Covering your assets. That’s what the insurance is really all about. It’s not just to get the state limits so you can register your vehicle or get that new driver on the road. Insurance is “just in case” something happens you will be in the same economic position you were in when you woke up this morning. So “just in case” something does happen, let’s take a look at the basics of your automobile insurance.
Full Coverage vs Liability Only
Most people who have new vehicles or own a home opt for the “Full Coverage” policies. This will protect you in case you are the one deamed at-fault an accident, uninsured motorist, underinsured motorists, and comprehensive and collision deductibles. Liability only is generally used for people who have older vehicles where their deductibles would cost more to fix or replace their vehicles if involved in an accident.
Liability: This covers the bodily injury and property damage you cause to the other person if you are found to be at-fault for an accident.
This portion of your policy sets the tone for everything else right down to your uninsured/under-insured motorists choices. (We’ll get to that part in a little bit). Say you choose the state minimums for California. It would look like this on your declarations page of your policy (usually your first or second page), Coverage A/B 15/30/10. This means that your insurance company will pay on your behalf to the other party up to $15,000 per person or up to $30,000 per occurrence for bodily injury and up to $10,000 for property damage.
Remember that phrase “per occurrence”? This means exactly that; per occurrence NOT per vehicle or per person. So if you were the one at-fault for the 5 car pile up on the freeway…you better hope you have more than just $10,000 in coverage to pay for the repair or replacement of those vehicles and don’t get me started on the bodily injuries. Your assets are definitely at risk. When I say your assets I mean anything that you own (that includes your baseball cards or rock and roll memorabilia), anything that can be liquidated into cold hard cash, AND your future earnings.
There are insurance companies that offer $500 and even a million dollars in coverages. You’ll be surprised to find out that it’s not that much more to up your liability insurance especially compared to the amount of protection you receive. (The cost really lies in the next portion).
Collision and Other Than Collision: Collision includes the obvious, a collision, as well as vehicle roll over or upset (your car flipping over). If you are found at-fault for any of the aforementioned then you will need to pay your deductible before your insurance kicks in. Other Than Collision is the comprehensive portion of your policy such as vandalism and some acts of nature. Read your policy because you may be surprised to find out that some acts of nature will not be covered on your automobile insurance policy and the same holds true for acts of war or even riots. If in doubt, be specific and ask your licensed insurance agent.
Most people stick to the $500 deductible just because it is easier to raise those funds if need be than it is for a $2000 deductible. The deductible choices vary from one company to the next. Just keep in mind that the lower the deductible the higher your premium. This is where most of the cost of the insurance lies.
Uninsured and Under-insured Motorist: This portion is again to protect you for those who either haven’t gotten the insurance or just doesn’t have enough to cover your costs. This also protects you and your passengers and vehicle from those pesky hit and runs. The amount available on this portion of insurance depends up what you have for the liability. If you only have the 15/30/10 you cannot insure yourself with 100/300/300. It either has to be equal to or less than your liability coverage.
Medical: This part is to cover the medical expenses up to the limits you choose for your passengers. If you have kids and you are driving there buddies to pizza after the basketball game and get in an accident, this is where the coverage will kick in. Good to have if some passengers (adult and minors) don’t have medical insurance on their own.
Also remember to ask your licensed agent whether or not your insurance has “drop-down coverage” in case you lend your car out and there is an accident where the driver is at-fault. It would be a shame for you to have a million dollars in coverage for all drivers covered on the policy but come to find out that any drivers not covered on the policy are only covered to the state limits. Oh, that will hurt the pocket book. When you allow someone who is not specifically named to drive your vehicle it is called “permissive use” and if that person is found at-fault for an accident or that 5 car pile up you better know exactly what your limits are and I’d make sure they have there own insurance also.