What does my auto policy actually do for me?
Auto insurance is so important, and it covers more than just your car. Think of it also as a “shield” that protects you against lawsuits and to cover the cost of the other drivers or passengers’ medical bills and property damage if you’re found at fault. Have you ever looked at your auto insurance policy and thought, “What is all this and why do I need it?”. A lot of people feel overwhelmed and that’s O.K.! There are two main pieces that make up your policy that I’ll break down, so this is for anyone who doesn’t completely understand what it all means.
First, let’s talk about the term “Liability”:
Liability coverage is the shield protecting you from third party bodily injury or property damage claims when you are found liable. For example, if you drive through a red light and crash into another driver, you would be considered at fault. Now, let’s say you have your Bodily Injury Liability limits at $50,000/person $100,000/accident, and the driver of the vehicle you hit has $30,000 worth of medical bills, your insurance would pay that claim. However, if the driver had $80,000 worth of medical bills, your insurance would only cover the first $50,000 and you would be liable for the remaining $30,000 out of your own pocket – which could end up being a lawsuit! Property damage is another part of your liability coverage. This will protect you from damages to the other drivers’ property, such as their car. If you carry property damage limits at $50,000 and their brand-new Mercedes is totaled, chances are very high that you will have to pay quite a bit of money out of your own pocket, so it’s always best to carry sufficient coverage.
You also have the option to have coverage to protect yourself in the event of someone else being at fault and not having any or enough liability insurance to cover YOUR medicals bills and YOUR property damage. This is called Uninsured/Underinsured Motorist coverage. This can be very important coverage to carry! Example: Driver A (You) stopped at red light and driver B (uninsured driver) distracted by texting on the phone, smashes into you causing bodily injury to you and your passengers and totaling your brand-new BMW. Your Uninsured Motorist coverage will pay for your injuries as well as lost wages and pain and suffering. Your collision coverage for your vehicle would take care of the damages to your vehicle and your deductible would be waived, in most cases. If you don’t have collision but opted for Uninsured property damage coverage only which would pay up to $3,500 to repair your vehicle. Without this important coverage your medical bills and vehicle would come out of your pocket, which could be tens of thousands of dollars!
When talking about liability and your company paying claims, it’s important to mention that most companies will “Subrogate” claims. That means that they will pay claims first, then decide who is at fault. If your company pays the claim and it’s later decided that the other drivers is at fault, your insurance company will “subrogate” and basically get their money back from their insurer. The claims process can take a while, so this helps the insured take care of any financial set-backs that may occur (paying for vehicle repairs, getting a new car, etc.).
Second, let’s go over how YOUR vehicle is covered:
Coverage for your car is broken down into two key components – Collision and Comprehensive. Having both means that you have “full coverage” and if you’re financing or leasing a vehicle, the banks may require you to carry full coverage to protect the vehicle if anything happens.
– Collision covers your vehicle if it collides with another object such as another vehicle, a wall, building, guardrail, telephone pole, etc.
– Comprehensive coverage (which may read on your policy as “other than collision”) covers glass, weather (hail, lightning, etc.), vandalism, damage by an animal when hit and theft.
Your policy may also give you the option to cover aftermarket parts on your car. It may make your policy a little more expensive, but if you have a show car with a nice paint job, or any expensive engine upgrades, it would be well worth it to have all that covered.
Now that we’ve discussed the two main pieces of your policy, there are other coverages that you can add on. Most companies with provide the option for Roadside Assistance & Towing, and Rental coverage. Having Roadside Assistance can be very useful for breaking down on the side of the road and needing a tow to the nearest garage, and Rental coverage is for when your vehicle is in the shop and you still need to get to work and run errands while it’s being fixed. Often, the Rental coverage is on a “reimbursement” basis where your insurer essentially pays you back for the rental car when the claim is paid, but it all depends on the insurer. There are other coverages that will sometimes come into play like using OEM (Original Equipment Manufacturer) parts to make sure that your car isn’t being fixed with cheap aftermarket parts. Some insurers will try to keep claim payments down by using cheaper aftermarket parts that may not have a proper fitment on your vehicle, or may not be as reliable. There are more options for special coverages within your policy, so speak with your agent about what’s available to you.
I hope this has helped shine a light on how your auto policy works for you! Thank for you taking the time to read the blog, and if you have more questions, don’t hesitate to give us a call because we always have an agent ready to assist you in your search for a better option!