Car Insurance Coverage Explained

By: Raphael Locsin
Website: http://www.shiftins.com

Working as a California car insurance agent has help me realize people always want to get a good deal on their insurance premiums. What my job has also taught me is that people will spend more time trying to get a good deal than understanding what the deal actually is. Recently, I have been hearing an increasing amount of stories about someone's insurance nightmare. While plenty of these could actually be cases of "insurance gone wrong", I feel that some are actually attributed to the insured not knowing what their policy actually covers. By learning the different forms of car insurance coverage, you will be able to not only ensure you are receiving the best deal but you will also ensure you are properly protected.

Liability 
Covers: Damages done by the insured to other people or their property 
Limits of liability: Bodily Injury per person / Bodily injury per occurrence / Property damage 
Examples of limits: ($15,000 / $30,000 / $5,000) is the same as (15 / 30 / 5) 

·         15/30/5 

·         25/50/25 

·         50/100/50 

·         100/300/100 

·         250/500/250 

Bodily injury - If you cause an accident that injures other people, this insurance will pay the amount you are legally obligated to pay for those injuries and related costs, which can include:

·         Hospital and medical bills

·         Rehabilitation

·         Long-term nursing care

·         Funeral expenses

·         Lost earnings

·         Pain and suffering

·         Other damages

Property damage - If you ever cause an accident, your Property Damage Liability coverage will pay for the damage done to anyone else's property, whether it's another vehicle, a lamppost, or even a house, up to the selected amount.

Liability is the most basic form of coverage. In order to operate a vehicle, it is usually required by law to have liability insurance. Liability will take effect if you are driving your car and crash into anything or anyone (at fault accident). The policy will pay any damages you are found legally responsible for until the dollar limits specified. If you have a liability only policy and are at fault in an accident, it will not cover any damages to your car or any injuries you may have. If you have a liability only policy and you not at fault in an accident, the policy of the driver at fault will pay for any damages and injuries you may have.

Uninsured Motorist
Covers: Damages done to the insured by a driver with no insurance or insufficient insurance limits
Limits of liability: UMBI per person / UMBI per occurrence
UM Property Damage: Exists but is usually limited to low amounts like $3500. Anything more should be covered under comprehensive and collision. 
Examples of limits: ($15,000 / $30,000) is the same as (15 / 30) 

·         15/30

·         25/50 

·         50/100 

·         100/300 

·         250/500

note: UM limits may not exceed those of Liability but do not necessarily have to match the limits either. It is possible to have a liability of 50/100/50 and a UM of 25/50

Uninsured or under-insured motorist coverage is not always required by law to have but is extremely important to know about. In 2004, the California Department of Insurance calculated that 14.43% of drivers on the road were uninsured. If an uninsured driver were to injure you in an accident, who would pay for your medical bills? With some exception, the average person whom does not carry insurance will also not be able to afford $15,000+ of your medical bills. You will end up having to sue the person and try to collect money from them for what could be years and try to recover from your injuries at the same time. UM will pay for any injuries the policy holder has that is caused by a driver with no insurance or not enough insurance.

Full Coverage (comprehensive and collision) 
Covers: Damages or loss towards or of the covered vehicle 
Limits: Will pay to repair or replace the insured vehicle according to its current value 
Deductible: Is the amount you are required to pay after a covered loss in order for a claim to be covered
Examples of deductibles: ($500 / $500) is the same as (500 / 500)

·         250/250

·         500/500 

·         1000/1000 

Comprehensive coverage - will cover pretty much anything that can happen to the car besides a collision with another vehicle or form of property. This includes but is not limited to:

·         Theft

·         Vandalism

·         Fire

·         Windstorm

·         Collision with an animal

·         Glass breaking

Collision Coverage - will provide protection in the event that it is damaged in a collision and will pay out if your vehicle:

·         Collides with another object

·         Overturns or rolls

The common misconception about the term full coverage is that it is usually only referring to the vehicle not of every possible loss. Make sure to check your policy to see if what you have is what you are getting. You may think you have a full coverage policy when an uninsured motorist crashes into only to have injuries and find out you only had liability and comprehensive and collision. It is also important to remember that you will only have to pay your deductible if you want to have the insurance company pay for any damages or loss towards your vehicle.

Medical Payments
Covers: Any medical the insured may need as a result of an accident regardless of who is at fault.
Limits: Usually limited to treatment received within the first 3 years after an accident and limited to a specific dollar amount.
Common Med pay amounts:

·         $1,000

·         $5,000  

·         $10,000

·         $25,000 

·         $50,000

Med pay is usually very inexpensive and is sometimes considered the least expensive form of coverage to add on to a policy. The most common time med pay will take effect is if the insured is at fault in an accident and he or she is also injured. For instance if you are driving down the street and crash into a parked car (with nobody inside) and break your arm, med pay would cover your medical bills and property damage liability would pay for the car.

Road Side and Towing
Covers: road side services and towing for a vehicle
Limits: usually restricted to only vehicles listed on the policy and only after a covered claim

This is more of an add-on to your policy but it is worth mentioning. Road side and towing can save you money in the event of an emergency that requires a tow service to be hired.

Understanding what forms of coverage are on your policy is vital to understanding the type of "deal" you are getting. Sometimes it is not always beneficial to go after the "lowest price" when you are skipping out on coverage that is important to you. Become familiar with the different forms of coverage and determine what fits your needs then shop for the best deal on the proper coverage. You will feel safer knowing that you not only saved money but that you are also properly protected.