Auto Insurance

Liability Coverage

Auto insurance policies purchased by the owner of a vehicle provide two forms of liability coverage: bodily injury liability and property damage liability. If you are responsible for an accident that injures other people, bodily injury liability insurance protects you against their claims for damages, such as medical expenses, lost wages, and pain and suffering.

Property damage liability pays for damage you are legally responsible for to the property of others, such as a dented fender, broken glass, or a damaged wall or fence. Both bodily injury and property damage liability insurance will pay if an accident is caused by a member of your family living with you unless the family member is specifically excluded from coverage through a named driver exclusion. Coverage is also provided for any person using your car with your permission. The insurance company will also cover you and any family member living with you when you are driving a vehicle owned by someone else.

Bodily injury and property damage liability insurance are sold with specific policy limits.

Bodily injury liability coverage may be purchased with a multiple (or split) limit, or with a single limit. Split limit policies pay a certain amount to each person in an accident. The total amount paid out is subject to a maximum for each accident. If you purchase a policy with a bodily injury split limit of $100,000 per person and $300,000 per accident, and caused an accident resulting in injuries to one person of $200,000, the policy would pay $100,000 to that person. If four people suffered injury in a single accident, each with damages of $100,000, the policy would only pay up to the maximum limit of $300,000 for all damages. In this case a separate limit would apply for property damage.

A single limit policy pays one amount per accident, no matter how many people are injured or how much property is damaged. If you carried $300,000 single limit coverage and injured one person, your policy would pay up to the $300,000 limit of the policy for that one person.

Alaska law requires you to carry policy limits at least as high as the legal financial responsibility limits of $50,000 for bodily injury to one person with a maximum of $100,000 for bodily injury to two or more persons, and $25,000 toward damages to others’ property. This is commonly referred to as 50/100/25 limits. If you choose to increase the amount of coverage you carry, you will be charged an additional premium to pay for the increased risk of a higher claim that your insurance company assumes. The additional premium charged for this coverage is usually relatively low. With the high prices of today’s medical and vehicle repair bills, many Alaskans recognize the wisdom of carrying higher liability limits.

Physical Damage Coverage

Physical Damage Coverage pays for damage to your vehicle, and is separated into collision and comprehensive (sometimes referred to as other than collision) coverages. Both collision and comprehensive coverage are optional and are not required by Alaska law. However, if you finance your vehicle, the lender may require that both of these coverages be purchased.

Collision insurance pays for physical damage to your vehicle caused by your vehicle colliding with another object or overturning. In the event of an accident, collision coverage will pay to repair your vehicle up to an amount equal to the value of the vehicle before the accident. In an accident involving an older vehicle, the cost of repairs usually exceeds your vehicle’s value. If repairs to your vehicle approach or exceed the value of your vehicle, your insurance company will declare your vehicle to be a total loss. In this case, the company will compensate you for the actual cash value of your vehicle before the accident. They are entitled to keep the damaged vehicle unless they have reduced the payment by the value of the salvage.

Comprehensive insurance pays for damage to your vehicle resulting from fire, severe weather, vandalism, broken glass, and theft. Comprehensive coverage will also pay if your car is damaged in a collision with a bird or animal.

If you finance a vehicle, the financial institution that issues the loan may require you to buy collision and comprehensive coverage. This is because the lender considers your vehicle to be collateral for the loan. The lender wants to make sure your vehicle is covered by insurance that will pay repair costs if you have an accident. The lender also wants a vehicle to repossess in the event you fail to meet your payments.

Uninsured/Underinsured Motorists Coverage (UM/UIM)

Uninsured and underinsured motorists coverage is sold together as a single package. UM/UIM insurance is sold in single or split limits similar to liability insurance.

Uninsured Motorists coverage pays for your injuries and damages to your car if you are legally entitled to recover damages from a hit-and-run driver or a driver who does not have auto insurance. Under-insured Motorists insurance provides coverage for you when another driver is legally liable for your damages and does not have enough insurance to cover your claim.

Alaska law does not require that you purchase uninsured motorists coverage, but your insurance company is required to offer you, in writing, a variety of policy limits. Regardless of your liability limits, you may purchase UM/UIM in amounts up to $1,000,000/$2,000,000 for bodily injury and $25,000 for property damage. If you do not want this coverage or if you want less coverage than your liability limits, you must state this in writing. If you do not refuse uninsured motorist coverage in writing, it will automatically be added to your policy at the limits of your liability coverage. If you reject this coverage in writing, keep in mind your insurer does not have to offer it to you on any renewal policy unless you request it.

Other Coverages

In addition to the types of insurance coverage we have discussed, there are other additional coverages you may be interested in. Use caution when buying optional coverages. Review the coverages you already have through other policies to avoid duplication.

Medical payments insurance is an optional coverage that pays all reasonable hospital, medical, and funeral expenses for you or others injured or killed in an accident while riding in or driving your vehicle. Unlike UM/UIM, it pays without regard to fault. It will also cover you and your family if you are struck by a vehicle while walking or riding in another vehicle. The limits generally offered for this coverage are $1,000, $2,000, or $5,000, although higher amounts are available. Alaska law does not require you to purchase medical payments insurance.
Even if you have a good health insurance policy for yourself and your family, you might want to consider purchasing medical payments coverage through your auto policy to cover nonfamily members who may be injured while in your car. Their medical bills can then be paid Immediateely by your insurer. Without this coverage, injured passengers may have to sue the responsible party to collect against the negligent driver that caused the accident.

Rental reimbursement coverage usually pays a specified amount per day for you to rent a vehicle for a reasonable time while your vehicle is being repaired.

Towing and labor coverage pays the cost to tow your vehicle to a repair shop. Sometimes the insurer will pay only for the cost to tow your vehicle to the nearest repair shop. Your policy will sometimes state a flat amount as the limit of coverage. If you belong to an auto club that provides this service in the locations where you drive, you may not want to purchase duplicate protection in your auto policy.

If you have ever rented a vehicle, you almost certainly have had a rental agent ask you whether or not you wanted Collision Damage Waiver (CDW) coverage. A CDW agreement essentially states that the car rental company will not collect repair costs from you if the car you rent is damaged.
All automobile insurance policies in Alaska are required by law to extend your collision and comprehensive coverages from your vehicle to a rental vehicle under a provision sometimes titled "nonowned vehicles" or "temporary or substitute vehicles." Some policies put restrictions on the amount of time a vehicle is rented for or the purpose of the rental, but usually they extend the collision and/or compre-hensive coverages to a vehicle you rent for an out-of-town trip. If you do not carry physical damage coverages on your policy, then the law requires that your insurance company must at least offer you separate coverage to provide physical damage coverage to rented vehicles.

If you rely on your own coverage, the same deductible that applies to your vehicle in case of an accident will also apply to a vehicle you rent. You would have to submit a claim to your insurance company to approve repairs made to the rental vehicle. Some credit cards also provide CDW coverage. If you are uncertain as to whether your credit card offers this coverage, call your credit card company before you travel.

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