Understanding How Car Insurance Works
The purpose of car insurance is to protect you financially in the event of an auto accident, theft, or other circumstances beyond your control (such as a tree falling on your car). Your car insurance not only protects you when you are liable for someone else’s injuries or property damage, it also protects you when another motorist is at fault. There are several categories of coverage included in your car insurance.
These categories include:
- Liability insurance
- Uninsured/underinsured motorist coverage
- Underinsured motorist conversion coverage
- Collision coverage
- Comprehensive coverage
- Basic reparation or medical payments coverage
- Full glass coverage
Every state, except New Hampshire and Virginia, requires some type of car insurance. This means that Connecticut drivers are legally required to have car insurance.
Connecticut Automobile Insurance Coverage Requirements
In addition to requiring that all motorists have car insurance, Connecticut also mandates that motorists have specific coverage types and meet certain coverage limits. In Connecticut, you are required to have liability coverage and uninsured/underinsured motorist coverage.
Required coverage amounts are:
- Bodily injury liability: $25,000/person, $50,000/accident
- Property damage liability: $25,000/accident
- Uninsured/underinsured motorist: $25,000/person, $50,000/accident
How Liability Insurance Works
The financial cost of a car accident is often significant, especially when there are injuries. Liability coverage protects you financially when you are found liable for an accident. It is used to cover the costs associated with the bodily injury of those who are injured in the accident and any damages. Bodily injury and property damage liability insurance does not cover your own injuries. It also does not protect you if you are injured in an accident caused by someone else.
Though the state does have required minimum limits, you are encouraged to increase these limits. Medical costs can escalate quickly, and in serious accidents, the $25,000/$50,000 limit is frequently inadequate.
What Protects You When You Are Injured?
If you are injured in a car accident that you are found liable for, you may be able to get coverage through basic reparations or medical payments coverage. This type of coverage is optional, and not all motorists opt in when they sign up for their insurance coverage.
If you are injured in a car accident caused by someone else, their liability insurance is what will cover your injuries. However, if you are in a situation where their insurance only meets the bare minimum legal requirement, you may be facing significantly more in medical bills alone. When this happens, you can turn to your own insurance policy.
Uninsured /Underinsured Motorist Coverage
Though it is illegal to drive without car insurance, it does happen. If an uninsured motorist injures you, you cannot get compensation for your injuries or property damage through their liability coverage as they don’t have any. Instead, you will have to turn to your own uninsured motorist coverage.
Suppose you are injured by a motorist whose liability insurance is less than your underinsured motorist coverage, or in a hit-and-run accident. In that case, you may also turn to your uninsured/underinsured motorist insurance for compensation.
Typically, your uninsured motorist coverage will mirror your liability coverage. Therefore, if your liability coverage is $25,000/$50,000, your uninsured motorist coverage is also for $25,000/$50,000.
Why You Should Increase Your Insurance Limits
While you can buy additional uninsured/underinsured motorist coverage, many insurance companies do not allow this coverage to exceed your liability coverage. Therefore, if you want to increase your uninsured motorist coverage, you must also increase your liability. Many people are hesitant to do this because “more coverage” means “more expensive” in the world of insurance. However, it is to your benefit to increase your insurance limits beyond the state-required minimum.
If you are in an accident and have medical bills amounting to $300,000, and the person at fault only has liability insurance up to $100,000/person, you’re left to cover the remaining $200,000. If your underinsured motorist coverage limit is $200,00/person, you will be able to get $100,000 from the other person’s liability insurance and another $100,00 from your own underinsured coverage.
Remember: you can only tap into your underinsured motorist coverage if your coverage exceeds that of the at-fault party.
You will note that in this example you were only able to collect $100,000 from your underinsured insurance and not your coverage limit of $200,000. This is because basic underinsured motorist coverage limits can be reduced by payments from the at-fault party’s insurance. It is designed to meet the shortfall between the underinsured motorist and your own policy. Consequently, you are still short $100,000 on your $300,000 medical bills.
You Should Also Sign Up for Underinsured Motorist Conversion Coverage
Using the example above, you may be wondering how you would come up with that $100,000. Most people do not have this kind of cash at the ready. This is where underinsured motorist conversion coverage comes in. This type of coverage also provides compensation when an underinsured driver injures you. However, unlike your regular underinsured insurance, it is not affected by payments from other sources, including the other driver’s liability insurance.
Conversion coverage allows you to collect up to your full underinsured insurance limit (in this example, $200,000). Therefore, if you are left with $300,000 in medical bills, you will be able to get $100,000 from the other driver’s liability insurance, and the remaining $200,000 from your own policy.
To learn more about car insurance and state requirements, review the State of Connecticut’s Insurance Department site.