Anything from the most basic coverage and limits to the completely built out options and well rounded protection to fit your lifestyle and any customization of your car.
If you own a car or have a car that is furnished for your regular use regardless of ownership or, if you have a car, that is registered to you, or [many other scenarios] you need a Car insurance. We all know that if we drive the car we need to have it insured, but which coverages we need, what they all mean and how much coverage we need are not easy questions to answer. Its very important to get proper coverage before you are involved in a car accident. Accidents are accidents, they are unexpected and unplanned. We never know when we are going to be involved in an accident; how and when it will happen; and how severe financial damages we will cause to others and ourselves, so to think about your coverages at the time of the accident is just a little too late.
“Liability Only” vs. “Full Coverage"
Consumers often go by two terms: “liability only” and “full coverage” Car insurance. These are basic terms that we all understand, so we think, but can get you in a lot of trouble, because the level of liability coverage or “full coverage” are interpreted differently by different people. We both may have so-called “full coverage”; however, some people may have a liability limits in hundreds of thousands of dollars or even in millions of dollars, while many others may have only in tens of thousands of dollars.
Auto insurance policies generally offer 7 main specific coverages that cover specific damages up to specific dollar amounts. Did you notice the word “specific” was used a lot in the last statement? For those of you that use the phrase “full coverage” and expect that you will be fully covered in case of a car accident, one day you may need to be prepared for a rude awakening. Make an effort to learn at least the basics of Auto insurance coverages, so, when you will be shopping for your Auto insurance, you will be better prepared for choosing the right coverage for yourself.
In addition, there could be additional endorsements that amend your policy, exclusions and limitations and all kinds of add-ons that insurance companies may incorporate into a policy, which affect the quality of your insurance policy (reason #82 to use a help of a knowledgeable insurance agent).
Insurance companies often trying to be creative on cutting corners, limiting coverages to reduce the cost of Auto insurance; some are trying to create fancy “add-ons” to lure clients to bite on their new shiny objects.
Its nice when insurance companies offer extra add-ons, especially, if they come with the policy at no additional cost, which is rarely the case; but don’t let them steer you away from the main coverages that insurance policy is built on.
Let’s go over the core coverages of Auto insurance policy
Bodily Injury Liability Coverage
This coverage is one of the most important coverages of Auto insurance policy, where you need to put a lot into a consideration. Lack of this coverage can send you to the “BrokeLand” in a hurry and, If you happen not to be financially stable already, one major or even an average accident may keep you at not-so-desirable financial status for a very long time (Imaging a random, unknown person becoming your dependent for the rest of your life or a very long time… Scary, right?). This coverage pays for the Bodily Injuries you caused to others. In addition there are attorney fees, punitive damages and lost wages damages that may be added on.
Insurance companies usually offer “split limits” of liability or “combined single limit”. Most consumers buy split limits of Bodily Injury coverage, which consist of two numbers: first number (most important one) is the limit of liability of Bodily Injury coverage per person; second number is the limit of Bodily Injury per accident – if more than one person is injured (excluding you, because this coverage pays for injuries to others, not you). Example of liability limits are: $15,000/$30,000; $50,000/$100,000; $250,000/$500,000, etc.
Let’s say, you purchase the minimum required in state of California, which is $15,000 per person. That means that, if you cause injuries to someone, your insurance policy will defend you up to $15,000, so it’s up to you to choose how much money you want insurance company to put in your pocket to defend you in case you cause injuries, disabilities or even death to someone. After you exhausted your coverage amount – you are on your own.
To help you determine amount of liability limits you should select, here are some of the examples of possible claims (Who you hit matters a lot):
Let’s say, you were involved in a car accident, that is your fault, and you injured a person, who had to be taken to the emergency, had a surgery, spent a month in a hospital and then spent 2 years in a rehabilitation, missing 2 years of work. His medical bills are $100,000.
- If that person is an accountant, his lost wages for 2 years might be $160,000; his pain and suffering might be $300,000 and medical bills of $100,000, which would make his total claim to be $560,000
- If that person is an attorney, his lost wages for 2 years might be $300,000; his pain and suffering might be $400,000 and medical bills of $100,000, which would make his total claim to be $800,000
- If he is a surgeon, his lost wages for 2 years might be $600,000; his pain and suffering might be $400,000 and his bodily injury claim alone would be $1,100,000
These are just examples of Bodily Injury portion of the claim (We didn’t cover Property Damages of others, Property Damages to your vehicle, nor injuries to you)
So, choosing liability limits is one of the most crucial steps in the process of purchasing your Auto insurance policy
Property Damage Liability Coverage
This coverage pays for Property Damages you cause to others. Most common damage that you may cause to others is damage to other person’s vehicle; however, It could be any property, such as a bus stop, a fence, a building and anything that has a financial value. If you cause a damage to someone’s else property, you are responsible to pay for the damages and, in case of a car accident, your Auto insurance policy will pay for the damages up to the limits of Property Damage liability that you purchased. If that limit is insufficient, you will be personally responsible for the difference of what insurance policy will pay and the total amount of damage, that you caused. This coverage does not pay for your car or your property. It pays for the property damages you cause to others, so, just because you drive an inexpensive car, does not mean it is a good idea to buy low liability coverage because it’s not about what you drive, it’s about what other people drive and the damages you may cause to them. In other words, insurance company will put some money in your pocket if you are liable for some damages you caused. Do you want a little bit of money or a lot of it, when you need to cover the damages you cause?
Uninsured Motorist Bodily Injury + Property Damage/CDW
This coverage is for injuries you and passengers of your car sustained in a car accident with another driver, who at the time of the accident didn’t have auto insurance. That other driver is the uninsured motorist. If it was his fault and he didn’t have insurance at the time of the accident with you, he’d need to compensate you for damages out of his own pocket. Often it can be a very long process of getting paid and sometimes you may just not be able to collect anything at all. The good news is, if you purchased Uninsured Motorist Protection with your own insurance company, your Car insurance policy will pay for Bodily Injuries to you and your passengers up to the Uninsured Motorist limits of liability that you purchased. So, your own insurance company will pay for the damages and it’s up to them to go through a long process of trying to get reimbursed by the driver, who, actually, was at fault; the one, that had no insurance. Whether or not insurance company will be successful at collecting from uninsured driver won’t concern you – you will get paid, so make sure you purchase enough of that coverage.
The Uninsured Motorist Property Damage will pay for the damages to your car and there is no deductible for you to pay.
This coverage pays to you and the passengers of your car for your medical expenses due to a car accident. Also, this coverage pays to you regardless of who is at fault and it pays up to the limit that you purchased. Insurance companies usually do not offer much of this coverage and many people do not buy it as a part of their Car insurance, so it’s very important that you have a solid Health insurance coverage for yourself.
This coverage pays for damages to your car in case you and your car collide with another object (another object could be another car, a wall, a light pole, a boulder on the road, etc…). Collision type of accidents are the ones that affect your cost of insurance (not in your favor, of course). Insurance company will pay for a cost of repairing the damages to your car or the cost of replacing the car, whichever is lower, minus Collision Deductible. This coverage usually has a Deductible. Deductible is the amount of money that you will pay first and then insurance company will pay the difference. For instance, let’s say the damages to your car are $4,000 and your Deductible is $500. In this case insurance company will pay you $3500 and you will pay $500. Another example, if, let’s say, your car’s value right before the accident was $7,000. The cost of repairing the car is $8000. In this case the insurance company will give you a check in the amount not greater than the value of your car minus your Deductible, which would be $6,500. You should buy this coverage if the car is being financed or it has the value, that’s worth insuring. That value is different for different people based on their financial status. One person may not care much if he will lose the car worth $7000 while another person may suffer financially if he will lose the car that has a value of $2000.
This coverage also pays for damages to your car; however, this coverage pays for damages that Collision coverage does not pay for. This coverage also known as “other-than-collision” coverage and provides protection to your vehicle in case of fire, vandalism, theft and collision with the animal (collision with animal is the only type of collision that is covered by Comprehensive coverage instead of Collision). Typically, these are the damages that you didn’t cause and had very little to no control of. Claims of this nature do not affect your insurance rates; however, having too many of them may prevent you from getting insured by many insurance companies, that simply do not accept drivers with more than certain amount of claims.
This coverage will pay for the cost of renting a car while yours is at the body shop being repaired due to a covered loss. This coverage is limited to amount of days and the dollar amount per day that you purchased. For instance, if you purchased 20/30, which means up to $20 per day and up to 30 days of coverage, a value of $600 maximum, and let’s say, you rented a car for 30 days at $40 per day,- your insurance policy will pay $600 which is a portion of your total rental car bill of $1,200. If you typically own nice cars and you prefer to rent a similarly nice car in case yours is at the body shop, then choose your rental reimbursement limits accordingly.
This coverage is not offered by all insurance companies; however, more and more insurance companies started to incorporate this into their policies and provide it as an optional add-on coverage. Typically, it will provide coverage in case you run out of gas and need it to be delivered to you, have a flat tire and need help replacing it, locked your car with keys in it, have a dead battery and in need of jump starting your car or if you need towing service.
Here you have it. These are the main core coverages of Auto insurance. In addition, learn about policy’s endorsements, restrictions, exclusions and limitation; or work with our agency to help you with your Auto insurance. Our agency will also keep re-shopping your Car insurance on your behalf to make sure you do not pay too much for your coverage.