What Is Insurance Coverage?
Last Updated on February 19, 2020
Insurance coverage is the amount of risk or liability covered for an individual or entity through an insurance policy.
Auto insurance, for example, provides coverage to your vehicle. Home insurance provides coverage to your house.
Different insurance policies have different types of coverage. Coverage can vary based on the following factors:
- Properties (like a home or car) covered
- Liabilities covered
- Limits, including claim limits and total policy limits
- Premium cost
- Restrictions and exclusions
All of the above factors can affect insurance coverage.
How Does Insurance Coverage Work?
Insurance coverage protects consumers against losses caused by unforeseen events – like car accidents or a house fire. If a covered event occurs, then your insurance company is required to pay.
In exchange for taking on this risk, insurance companies will charge premiums. You pay your insurance company money, and your insurance company agrees to cover certain unexpected events. Your insurance company is absorbing this risk in exchange for a price. This is how the insurance business works.
How Does Auto Insurance Coverage Work?
Auto insurance coverage is required in every state except for New Hampshire and Virginia. To legally drive on the road in your state, you need auto insurance coverage.
States require you to have some level of bodily injury liability coverage and property damage liability coverage.
Bodily Injury Liability Coverage: This coverage is for medical bills, lost wages, and other expenses incurred by other people – like another driver or passenger – injured as a result of your actions. States require you to have a certain amount of bodily injury liability coverage per person and per accident – say, $25,000 of coverage per person and $50,000 of coverage per accident.
Property Damage Liability Coverage: This coverage is for any property damaged as a result of your actions – like another vehicle or a fence. States will also require you to have a certain amount of property damage liability coverage – say, $100,000 of coverage.
Some states require other auto insurance coverage options. Some states, for example, require medical payments coverage or uninsured/underinsured motorist coverage.
Other Types of Insurance Coverage
Insurance coverage is available for all different personal and business needs.
A clinic might buy medical malpractice insurance coverage, for example, or an engineering firm might buy professional liability coverage. A delivery company might buy commercial lines insurance to cover a fleet of vehicles, while a fine art collector might buy inland marine insurance to protect items during transit.
Based on your personal and business needs, you’ll be able to find the right insurance coverage for you.
