Understanding Your Car Insurance

Yes, Every Driver Needs Car Insurance

car insurance graphicEveryone knows you can’t drive your car without insurance. Well, you “can” but you’re in for a sizeable fine if you get caught, and an accident could ruin your life financially. Years ago, I heard a story of a young man who bought and financed a new car, back in the days when the dealership would let you leave the showroom without insurance. He had an accident on his way home, totaled the vehicle and spent the next 4 years paying for a car he no longer had. The same can happen if you let your insurance lapse and drive even a short distance (most accidents happen within 30 minutes of home).

Most of us buy insurance as an afterthought or take whatever seems to be the easiest and the cheapest option. This provides peace of mind until something happens, which might be too late.

Speaking to an accident attorney about this article, was told that, after an accident, many of his clients tell him they have “full coverage” and are then stunned to learn that there is no such thing as “full coverage”. It’s at this moment when one learns the kind of coverage they do have, what it means, and if it will be sufficient enough to cover the damages.

The first and most important document to understand is the Declarations Page. This is the main document that breaks down all the coverage in a quick overview. This document will list the insured drivers, makes, models and VIN’s of all insured vehicles and the coverage. Under coverage you will likely see this:

Bodily Injury Liability

            Each Person/Each Occurrence

Property Damage Liability

Uninsured Motorist

            Each Person/Each Occurrence

Comprehensive

Collision

In the column to the right of the above will be the amount of coverage you actually have and the deductible for Comprehensive and Collision. These are the amounts that are the most important to understand. Your bodily injury coverage likely has two separate amounts listed, such as $100,000/$300,000. That means you have $100,000 of coverage per claimant (injured person) and a total of $300,000 of coverage which is the maximum that can be paid out no matter how many people are injured.

One very important thing to know is that your basic Liability coverage is mandated by law, without exception. The minimum Liability in most states is $25,000 but there is no limit on the amount you can buy. This coverage protects your assets (money, property, etc.) if you cause an accident that results in an injury. There are two types of liabilities you may have 1) claim for property damage and 2) claim for personal injuries.

If you have any questions about these amounts and whether they are sufficient for most cases, speak with your insurance agent or company rep. If the agent isn’t prepared to clearly explain this to you, find another agent who will. Getting this wrong can be very costly. As an example:

A driver named Jason is driving down the road, distracted, and slams into the back of a new Mercedes driven by Gloria Jones causing $50,000 in damage. Ms. Jones’ insurance company contacts Jason’s insurance company and learns that he only has $25,000 in Liability coverage which is not enough to cover the damage. In this case, once the judgement is settled, Ms. Jones can then file a lawsuit against Jason for the balance of $25,000. If Jason doesn’t have the money, they can put a lien on his property and/or garnish his wages until it is paid. If Jason had purchased more Liability Coverage, he would not be in this situation as his insurance would have paid.

Additionally, if there are any injuries requiring medical attention, Jason will be responsible for these as well. If you own assets or have a regular job, make sure your Liability Insurance is high enough to cover most scenarios. It’s not a good idea to be frugal here. It may cost a bit more each month in insurance premiums, but it will be worth it if something bad happens.

The takeaway here is, don’t just buy the quickest, cheapest insurance. It pays to do some research and compare prices as well, try to get a good understanding of what you are paying for so you can be sure you are adequately covered in the event of an accident. (For a really comprehensive article on understanding your car insurance, check out insure.com).

There are times when you might have a minor accident and don’t want to use your insurance company. Or maybe the insurance company has paid your directly and you want the best price to get the damage and paint repaired. That’s when you visit Econo Auto Painting for a free estimate and see how much money you can save!