Time to rev up your knowledge: With a clear understanding of how your car insurance works, you can better protect yourself and make more informed buying decisions. So sharpen your pencils and have a seat: Read on for Auto Insurance 101 and some common terminology you’ll find in a basic policy.
Collision Coverage
If you hit a stationary object while driving or cause a crash with another vehicle, collision coverage will pay toward repairing your car. However, it won’t cover anything related to other property damage you may have caused. If you took out an auto loan, collision coverage will probably be required by the lender.
Comprehensive Coverage
This pays for damages to your vehicle from causes other than traffic accidents, such as if a tree limb falls on your car or you’re a victim of auto theft. Colliding with animals is the cause of many comprehensive claims. A study found that more than a million accidents a year are caused by deer, most frequently in the two hours after sunset in the fall.
Liability
If you cause an accident and injure someone or damage their property, liability coverage compensates them and pays for your legal defense if you’re sued. The maximum amount the insurer will pay may be listed in a short form, for example, “100/300/50,” which would mean you’re covered for $100,000 for each injured person, a maximum of $300,000 per accident and up to $50,000 in property damage per accident.
Uninsured/Underinsured Motorist
Not everyone is insured. About one in eight drivers — or 32 million nationwide — don’t have auto insurance. Massachusetts and New York have the lowest percentages of uninsured drivers while Michigan, Mississippi and Tennessee have the highest. If you’re involved in an accident with one of them, this pays for damages to your car and medical costs.
Stacked/Unstacked
Some states allow you to “stack” policy limits for different vehicles together to increase your coverage limit for uninsured/underinsured (UM/UIM) motorist coverage. If your policy has up to $100,000 in UM/UIM coverage for your primary vehicle, but you have two other vehicles with UM/UIM coverage of $30,000 each, you have a total policy limit of $160,000 by stacking those coverages together. Of course, that extra coverage comes at an extra cost, but it can be valuable protection if it’s ever needed.
Deductible/Gap
For collision and comprehensive claims, you can select an amount that will be deducted from your settlement if you’re in an accident. Generally, the higher the deductible, the lower the cost of the policy — but it can leave you with a bigger bill if something does happen. Gap coverage is sort of the opposite. If your car is totaled, it will pay the difference between the vehicle’s dollar value and the balance of your auto loan.
MedPay/Personal Injury Protection (PIP)
MedPay covers the cost of treating injuries for the policyholder and passengers no matter who was at fault, up to the limits of the policy. PIP is similar, but may also cover other costs such as lost income and physical therapy.
Exclusions
Pay close attention to a policy’s exclusions, which are things it won’t pay for. Common exclusions include damage while using the vehicle for commercial purposes, while racing on a highway or racetrack, or from normal wear and tear.
Class Dismissed!
With the insights gained from this Auto Insurance 101 and the expertise of your local We Insure agent, you’re not just informed, you’re at the head of the class. Trust in We Insure to consistently deliver an A+ in choice, value, and service for all your auto coverage needs. And if you need a refresher course on what we’ve just gone over, call your local agent or stop by — we’ll be happy to explain your coverage options in detail (no need to bring an apple).
Sources
https://www.nerdwallet.com/article/insurance/auto-insurance-glossary
https://www.caranddriver.com/car-insurance/a35291950/car-insurance-explained/
https://www.caranddriver.com/car-insurance/a36422027/stacked-vs-unstacked/
https://www.washington.edu/news/2022/11/02/deer-vehicle-dst/
https://www.bankrate.com/insurance/car/uninsured-motorist-statistics/
