If you are driving a car, you are most likely to have some level of auto insurance because it is required in most states. The tricky question is, how do you choose the right carrier and coverage? You should start by doing a little homework, so you have a better understanding of what you are buying when you are shopping around.
Getting auto insurance can be complicated, and it can be difficult to understand if you are not familiar with the basic terminologies, there are a few things that you should consider when searching for new auto insurance.
What is Auto Insurance – An auto insurance policy is a contract between you (the insured) and the carrier (the insurer) to help protect your financial assets if a covered loss occurs. An auto loss may include damage to your vehicle, liability for damage caused to another vehicle or individual, Theft, medical, rental car, etc., depending on your coverage selections.
Bodily Injury Liability (BI) – “Bodily injury liability coverage” pays for the injuries to other party involved, within the policy limits you selected in for your policy. This may include drivers and passengers involved in the accident, pedestrians and, in some cases, passengers in your vehicle, when the insured vehicle’s driver is legally at fault. It does not cover your own injuries sustained in the accident. Bodily injury is often used to pay for medical bills, lost wages and pain and suffering.
Collision Coverage (Deductible) – “Collision coverage” typically pays for the damage to your own vehicle – or provides you with a reimbursement that allows you to replace the vehicle in the event of a total loss – if it collides with another vehicle or object (e.g., Vehicle rollover, single car accident, rear-end collision, side-impact collision or head-on collision.), regardless of fault. Typically, you must first pay a deductible, an amount for which you have agreed to be responsible before insurance pays – usually ranging from $100-$2,500 or even higher. Again, insured has the option to pick how high they want for their deductible.
Comprehensive Coverage (Deductible) – “Comprehensive coverage” pays for damage to your vehicle that occurs in a non-collision situation (e.g., vandalism, damage from natural disasters (hail, wind, tornado, hurricane, earthquake) collision with n animal, flood, fire and explosions, etc. As with collision coverage, you must generally pay a deductible before your insurance company offers financial assistance towards repair or replacement costs – comprehensive coverage ranges the same as collision coverage.
Deductible – is the amount that you (the insured) must pay out-of-pocket for damages before your insurance policy will pay an insurance claim. For example, and your car has $5,000 worth of damage, you must pay $500 before your insurer pays the remaining $4,500. Deductibles are most often found in amounts of $100- $2,500 but may vary from state to state or by carrier. Also, you need to know that the amount of your deductible is inversely related to the amount of your insurance premium. With that being said, the higher deductible is, the lower your insurance premium will be.
Electronic Proof of Insurance – is a digital image of your insurance card, but first you need to check if your state has adopted this law and, as a backup, be sure to always keep a hard copy in the car in case your phone decides to die or freeze at an inconvenient time. You can have a temporary ID card printed out from your own printer or the actual ID card that carrier sends you.
Filing a Claim – The unthinkable has happened and you have gotten into an accident or your car has been stolen. These are not the only circumstances for which you might file a claim, but they are certainly some of the most common. Try to gather as much information as possible at the scene. Notify the police immediately and file a police report. Collect contact information from everyone involved, including witnesses. Document and photograph the damage and the scene and contact your insurance company immediately. You can use your phone to take pictures of the other party’s driver license and insurance I.D. card. These items will contain most of the information you will need to file a claim, but do not forget to also get a phone number.
Discounts – Everybody loves to get a discount! Most auto insurance commercials talk about discounts that can help you save money, but do they? Sometimes yes…sometimes no. Just because you get a discount does not necessarily mean you will be saving money. Look at the total cost, not the discount. You may notice that some companies start with high rates and then pile on the discounts to make it seem like you are saving money. When you compare final rates, however, you may notice the company that did not have big discounts is a lot cheaper.
It never hurts to ask, though, because it all adds up. Some of the more popular discounts include the following: Good driver, good student, multi-car, and one of the best is the discount you can get when you insure both your auto and home together. Many carriers may offer up to 15% off when you buy both, which can save you a lot!
Liability Coverage – This is not an option in most states. The law says you must have liability coverage, but what is it? Simply put…if the insured vehicle is involved in a covered, at-fault accident, liability insurance is what pays for the property damage (vehicles and property like lampposts and fire hydrants) and bodily injury damages (medical expenses, pain and suffering and lost wages) for the other people involved. Most states require that you carry some level of liability insurance. However, there are a handful of states where you can drive without a motor vehicle liability insurance policy…if you can prove you are financially able to pay the liability costs in the event of a collision. All insurance policies have exclusions and conditions, so make sure to review your policy carefully with your agent so you know what is covered and what is not.
Medical Payment Coverage – If you are injured in an auto accident, this coverage will pay your reasonable and necessary medical expenses regardless of who is at fault for the accident (up to your policy’s limits).
Premium – The price you pay for your insurance policy. It is typically charged monthly, semi-annually, or annually. Some insurance companies will offer insurance discounts if you pay your premium all at once instead of in monthly installments or if you have your payments automatically deducted from your bank account.
Property Damage Liability (PD) – Covers you if your car damages someone else’s property. It mainly applies to damage caused to another person’s vehicle, but can also apply to fences, shrubbery, trees, light poles, houses, and other property. This does not cover damage to your own vehicle.
Rental Reimbursement – Rental reimbursement is an optional auto insurance benefit. If your car is damaged and the cost to repair it is more than your deductible, this coverage pays for a rental car, usually with per-day or per-accident limits. This benefit is only available; however, if you selected this coverage and the accident is a covered loss.
Roadside Assistance – Did your car break down on the side of the road? As the name implies, roadside assistance comes to your aid. It is often available as an additional coverage option from your insurance company. For example, our carriers can offer this coverage at a very low cost. It covers a variety of services, up to the policy limit, including towing, reimbursement for expenses if you have locked your keys in your car, need a flat tire changed, etc. Roadside Assistance is another optional coverage, so be sure to talk to your agent about adding this coverage if you need it.
State Laws – Every state has different requirements regarding insurance, including the minimum amount of insurance coverage you need to carry. You can learn more about your individual state’s insurance requirements by visiting the insurance commissioner’s website.
Tort (PIP) Insurance – The Tort system, which operates in 38 states, makes the driver who causes an accident responsible for paying for damage to the victim’s property and medical bills, pain and suffering, and lost wages. The other 12 states use some form of no-fault insurance coverage. Kentucky, New Jersey, and Pennsylvania allow residents to choose between limited-tort and full-tort insurance when seeking insurance policies. If you’re the victim of an accident in one of those states and you opted for limited tort coverage, this means that you give up the right to seek damages for pain and suffering, whereas full tort coverage allows you to seek compensation for whatever you think you’re owed.
Uninsured/Underinsured Motorist Bodily Injury Coverage – Uninsured Motorist Bodily Injury Coverage pays for injuries to you and other people in your vehicle, within the policy limits you selected, when the loss is caused by an uninsured driver. Underinsured Motorist Bodily Injury coverage may apply if the person who caused the accident does not have enough liability insurance to fully compensate you and your passengers for injury claims. *
Uninsured Motorist Property Damage Coverage/Collision Deductible Waiver – Uninsured Motorist Property Damage Coverage will compensate you, up to the policy limit, for damages to your vehicle caused by an identified uninsured motorist. Collision Deductible Waiver will pay your deductible if your covered vehicle is damaged by an identified uninsured motorist. *
* In some states these coverage may be combined into one coverage. Please check with your local insurance agent to learn about different options.
There is no “one size fits all” insurance policy so your best bet is to do some research and speak to a local insurance agent about your specific needs.
Thank you so much for tuning into our blog, we hope you enjoy reading these tips and a got better understanding of the insurance world.