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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.
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.
A 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
car.
- Uninsured Motorists (UM)—Provides injury coverage
to the insured driver, resident members of your family and passengers,
up to the policy limits, when involved in an accident caused by
the owner or operator of an uninsured vehicle or a “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 injury coverage
to the insured driver, resident members of your family and passengers,
up to the policy limits, when involved in an accident when the
at-fault driver’s policy limits are less than your UIM limit.
- Uninsured Motorists Property Damage (UMPD)—Provides
coverage for your vehicle if involved in an accident with a 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
no higher than $250.
- 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 wage losses
if attending a hearing or trial at the company’s request.
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: 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 this section 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.
Liability limits
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.
Legislation was introduced in the Ohio General Assembly in late
2001 aimed at increasing the FR law minimum limits of liability.
At press time, the bill (HB 363) was in committee.
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
financial responsibility.
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 Law.”
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