Auto Insurance Frequently Asked Questions
- Why you need auto insurance?
- How much insurance do you need?
- What will my car insurance policy cover?
- Tips for saving money on your auto insurance policy.
Why do you need auto insurance?
We know that auto insurance is required by law, but why do you need it? Auto insurance is far more important than just a way to protect your car. In fact, auto insurance is a way to protect your finances, your assets, your home, your lifestyle, and your peace of mind. Here is why… Whether or not you are at fault in a car accident, you want to be able to afford the damages that result. The cost of medical care is continually increasing and so is the frequency of major lawsuits. These factors are just a few reasons why it is important to have adequate auto insurance coverage…
How much insurance do I need?
As insurance professionals, we are asked this question every day. The truth is that everyone’s needs vary and they continue to change throughout the course of your life. The insurance coverage that you need today may be completely different than the insurance coverage that you need next year or 5 years from now.
Here is an example:
Today you are single, renting an apartment, you have student loans, a car payment, and you just got a good job.
As of today, you do not have many assets to protect so you may not need the highest liability coverage offered. However, if you just started a new job you may not have medical coverage, so you might want to consider personal injury protection (PIP). Additionally, if you have a car payment, you will have to carry comprehensive and collision coverage. This is the bank’s way of protecting its loan. Lastly, what if something does happen to your vehicle? How will you get to work, so you don’t lose your new job? You may want to look at loss of use coverage and maybe even roadside assistance.
Now let’s look 5 years down the road. You are now married, you now own a home, you still are working on those student loans, but your car payment is gone.
Now you may want to look at changing your coverage. You may want to increase your liability coverage because you have more assets and you want to protect the home, car, and retirement plan that you have worked so hard to establish. You may also want to consider an umbrella policy to give you additional protection for these assets. I also mentioned that your car is paid off. Do you need comprehensive and collision coverage? At this point the bank is not requiring it so you may want to drop one or both coverages, or you may find comfort in these coverages and choose to continue carrying them. You may also have multiple vehicles so you may not need to have loss of use coverage.
As you can see, in a short period of time, things change. As life progresses your insurance needs will change. This is why it is important to have an auto insurance agent that can explain the coverage options that may be beneficial for you as changes occur in your life.
From the example above, several auto insurance terms were used. What do they mean? Let’s review:
- Liability Insurance
- Uninsured/Underinsured Motorist
- Personal Injury Protection
- Loss of Use
Liability coverage comes in two forms, Bodily Injury Liability and Property Damage Liability:
Bodily Injury Liability covers bodily injury or death to another person in an accident in which you are at fault. This may include medical bills that arise, lost income, and pain and suffering. This coverage also provides legal defense costs that may arise if the other person files a legal suit against you.
Liability Property Damage provides coverage for you if your vehicle causes damage to another person’s property. Often times this is damage to someone’s vehicle in a car accident, but this can also include damage that your vehicle may cause to someone’s fence, house, or even a guardrail. This coverage also provides legal defense costs that may arise if the other person files a suit against you.
Uninsured/underinsured motorist coverage works in the same fashion as the liability coverages above, however, with uninsured/underinsured motorist coverage, another driver has caused injuries to you or damage to your vehicle and they either do not have insurance or they do not carry enough insurance.
Personal Injury Protection:
Personal Injury Protection can cover medical bills, lost income, loss of services, and funeral expenses for you AND passengers in your vehicle if you are in a car accident. This coverage applies to covered losses regardless of who is at fault.
Also known as “Other than collision coverage.” Comprehensive coverage is just that; it coverages your vehicle is there is damage to your vehicle by something other than a collision. Some examples include theft, a tree falling on your vehicle, vandalism, glass damage from a rock, hitting an animal, etc…
Collision covers the damages to your vehicle as a result of it colliding with something. Some examples include: hitting another vehicle, hitting a pole, sliding off the road due to ice, etc…
Loss of Use:
Loss of use coverage on your auto policy provides you with a rental vehicle while your vehicle is being repaired as a result of a covered loss.
Tips for saving money on your auto insurance policy.
Everyone wants to know how to save money on their auto insurance, so here it is…
- Bundling – insurance companies frequently offer discounts for bundling your insurance with the same company.
- Safe Driving – the fewer tickets and accidents you have in the last 5 years, the better.
- Homeownership – there are discounts for homeownership and packaging
- Good Credit – believe it or not, good credit is a sign of responsibility and insurance carriers believe it is an important factor.
- Low Mileage – if you are not driving your vehicle very often there is less chance of being in an accident.
- Increase Your Deductibles – if you have a lower deductible you are more likely to turn in a claim and therefore you have a higher premium.
- Maximize Discounts – there are several discounts out there. Make sure you are taking advantage of them!