits will be reduced, or offset, by any amounts recovered from another party’s auto insurance liability policy. Thus, if you are ever involved in an accident with other drivers, you can be sure your family is protected at least to the amount of SUM coverage you have purchased from your own insurer.

E. Collision Coverage

 With this optional insurance, your own insurer pays you, without regard to fault, for damage to your car caused by a collision with another car or any other object or your car overturning.

If you do not have collision coverage, and your car is damaged in an accident where the other party is at least partially at fault, you may still recover all or part of the damages to your vehicle by making a claim against that other vehicle’s property damage liability insurance coverage for the proportion of damages for which the other driver was at fault.

F. Comprehensive Coverage

Under comprehensive coverage, your insurer pays you, without regard to fault, for damage to your car from all causes, other than collision, such as theft (of the car itself or its parts), fire, flood, windstorm, glass breakage, vandalism, hitting or being hit by an animal, or by falling or flying objects.

If your car is stolen comprehensive coverage will also provide a certain amount per day specified in your policy for transportation expenses (rental car, public transportation, etc.). Generally, this coverage is provided until the time the company makes an offer to settle your claim.

Comprehensive and collision deductible options generally offered are $100, $200 (standard), $250, $500 and $1,000. Coverage may also be sold where the deductible does not apply to window glass damage. Remember, generally, you will not be paid more than the actual cash value of your car (i.e., what the car is worth) at the time of an accident, which takes depreciation into account. Some insurers also offer "replacement coverage" which will pay the cost to replace a vehicle with a brand new vehicle of the same make and model. This coverage usually applies in limited circumstances, for example, only up to 6 months after the car is purchased.

G. Medical Payments Coverage

This insurance pays, without regard to fault, medical expenses and funeral expenses for you and persons riding with you, if an accident occurs involving your car, up to its stated limits.

H. Accidental Death and Dismemberment (AD&D) Coverage

Some insurers offer coverage that will pay you, your family members, or other occupants of your car, under the terms of the policy, a set amount for certain serious injuries or death caused by an accident while in your car. These AD&D amounts are payable in addition to any amounts collected under the No-Fault, liability, or other parts of the policy.

I. Gap Coverage

Under the terms of a loan or lease on an automobile, at the time of total loss, there is often a difference between the amount your insurer will pay as actual cash value (under comprehensive or collision coverage) and the amount which you owe to the entity that financed or leased the vehicle (such as a bank or auto dealer). This difference, which can be hundreds or even thousands of dollars, is called the "gap amount". Gap coverage pays this amount in the event of a total loss. There are two different forms of gap insurance. You may either (1) purchase a "waiver" of the gap amount directly from the lender or dealer, who in turn has purchased gap insurance to cover the vehicle, or (2) you may buy a separate policy, or add an endorsement to your present policy, to cover this gap amount. The latter option is presently not available. Please note that in the past few years, some lenders and leasing companies have changed the language of their financing contracts to state that the amount of settlement by the physical damage insurer (based on actual cash value) will be accepted as full satisfaction of the contract in the case of total loss to the vehicle. In these cases, neither a gap waiver nor policy is necessary, as no "gap" exists.

J. Supplemental Spousal Liability Insurance

While your automobile liability insurance policy provides coverage for every passenger in your vehicle injured in an accident caused by the driver’s negligence, it will most likely not provide any liability coverage when the injured passenger is your spouse. However, the state legislature recently passed a law requiring insurers to offer their policyholders the opportunity to purchase supplemental spousal liability coverage beginning January 1, 2003. This insurance covers the liability of an insured because of the death of or injury to his or her spouse for the liability insurance limits provided under the policy. You must request this additional coverage from your insurer and pay an additional premium for it unless your company is providing this coverage at no charge.

When you initially purchase insurance or at your policy renewal, your insurance company will be sending you notice of the availability of this coverage, an explanation of it and the additional premium that will be charged for it. Even if you do not purchase this optional coverage, a spouse is still eligible for No-fault benefits as discussed earlier.

K. Other Coverages

Other optional coverages available from some companies are Towing and Labor Coverage, Extended Transportation Coverage (Rental Reimbursement) and Mechanical Breakdown Coverage. You should contact your insurer, agent or broker to discuss whether it would be advisable for you to purchase them. Some additional coverage may only be offered when comprehensive and/or collision coverage is purchased on the insured vehicle.

Reprinted from New York State's Consumer Guide to Automobile Insurance.