Liability CoverageLiability insurance is for the benefit of the "victims" of your McQueen-like maneuver. The end goal of the insurance company is to "make whole" again the people on the business end of your BMW, meaning they want to make sure to erase any physical evidence of your amateur stunt driving.
Your insurance policy usually describes the amount of liability coverage you have as "split limits." Suppose your limits of liability coverage reads 50/100/50. In this example, $50,000 is the maximum the insurance company will pay for bodily injuries to each person in the accident. The maximum amount paid for all bodily injuries, no matter how many people are hurt in the accident, is $100,000. The maximum amount paid for damage to someone else's property in the accident is $50,000. Both levels of liability may also be shown as a single limit, e.g., $100,000 Combined Single Limit (CSL).
Many states require drivers to carry a minimum amount of liability insurance of approximately 25/50/10 (your state may vary, as California is much lower, 15/30/10). That's not a whole lot of coverage, considering how sharply medical bills can skyrocket when someone gets infamous whiplash soon after they speak to a lawyer. In addition, some states have "no-fault" laws, meaning your auto policy must pay medical bills for injuries suffered in an auto accident regardless of who caused the accident or what the outcome was.
Collision And Comprehensive CoverageIf you bought the car outright and hold the pink slip, collision and comprehensive coverage are optional, but if the bank owns any part of your car, it'll require you be fully covered for any kind of incident. Collision coverage pays for physical damage to your car as a result of an accident for which you are at fault. Essentially, collision covers human error and free-will activity, while comprehensive coverage takes care of everything else, namely, in our scenario, the lightning strike and the impending conflagration.
Collision and comprehensive coverage usually do not pay for a total loss, such as your BMW in our scenario, and companies will want a little money up front first. You will be charged a deductible every time you make a claim, an out-of-pocket initial payment before your insurance payment takes effect. This is to keep you from filing frivolous claims for nickel and dime stuff. Suppose, for example, you have a $250 deductible on your policy. On a loss of $1,000, you would pay the first $250 and your insurance company would pay the remaining $750.
Depreciation will also affect the amount you recover for the damages incurred by your car. As your car ages and its value declines, the amount you would collect for a total loss declines as well. Your insurance company reimburses you for the actual cash value of your car or the sum of its parts at the time of the loss (not when you bought it). For example, if your car was purchased for $40,000, you will get less than your original purchase price to replace it due to the car's "natural" depreciation in value, regardless if you never drove it and rubbed it daily with a diaper. In the company's eyes, it is like any other BMW on the road.
Uninsured Motorist Protection Let's alter the M3 scenario a little: The truck hit you, the deadbeat driver doesn't have any form of insurance and the devil will be ice skating before you collect a dime for your damages. In layman's terms, you're up the creek. Lucky for you, you've got uninsured motorist protection on your policy that will pony up the cost of damages and injuries resulting from being hit by an uninsured driver or by a hit-and-run. Happy days prevail.
Specialty Car InsuranceThough some offer similar coverage to the conventional insurance polices described above, the policies of specialty insurance companies are based on "agreed value," meaning if you and your agent agree that your car is worth $16,500 and you total it in an accident, they will shell out $16,500, period. No ifs, ands or buts.
This agreed value is set using a variety of parameters: the owner's word, an appraisal, and comparable values from a Kelly Blue Book or Hemmings Motor News to name two, not to mention research into that particular car's market.
Created for the collector car and classic marques that don't see much of the light of day, specialty insurance, though vastly less expensive than a conventional policy, has a regime of restrictions that will keep your beauty parked more often than not. The majority of the companies we spoke with only allow a limited amount of miles a year (usually 2,500), and those miles must be to and from shows, parades or club-related functions such as Sunday drives and cruises. There's no showing off your car to your buddies at work, no vacations, no errands, and it certainly can't be your primary mode of transportation.
This form of insurance may help you if you own a classic Porsche, an antique Lancia or a car that is rarely seen on the road, but probably wouldn't do you any good if you're trying to cover a new Benz or an R32. Specialty car insurance companies just won't understand what is so special about a new car. There is an exception, of course. Filling the void is Hagerty Insurance, which has discovered there is a very viable market for non-standard collector cars, the third-car toys that see little of the road and more of the car-care products. Usually known for insuring cars at least 25 years old, Hagerty now offers a policy that caters to newer cars, such as your BMW, whereas other specialty insurance companies wouldn't come near people like us unless the BMW in question was made by Franz-Joseph Popp himself.