Auto Insurance 101

What Does Auto Insurance Do?

How much do you know about your auto insurance policy? Most people know they need auto insurance, but aren’t aware of what coverages their policy actually includes. Auto insurance provides financial protection for certain events, such as an at fault accident, having your vehicle stolen, or hitting a deer. Some people also aren’t aware of what their current coverage limits and deductibles are. Knowing what coverages you’re paying for is key to ensuring you and your loved ones are properly protected.

Your auto policy is made up of several different parts. Within these parts, there are many different deductible and coverage limit options for you to choose from. Most states require for you to legally carry some of these coverages, but not all. If you choose to only have the minimum required state coverages, you are likely not properly covered.

The Parts of Your Auto Policy

• Physical damage coverage pays for damages to or theft of your car.
• Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
• Medical coverages pays for the cost of treating injuries.
• Towing and labor coverage provides coverage/reimbursement if your vehicle needs towing or for labor done at the site of disablement.
• Extended transportation coverage provides coverage for a rental car while your vehicle is being repaired during a covered loss.

Physical Damage Coverage

Physical damage coverages provides coverage for YOUR vehicle. This coverage is made up of two separate parts, your comprehensive (other than collision) and collision coverage. Both of these coverages have a per occurrence deductible of your choosing. If you choose lower comprehensive and collision deductibles, then your premium will be higher. If you choose higher deductibles, then your premium will be lower.

Included in your physical damage coverage, is your coverage for glass damage. Different states and policies handle glass damage differently. Some companies have an option for “Full glass coverage,” which repairs/replaces glass damage with no deductible, while other states include glass damage in your comprehensive coverage.

Liability Coverage

Liability coverage pays for damages to OTHERS that you’re responsible for. This coverage is also compromised of several different components.

• Bodily Injury liability coverage pays for the medical expenses of others that you are responsible for. There is typically a PER PERSON limit and a PER ACCIDENT limit. For example, if your bodily injury coverage limits are $100,000/$300,000, each person will get up to $100,000 in medical expenses covered by your insurance, but that maxes out at $300,000 per accident. If you are responsible for 5 people’s medical expenses of $100,000, the other $200,000 in medical expenses would be your personal responsibility. This is where umbrella policies come in handy.
• Property damage coverage pays for damages your are responsible for to other people’s property. Whether that be their vehicle, mailbox, a power pole, or guard rail. This coverage is also applicable to a per occurrence limit.
• Uninsured/Underinsured motorists coverage provides coverage in the event you’re in a not at fault accident with another driver who is uninsured or doesn’t carry liability limits high enough to cover your damages.

There are also non-owners policies for people who have a drivers license and need liability coverage, but don’t currently own a car. If you choose to purchase a vehicle later and need to add physical damage coverage, your non-owners policy can easily be changed to fit your new coverage needs.