Getting car insurance is like a rite of passage for Americans. When the time comes to finally own or lease your first car, it becomes your duty to get the appropriate insurance. And while we all understand the importance of insurance to protect your vehicle, this new responsibility can be quite confusing. Fortunately, your local insurance agency is here to share the basics of insurance.
The Process of Getting Car Insurance
One of the first reactions people have is to search the web for insurance quotes. They might remember a commercial from Geico or State Farm and hop onto their website for a quote. If you are looking for a good deal, this can be quite tedious. You will have to fill in your details on a variety of sites. Luckily, insurance doesn't have to be this cumbersome. As an independent insurance agency, we work for you and get quotes from dozens of different car insurance companies. This makes your job easy and ensures the best, most affordable rate.
States Vary In Requirements
Every state determines what is required, and not required, for car insurance. Some states, such as New Hampshire and Virginia, don't even require insurance! Most of the time, the differences between states boil down to the coverage requirements. In Missouri, for example, the minimum amount of coverage for bodily injuries are $25K per person while in Pennsylvania it’s only $15K. But we are getting ahead of ourselves... let's look at the basics of a car insurance policy. If you are interested, you can view your state's minimums here.
A Car Insurance Policy Has Many Parts
The basis of all insurance is a contract between the policyholder (you) and the insurance company. For you, a premium is paid. A premium is the amount you are required to pay for the coverage assigned by the insurance company. The premium is typically paid monthly, but you can usually opt to pay in advance for a discount. In exchange for the premium, the insurance company is obliged to cover for losses outlined in the policy. These losses are covered up to a certain limit. So if you have a $25K limit, the insurance company will pay up to $25K. If the loss exceeds that amount, you will have to pay the remainder. Losses include the following aspects of an auto policy:
Property Damage Liability
For at-fault crashes, this covers the damage done to someone else's property. It can include crashes with vehicles, fences, buildings, or any other type of property. The minimum in Missouri is currently $10K. Since cars can cost $50K+, we strongly advise clients to get a higher limit. We wouldn't want you hitting a $50K truck with a $10K property damage liability, since the insurance company would only pay $10K and you would be on the hook for the other $40K.
Bodily Injury Liability
This part provides protection where you were liable (at fault) and the accident caused injury to others. With the rise of healthcare costs and the severity of auto accidents, getting limits above the state minimums are recommended.
Medical Payments or Personal Injury Protection
Whether the incident is your fault or someone else's fault, this will cover medical payments for you and other passengers in your vehicle. It can even include money for lost wages if you weren't able to work.
Uninsured and Underinsured Motorist
When the other person is at fault for the accident, this coverage will kick in if they weren't insured, did a hit-and-run, or exhausted their own liability. Basically, this part protects you from someone else having bad insurance (or even lacking it completely).
Collision
This is typically an optional coverage that helps cover costs if you are at fault. The policy will have a deductible, meaning you will have to pay the deductible before the insurance company starts to pay. If a crash does $2K of damage to your car and you have a $500 deductible, you would pay $500 and the insurance company would pay you the remaining $1,500. Keep in mind, this is for at-fault accidents. If the other person is at fault, their insurance company (or possibly yours with the Uninsured Motorist), would cover the costs and you wouldn't have to pay the deductible. The deductible only comes into play when you are at fault.
Comprehensive
Just like with collision, this is normally optional and it also has a deductible. The only difference is this covers non-vehicle losses. If you were to hit a deer, get hail damage, have a tree fall on your car, or have a rock break your windshield, this would all be covered under comprehensive insurance.
Insurance Is A Game Of Risk
Insurance is an interesting thing as you are trying to balance risk and cost. Should you get lower coverage because you don't think an accident will happen, or should you get higher limits just in case? Can you live with a high deductible or would that put a strain on your finances? It can be tough to navigate these decisions that may end up affecting you in a major way. If you get low limits, it could end up costing you thousands of out-of-pocket money. Hefty debt can result from an accident that exceeds your limits.
Get A Car Insurance Quote Today
As your local insurance agency, we stand ready to help you get quotes from our various insurance partners. We can guide you through this process and break down all the terminology. Call us for a quote today!