Auto Insurance: An Overview
The automobile insurance policy currently in use, as provided by
Ohio law, is described below. In general terms, a policy constitutes
a contract by which a company promises to pay to, or on behalf of,
an insured certain losses under specified conditions. The policy
also provides certain services. Automobile insurance contracts generally
spell out the dollar limits of coverage and the conditions applicable
to a loss occurrence.
Note: This is a general description of coverages that vary based
on your specific auto policy. It’s important to read the policy
and discuss any limitations or exclusions with your insurance agent
or company representative. Equally important is to know and understand
your duties in the event of an accident or loss. Failure to comply
with these duties could void coverage.
Contents of policy
Most automobile insurance policies are composed of several interrelated
parts. These parts are: declarations, coverages, supplementary payments,
definitions, exclusions and conditions.
In an effort to help insurance consumers to better understand their
policies, policy language has been simplified. Most policies are
divided into separate parts, with each part indicating the amounts
of coverage and conditions that apply to a given type of protection.
Whatever format is used, the intent is the same—to specify
the maximum amount of coverage provided, when the coverage applies,
the limitations to a given type of coverage and what is not covered.
brief explanation of each section follows.
Declarations: The declarations section serves to personalize the
policy by listing the pertinent information described in the policy,
including the insured’s name and address, the policy number,
the type of policy, dollar limitations on various types of coverage,
descriptions of vehicles covered, deductibles, policy dates indicating
the time period in which coverage is provided, any endorsements
that modify the basic coverages and, if applicable, the names of
any other organization or person to whom payment is to be made in
the event of a loss (e.g., bank with loan).
Coverages: Each automobile insurance policy provides several types
of coverage, and each, when purchased, has a specific function.
Common coverages are:
- Bodily Injury Liability—This protects
you, up to the dollar amount stated in your policy, against the
financial consequences of a loss arising from injury to someone
from an automobile accident for which you are legally to blame.
Defense costs are in addition to the limits of liability.
- Property Damage Liability—Similar to
bodily injury liability coverage, except that it protects you
against a claim for damage to another automobile or other property,
in an accident for which you are legally liable. The protection
is again up to the amount of insurance you purchase. Defense costs
are in addition to the limits of liability.
- Medical Payments—Pays for medical or
funeral expenses, up to the amount of insurance you purchase,
for you and others injured or killed while riding in your car,
no matter who caused the accident. It also covers you and resident
members of your family if struck by a car as a pedestrian or if
riding in another vehicle designed for use on public roads.
- Uninsured Motorists (UM)—Provides bodily
injury coverage to the insured driver, resident members of your
family and passengers, up to the UM policy limits, when involved
in an accident caused by the negligent owner or operator of an
uninsured vehicle or an unidentified “hit-skip.” The
named insured and family members are also covered if they are
pedestrians and struck by a UM vehicle.
- Underinsured Motorists (UIM)—Provides
bodily injury coverage to the insured driver, resident members
of your family and passengers, up to the UIM policy limits, when
involved in an accident when the at-fault driver’s bodily
injury liability policy limits are less than your UIM limit.
- Uninsured Motorists Property Damage (UMPD)—Provides
coverage for damage to your vehicle if it is struck by an identified
negligent uninsured motorist. Insurance companies are not required
to offer UMPD to those carrying collision coverage, since it
provides similar coverage. Coverage amount is normally $7,500
and includes a deductible usually no higher than $250 (higher
limits might be available).
- Collision—This coverage pays for damage
to your car caused by impact with another object or an overturn,
irrespective of fault. The collision coverage usually includes
a deductible. This means you pay the first $100, $200 or so for
repairs to your car and the company pays the rest.
- Other Than Collision—This is a catch-all
coverage that pays you for damage to your car caused by something
other than collision or upset. Perils covered under “other
than collision” may include fire, theft, missiles, falling
objects, larceny, explosion or earthquake, tornadoes and windstorms,
hail, water, flood, malicious mischief, vandalism, riot, civil
commotion and contact with a bird or animal. “Other than
collision” is also available with deductibles. It is also
known as “comprehensive” insurance coverage.
Supplementary Payments: This provides for payment
over the limits of liability noted in your policy for expenses incurred
by the insurance company, all costs taxed against you in a court
suit, attorney’s fees, bail bonds (up to a certain amount)
and related costs. It also covers reasonable expenses you incur
at the request of the company. Most policies cover up to $200 a
day for actual lost wages if attending a hearing or trial at the
It is important to note that such expenses are an important benefit
to policyholders. To illustrate, a basic and very important provision
of automobile liability insurance contracts is the promise of the
insurance company to “pay for damages for bodily injury or
property damage for which any insured is legally responsible because
of an accident. In addition to our (the insurance company’s)
limit of liability, we will pay all defense costs we incur.”
Thus, coverage for legal expenses is a direct benefit to policyholders,
expenses they would incur if it were not for the insurance policy.
Definitions: This section of the insurance policy
defines the various terms used in the policy. It explains such terms
as who is covered by the contract and what the company describes
as the “covered auto.”
Exclusions: Each coverage section in a policy
includes exclusions. Exclusions clarify the intent of the insurance
policy by explaining the situations in which the policy will not
cover you or the insured vehicle. You may be able to “buy
back” coverage for certain exclusions by adding endorsements
to the policy. Policyholders should pay special attention to these
sections and should be aware that the policy does not cover all
things under all circumstances.
Conditions: This section establishes the conditions
that must be present or complied with by the company and/or the
insured. Examples of conditions include time-period restrictions,
duties in the event of a claim, proof of loss, cancellations, etc.
Under Ohio law, the minimum amounts of liability insurance that
satisfy financial responsibility law requirements are:
- $12,500 for any one person killed or injured in an accident
caused by the policyholder
- $25,000 as a total limit for all persons killed or injured
in an accident
- $7,500 for property damage caused in the accident
If you feel that these limits are not sufficient, you may purchase
higher amounts. Many companies also offer policies providing a single
limit of liability—such as $35,000 or $100,000—that
covers both Bodily Injury and Property Damage Liability.
Ohio’s financial responsibility law
The financial responsibility (FR) law, which took effect October
1953, is NOT a compulsory automobile insurance law. No motorist
is forced to buy auto liability insurance. The law DOES require
drivers to be insured or have other arrangements to pay for injuries
or damages they cause in the event of a crash. The law provides
protection against irresponsible drivers.
Stricter penalties for violators of the FR law were legislated
during 1994. As of October 20, 1995, this law requires law enforcement
officials to ask for proof of financial responsibility when a motorist
is stopped for any moving violation, accident or a vehicle safety
inspection. The law requires insurance companies to issue auto insurance
identification cards to policyholders, which suffices as proof of
As an additional enforcement measure, the Ohio BMV enacted a mail-in
random verification program in December 1998. Those receiving the
mailing are also required to provide proof of FR.
For further information regarding the law and its penalties, see
the section titled “Ohio’s Financial Responsibility
||The number of speeding citations issued by
the Ohio State Highway Patrol declined from 473,773 in 2001
to 431,036 in 2003. State highway safety officials believe
motorists receive at least a 5 mph cushion.
(Cincinnati Enquirer, 6/14/05)