Auto Insurance Tips

The Basics of Auto Insurance

What is auto insurance?

Owning a car involves several risks. When a car accident occurs, people may be injured and vehicles (or other property) may be damaged. Damage can also occur through theft, vandalism, or natural disasters. Auto insurance can protect you against the financial loss associated with these risks. Insurance companies provide auto insurance through personal auto policies (PAPs) — a contract between you and your insurer specifying each party’s rights and obligations.

Why do you need it?

State law (and/or your car’s lender) often requires you to purchase at least a minimum amount of auto insurance. You may find it sensible to purchase greater coverage, however, to protect your auto investment, pay for necessary medical expenses, cover your legal liability, and cover any additional losses related to driving. If you cause an accident and the other driver suffers damages over and above your policy’s limits, your personal assets and future earnings may be put at risk.

Part A — Liability Coverage

Liability coverage insures you against injuries you cause to other people and damage you cause to other people’s property. Liability claims can be virtually limitless — this is one area where you definitely do not want to be underinsured.

Part B — Medical Payments Coverage

Medical payments coverage pays medical expenses resulting from an automobile accident up to a specified dollar limit — with no need to wait and find out who is at fault.

Part C — Uninsured/Underinsured Motorist Coverage

This coverage insures you against losses caused by someone who is completely uninsured or who has less than adequate insurance to cover the loss.

Part D — Coverage for Damage to Your Auto

Part D consists of collision coverage (damage caused in an accident) and comprehensive coverage (fire, theft, flood, vandalism, and other events). These coverages can be written with or without a deductible.

Part E — Duties After an Accident or Loss

This part deals with the specific procedures that must be followed in order to have your claim covered. Timely payment of your claim may depend on your compliance with these procedures.

Part F — General Provisions

Part F contains various provisions that limit and qualify the coverage provided in other sections of the PAP. If the conditions set forth in this section are not met, the insurer may be able to deny coverage of a claim.

Auto Insurance Coverages

Auto insurance isn’t a “should I or shouldn’t I?” proposition. Most states have laws requiring you to purchase at least some minimum level of auto insurance. In reality, there is often a large gap between the insurance you’re required to carry and what you should consider carrying.

Liability Coverage

Liability coverage consists of bodily injury liability and property damage liability. The bodily injury portion is the most crucial — claims for medical bills, lost income, and pain and suffering can easily mount to hundreds of thousands of dollars. In most states, required minimum liability coverage doesn’t come close to covering the costs associated with a serious accident.

Collision & Comprehensive Coverage

Collision covers losses when your vehicle is damaged in an at-fault collision. Comprehensive covers losses when your vehicle is damaged by fire, vandalism, flood, and a variety of other events. If you drop your damage protection coverage, you could be responsible for the entire cost of repairing or replacing your vehicle.

Endorsements

Endorsements are optional provisions you can add to your auto insurance policy for an extra premium, to expand your coverage. Typical endorsements include towing and labor, car rental costs, extraordinary medical expenses, and certain recreational vehicles.

Auto Insurance Exclusions

Your personal auto policy (PAP) identifies a number of events and situations that are specifically omitted or excepted from coverage. These are called exclusions. Knowing what’s not covered is just as important as knowing what is.

Limitations

Your PAP also specifies certain caps on the dollar amounts of coverage you are entitled to receive. Separate limits are generally set for liability, medical payments, uninsured motorists, collision, and comprehensive coverages.

Auto Insurance Claims & Smart Shopping

Auto insurance often seems fraught with weighty terminology. It’s smart to ask questions and have our agents explain the differences between coverage types. Understanding your coverage levels before a loss occurs is far better than discovering gaps afterward.

When to Review Your Policy