Understanding your Auto Insurance Coverage

If you merely search for "understanding auto insurance" and "auto insurance facts" on the Internet, you may find a good, two-paragraph summary somewhere, or you may just get buried under about 4,300,000 hits (which the first phrase brought up on Google). Besides the many thousands that mention all kinds of companies or coverage types, you will also have to wade through many more thousands of sales pitches just to get decent definitions of liability, collision, medical coverage, deductibles, driving records and common policy limitations. This article will fight the tendency to “Internet overkill,” and hit the important points for you.

The most important point, of course, is to read your existing policy thoroughly. If you are shopping for coverage for the first time, take the following suggestions to heart, and continue your research in a targeted, effective manner. In fact, if you are in the market for auto insurance, one of the best approaches is to get yourself educated enough so that you can understand what you are being told, and then let a few insurance websites or local agents compete for your business.

Liability first

There’s one old question about auto insurance that you need to examine in the light of your precise situation. “Coverage, coverage and more coverage – can you ever have too much?” Some people don’t think so, not with the lawsuit-happy citizens of these United States, at any rate. However, you have to be realistic and strike a balance between “coverage, coverage, coverage” and cost, cost, cost! Therefore, cover yourself in the right order.

Without a doubt, liability coverage is the most important because it covers three major components, namely, other people’s bodily injury and property damage, plus uninsured motorists. This coverage protects you against loss if you should injure someone, if someone with no liability insurance injures you and also covers your damages if the other party is underinsured. This is by far the most important coverage, and is the minimum required in most states unless there is another lien holder on your auto.

Other terms and concepts

If the bank owns your car, you will probably be required to have complete coverage including collision, which insures the auto itself and covers repairs. Other coverage includes personal injury, which covers your passengers, and medical coverage, which pays for medical and funeral expenses for you or anyone injured in a covered accident.

Your deductible also plays a part in your coverage, and a higher deductible means that you pay a lower premium, but keep in mind that in the event of an accident the deductible comes off the top of the amount you get to fix your vehicle.

Some carriers will pay for rental of a vehicle while yours is being repaired. Like any other coverage, this has to be specified in your policy, and if it is not in the policy, it is not part of your coverage, regardless of what any insurance salesman says. In addition, there are details about your car, your amount of driving, etc., that can affect your rate, including where you live.

On the plus side, you can usually expect discounts for a good driving record, anti-theft devices, etc., so make sure you mention all of these when requesting a rate quote.

The numbers game

Liability and medical coverage amounts are often expressed in confusing terms (such as “10/15/30”) that refer to the amount in thousands of dollars for certain parts of the coverage. To further complicate matters, the numbers are sometimes given as “per incident” or as the total amount payable under the policy. Make sure that you understand exactly what the dollar limits are, how they are applied, what the “per-incident” and “lifetime total” amounts are, and how the figures relate to the historic experience of drivers like yourself.

You can read various articles on the Internet, like this one and others both more and less specific, to get yourself up to speed before getting some rate quotes. Talk to a few insurance agents, register at a few websites and don’t be afraid to ask questions when you don’t understand a term, a concept or (perhaps most importantly) a dollar figure. It is as unwise to over insure your car as it is to under insure it, so take the time to get the facts.

You should also check with your state’s insurance commissioner to discover what the minimum insurance requirements are for where you live. It is, of course, always wise to educate yourself as much as possible in matters of this importance. If you are still unclear about auto insurance, your state department of insurance should be able to provide you additional help.

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