Note: The following is a guide to help you better understand the coverage associated with automobile insurance. Because the laws in states vary, some of the information provided may differ in your location. Where necessary, always consult with a licensed insurance agent to help you understand the fully the laws and coverage in your state.
Automobile insurance. Doubtfully the most fun topic you will encounter in your life, but one that affects most of us at one time or another. Whether it is an accident that you are involved in or simply the fact that you have to pay auto insurance premiums year after year, auto insurance is a fact of life if you are a licensed driver. Because of this, it would make sense that we should clearly understand the coverage associated with our auto policy and how it works, but, most of us don’t. We simply take it for granted and just keep paying it bill after bill after bill. The one time we DO think about it is if we are involved in an accident, which is oftentimes too late. You can’t change your coverage AFTER your have an accident, so you had better make sure your policy makes sense for you RIGHT NOW.
This report aims to do just that. We will go over each coverage that pertains to automobile insurance policies, explain what it means, and give you some tips as to how you might want to tailor your own policy as it pertains to premiums and claim situations. In addition, we will try to be a little more fun than your average stuffy insurance agent…
Ok, ready to go? Let’s jump into the world of automobile insurance!
Liability Coverage
Ok, to begin with, liability coverage is EXTREMELY important. Think of the word LIABLE. This means AT FAULT. If your liability coverage is coming into play, it means you were at fault (at least partially) for an accident. This is the coverage that protects YOU financially in the event of an accident. Many people want to stick with the MINIMUM coverage required by their state, but this could put you in serious jeopardy financially if a claim occurs, you are at fault, and your policy is not sufficient to cover the amount of the claim. Let’s take a look at the coverage, what each part means, and how it could affect you in the event of a claim:
Bodily Injury/Property Damage
Liability coverage is broken up into two categories, bodily injury and property damage. For instance, most of the time this coverage will be represented by 3 numbers and will look something like this:
100/300/25 (the numbers may vary of course)
In the example above, the 100 represents bodily injury PER PERSON in the event of an accident. The 300 represents bodily injury AGGREGATE (which means all persons in the vehicle) and the 25 represents property damage that arose as part of an accident. So, if you are at fault in an accident and 100/300/25 was your liability coverage, you would have $100,000 coverage for EACH person in the other vehicle, a MAXIMUM of $300,000 coverage no matter how many people were in the other vehicle, and $25,000 coverage for property damage caused by the accident. This sounds pretty good, huh? Well, not so fast.
You see, medical expenses of course can be astronomical. If you injured 2 people in an accident and they required extensive medical treatment, you could eat up that $300,000 pretty quickly. And as far as the $25,000 for property damage, well, look around at all the cars on the highway the next time you are out and about. See any worth more than $25,000? You bet you do. If you total a car that costs more than $25,000, where do you think that overage comes from? Your pocket, that’s where.
SIDE NOTE: if you are at fault for an accident, and your liability pays out for the other person, this CAN affect your insurance rates. Most companies review the claim AFTER it has been closed to make a determination as to if it will have an impact on your premium.
Remember, liability coverage is there to protect you and your families assets, but you have to have enough there to do the job. Make sure to quote different levels of liability as you might be surprised as to how inexpensive jumping from one coverage level to the next is. Some may balk at paying another $50 every six months, but if that $50 just about you $100,000 worth of protection, it just may be worth it…
