Understanding How Auto Insurance Policies Cover Injury Claims

Here’s what you need to know about auto insurance coverage for injury claims, and how to get the compensation you deserve after a car accident.

When you’re involved in a car accident, it can be terrifying. Between injuries to your body and damage to your vehicle, it helps to know that auto insurance can help to pay for your losses.

According to the Insurance Research Council, medical expenses made up 79% of all auto claims in 2017 alone, with the average cost per bodily injury claim reaching $15,506 in 2013.¹

As important as it is to obtain auto insurance, it is equally important to understand how your auto insurance policy will protect you in the event of an auto accident, and what you can expect from the other driver’s insurance company.

Here’s what you should know about auto insurance policy coverage.

Overview of the Parts in an Auto Policy

Though the rules vary from state-to-state, most states require their drivers to obtain (minimum) basic personal auto insurance. The requirement provides for financial protection in case of an auto accident.

The driver pays a premium, while the insurance company promises to pay for the losses outlined in your specific policy. Auto policies are renewable, usually every six or twelve months.

Almost every state requires drivers to carry:

  • Bodily injury liability
  • Property damage liability

Many states also require other types of insurance, such as: 

  • Personal Injury Protection (PIP)
  • Medical Payments (MedPay) coverage
  • Uninsured motorist coverage
  • Underinsured motorist coverage

Personal Injury Protection (PIP)

PIP is mandatory in “no-fault” insurance states and an optional form of coverage in tort states.

No-Fault Insurance States v. Tort States

  • In a no-fault insurance state, drivers must first look to their own PIP coverage for injury expenses, regardless of who was at fault.
  • A tort state is one in which at-fault drivers, or their insurer, are responsible for paying the other driver’s medical expenses and property damage.

PIP covers the driver and their passengers for injury-related costs, like:

  • Medical expenses
  • Lost wages
  • The cost of transportation to medical appointments
  • Replacement services, like child care

PIP does not pay compensation for pain and suffering or property damage.

Medical Payments (MedPay) Coverage

MedPay is an optional coverage in most states. Similar to PIP, MedPay pays for injuries to a driver and their passengers, no matter who caused the accident.

MedPay differs from PIP in that MedPay only covers essential medical expenses. MedPay does not pay for property damage, lost wages, or replacement services like child care.

Uninsured Motorist Coverage

Uninsured motorist coverage reimburses you for losses caused by an uninsured driver. Most states require auto policies to include uninsured motorist coverage in case a non-insured driver hits the policyholder.

Uninsured motorist coverage pays for:

  • The policyholder
  • Covered family members
  • Passengers in the car driven by the policyholder (differs by policy)

Underinsured Motorist Coverage

Underinsured motorist coverage is an optional add-on to auto policies in most states.

An underinsured driver has an auto insurance policy. But the coverage is limited, meaning that it’s not high enough to cover your damages after a collision.

Underinsured motorist coverage kicks in when you have accident-related injury expenses that exceed the at-fault driver’s liability limits.

Severe injury claims are best handled by a personal injury attorney to maximize total compensation for the victim. 

What Does Bodily Injury Liability Cover?

When you are to blame for an accident that causes injury to someone else, bodily injury liability coverage protects you against their claims for damage.

Bodily injury liability coverage pays for the injured person’s:

  • Medical Expenses: Hospital bills, doctor appointments, physical therapy, and related costs
  • Lost Income: Compensation for lost income because of an inability to work
  • Pain and Suffering: Includes emotional distress, humiliation, and more

Bodily injury liability coverage on your policy may help to pay for the cost of your legal counsel if the injured party or their insurance company takes you to court

Example: Collision Causes Back Injury

Nathan is talking on his cell phone while driving to the grocery store. He can’t hear very well, so he looks over to turn the radio down.

When he looks over, he takes his eyes off the road for a moment. Before Nathan can look up, he has rear-ended Rebecca’s car at full-speed.

Rebecca sustains a severe back injury that requires surgery. She’s in the hospital for a week and incurs $20,000 in medical expenses, including rehabilitation.

Rebecca’s recovery is difficult and takes six weeks until she can return to her job, where she makes $1,000 per week.

Rebecca eventually files an injury claim with Nathan’s insurance company, seeking $60,000 in total compensation for her medical expenses, lost wages, and pain and suffering.

Her property damage claim was settled separately, soon after the collision.

Nathan has $50,000 in per-person bodily injury liability coverage. Rebecca’s injury claim settles out of court for $50,000.

If the claim didn’t settle, Rebecca’s attorney would have filed a lawsuit against Nathan.

Nathan’s insurance company has a duty to defend him against car accident lawsuits. Most insurance companies take care of hiring an attorney to appear in court for their insured. His bodily injury liability coverage would have covered the legal fees.

Bodily injury liability insurance covers any person you injure with your car, including: 

  • Another driver
  • Occupants of the other vehicle
  • Passengers in your vehicle who aren’t members of your household
  • Pedestrians

There are two coverage limits for bodily injury liability:

  • Per-person limit: The amount of money that each person injured in an accident can receive
  • Per-accident limit: The total maximum amount that will be paid if more than one person is injured

Example: Susan Injures One Person

Susan is driving in the rain, misjudges the distance, and slams into the back of John’s car. John suffers a neck injury.

Susan’s per-person limit is $50,000. No matter how seriously John is injured, there is only $50,000 available from Susan’s car insurance to cover his injury expenses.

Example: Susan Injures Three People

Susan is driving in the rain, misjudges the distance, and slams into the back of John’s car. Susan triggers a multi-car collision by forcing John to hit Rachel’s car in front of him.

As a result, John, Rachel, and Rachel’s passenger, Kim, are injured.

Susan’s per-accident limit is $100,000. The limit means that John, Rachel, and Kim could potentially each receive up to $50,000 for their medical expenses (the per-person limit on the policy). However, the combined total that Susan’s policy can pay is $100,000.

In this case, John, Rachel, and Kim would not each receive $50,000 since that would total $150,000. This amount exceeds Susan’s per-accident limit.

If the injured parties can’t agree on a fair division of the available limits, the insurance company may file an “interpleader action” to request the court to decide how to divide up the $100,000 per-accident limits.

How Much Bodily Injury Liability Coverage Should You Have?

You must carry your state’s minimum amounts of personal injury and property damage liability coverage.

Beyond the minimum, different types of auto insurance coverage are priced separately so you can obtain combinations of coverage in amounts that fit your budget and needs.

Some states enable policyholders to choose a combined single limit for bodily injury and property damage liability coverage. Your policy would pay up to your limit for physical injuries and property damage combined.

Example: Ray Causes Bodily Injury and Property Damage to Olivia

Ray is to blame for a traffic accident with Olivia, causing injuries to her shoulder and front-end damage to her car.

Olivia incurs $10,000 in medical expenses and has $2,500 in vehicle damage.

If Ray has a combined single policy with a limit of $50,000, it means that he can pay up to $50,000 total for Olivia’s medical expenses and vehicle damage. In this case, her combined damages total $12,500 – well under Ray’s limit.

It is important to note that if Olivia has $20,000 in medical expenses and her $40,000 luxury vehicle is totaled, exceeding Ray’s limit, Olivia may still be able to sue Ray for the rest of her damages.

Umbrella Insurance

Since you can be liable for damages that exceed the limits of your bodily injury liability coverage, you may want to consider purchasing personal umbrella insurance.

Personal umbrella insurance is a separate policy with additional liability coverage that comes into play if you’re responsible for someone else’s injuries and the damages exceed your auto or homeowner’s insurance liability limit.

In the example above, if Olivia has $20,000 in medical expenses and $40,000 in vehicle damage, but Ray’s policy limit is $50,000, he could be responsible for paying the difference of $10,000 out of pocket.

However, if Ray has an umbrella insurance policy, it could cover that $10,000.

Insurance Coverage for Property Damage

In addition to bodily injury liability coverage, auto insurance policies also include property damage liability coverage. Property damage liability coverage is intended to pay for damage that you cause to another person’s car or other property with your vehicle.

As with bodily injury liability coverage, most states require you to carry a minimum limit.

Although most basic auto policies will cover damage that your vehicle causes to others, it does not cover the damage to your car.

Optional coverage to pay for damage to your vehicle include:

  • Collision: Covers damage to your vehicle caused by a collision with another car or object when you are the one at fault.
  • Comprehensive: Covers damage caused by something other than a collision, like a flood, vandalism, falling trees, or hitting an animal. It also covers theft.
  • Glass Coverage: This covers damage to your windshield.

Sometimes policyholders use their collision coverage for car repairs after an accident caused by someone else and leaves it to their insurance company to collect the cost from the at-fault driver’s policy.

Who is Covered Under Your Policy?

You and your immediate family members are covered under your auto insurance policy, whether you are driving your own car or someone else’s car (so long as you received permission).

If you allow someone who is not on your policy to drive your car, your policy also provides coverage for them.

Personal auto insurance policies do not cover the use of your vehicle for commercial purposes, such as delivering food. It covers your daily non-business driving, like to run errands or go to and from work.

Additionally, your auto policy won’t provide protection should you use your car for a ride-sharing service (e.g., Uber). However, more and more auto insurance companies offer supplemental coverage you can buy to extend your coverage to include ride-sharing services.

What if You’re Not to Blame for the Accident?

Filing a claim with another person’s insurance company is called a third-party claim. Filing a claim with your own insurance company is called a first-party claim.

When you’re in an accident that isn’t your fault, whose insurance policy covers your injuries depends on the severity of your injuries and whether you’re in a no-fault insurance state.

When you’re in a tort state and did not cause the accident, you’ll file a third-party claim. The at-fault driver’s liability insurance coverage will usually cover your damages up to the limit of the policy.

Third-party damages may include:

Alternately, when you live in a no-fault insurance state, you would file a (first-party) injury claim with your own insurance company no matter who caused the accident.

You are permitted to seek injury compensation from the at-fault driver’s insurance company in a no-fault state only if your injuries are severe enough to meet the state’s injury threshold.  Examples of threshold injuries include permanent, disabling, or disfiguring injuries.

Most no-fault states allow you to seek compensation for vehicle damage from the at-fault driver’s policy.

When another driver crashes into your car, they are responsible for reporting the accident to their insurance company. However, it’s vital that you also notify the at-fault driver’s insurance company since motorists don’t always want to report accidents they’ve caused.

No matter what state you’re in, it’s imperative to notify your own insurance company after an accident. Most auto policies contain a “cooperation clause” that requires prompt notification, even if you weren’t to blame.

Filing a Claim with Your Own Insurance Coverage

In some situations, you can make a claim with your own insurance company, even when you’re not at fault for the accident. For example:

  • Collision insurance will pay for the loss of your vehicle
  • Uninsured motorist coverage will pay for your injuries and vehicle damage when the other driver lacks insurance coverage
  • Underinsured coverage will pay for medical costs that exceed the at-fault driver’s bodily injury liability limits
  • PIP will pay for your medical expenses and lost wages

What to Remember

The ability to proactively protect yourself lies in your own hands. Having the right auto policy (or policies) in place can make all the difference.

When you’re purchasing car insurance, keep in mind:

  • You will be financially protected for auto damage or injuries that result from an accident – up to the limits of your policy.
  • Bodily Injury Liability coverage pays medical expenses and lost wages to someone you’ve injured. If it’s not enough, you might be on the hook for the difference.
  • Property Damage Liability coverage helps to pay for damage you cause to another’s vehicle (or other property).
  • Many states also require other types of insurance (e.g., PIP, uninsured motorist
    coverage, and underinsured motorist coverage).
  • Under your auto policy, you and your household members are covered as is someone
    whom you permit to drive your vehicle.

Know What You Deserve and How to Get It

You deserve fair compensation for your injuries and related damages. It helps to know that insurance companies are required to handle your claim fairly and in a reasonable amount of time.

Be aware of your state’s prompt-payment laws and unfair claim settlement rules, which establish the time frame in which an insurance company must pay you for your damages.

If you’ve been in an accident, it’s a good idea to consult with an experienced personal injury attorney before deciding to handle your own insurance claim.

Based on the severity of your injuries, you can expect a range of average settlement amounts for car accident claims. An attorney can find out exactly how much money is available to cover your damages. The insurance company won’t voluntarily tell you the at-fault driver’s policy limits.

A skilled attorney knows where and how to look for all the funds available for your compensation. For example, an at-fault driver may have an umbrella policy, or a teen driver may have coverage through both divorced parents’ policies.

Most injury attorneys offer free consultations for car accident victims. Many attorneys will take your case on a contingency basis, meaning they won’t get paid unless your case settles or you win an award in court.

Don’t let the big insurance companies win. There’s no cost or obligation to find out how an attorney can help you today.

Dustin Reichard, Esq. is an experienced attorney with 20 years of work in the legal field. He’s admitted to the Illinois State Bar and the Washington State Bar. Dustin has worked in the areas of medical malpractice, wrongful death, product liability, slip and falls, and general liability. Dustin began his legal career as a JAG... Read More >>