When it comes to buying auto insurance, far too many individuals walk away not realizing what is actually covered and what is not. This is true for every type of coverage, but the most common we see is for home and auto insurance.
This blog will help explain car insurance terms so that you are able to get the appropriate coverage when you get a quote for auto insurance.
Why you need to understand your auto insurance terms
The main reason I am writing this is because a family member came to me excited because they were saving a bunch of money on the insurance for their truck. Saving money is always exciting but when I asked them how they did it I was shocked and a little upset.
The truck they have is used about once or twice a week and not driven very far. It didn’t make sense for them to have full coverage on it so they spoke with their agent about getting a better rate. The agent (possibly misunderstanding the truck’s usage) decided to drop all of their insurance except comprehensive (which you’ll learn about later). So now when they take the truck out, they will be driving illegally and if they cause an accident they have no insurance to protect them and could be sued.
The whole reason people need insurance is to protect their well-being. If you don’t know what you are buying you can find yourself in a situation that involves you losing everything.
State Minimum Coverage
Every state has a bare minimum liability insurance you need to carry in order to legally drive. This coverage is often shown with three numbers (15/30/10 for example) which explains the amounts you need. In the given example (15/30/10) it would mean you need $15,000 in liability insurance per person injured with up to $30,000 total for injuries per accident. You will also need liability for damages to property for at least $10,000.
You can feel secure in knowing that just about every policy you purchase will meet the requirements for your state as long as your agent understands you will use your car often. What is important to know about state minimum coverage is that it is not always enough. In fact, it is rarely enough coverage. If you exceed the given limits the injured party can sue you.
Not only do you not have much coverage if you hit someone, but you have no coverage to repair your own vehicle in an accident.
We mentioned liability in state minimum coverage. This is the protection that covers you when you damage or injury an individual. If you cause an accident or injury someone while driving your vehicle, they have the right to sue you for damages, and medical payments.
Your liability insurance however, will protect you and cover these costs for you.
Comprehensive and Collision
These two coverage protect your vehicle from damages that occur (Some people refer to this as Full Coverage). These protections are designed to help you repair or replace your vehicle when it is damaged. They work essentially the same way, but for different instances.
Collision coverage provides protection for your vehicle when you are at fault in an accident, whether you hit a piece of property or another car.
Comprehensive coverage provides protection for your vehicle when you are not driving or involved in an accident. So if someone vandalizes your vehicle or if the storage garage it is in burns down around it damaging it, you will be covered.
This is probably the simplest term to understand. When you need to use your insurance, whether you’ve been in an accident, someone damaged your vehicle or whatever happened, you file a claim. This is how you notify the company about what happened so that they can provide you with the money to pay for repairs, injuries, damages or whatever funds you need to use your insurance for.
When purchasing insurance you have an option to choose your deductible. This is the amount that will come out of pocket when you file a claim. So, if you hit someone’s car, before your insurance pays the full amount to them, you need to first pay your deductible.
Sometimes this comes directly out of the payment, other times you will have to pay it directly to the insurance company. Keep in mind that the higher your deductible the harder it will be to pay for a claim.
Uninsured and Underinsured Motorists Coverage
Basically if someone does not have insurance or does not have enough insurance, yours will kick in and help if you carry uninsured and underinsured motorists coverage on your auto insurance policy. The way car insurance works is that the at fault driver is responsible. If someone else causes an accident your insurance company will likely not pick up the damages because you are not responsible. If you have collision and comprehensive coverage, your insurance will cover the damage to your vehicle minus your deductible.
So for hit and runs, bad car accidents and protecting against non insured drivers you need this coverage to be protected.
Additional help with understanding your insurance
This blog post highlights some of the most common definitions that individuals need to know, but as you go through you buying process there will be more terms that come up which you may need help understanding.
The main job of your agent is to be your insurance advisor. They are there to help you understand what you are buying and also help you to find the right coverage.
With the advancement of technology many people are choosing to skip the agent and buy online. When you do this though, where do you get help understanding what you are buying?
This agency has adapted technology for individuals who want to handle the insurance buying themselves, but want an agent who can be there when they need a real person.
To contact an agent to help you, you can go online here or call 480-830-1800. You can also come back and search this blog based on the specific question or coverage you need help with.