In most states, car insurance is required to drive on public roads, particularly liability insurance.
If you are new to insurance or are ready for your first insurance policy, it may be confusing on what coverage you need and what coverage you may not need.
One key to helping you navigate the auto insurance coverage -- collision and comprehensive, liability, medical payments, uninsured motorists, etc... --- is having a local insurance agent.
Their expertise can be utilized simply with an office visit, phone call, email, and even virtual chats -- and can answer your questions, provide education on what the coverages are and how they protect you, then you will be able to select the insurance protection that is right for your lifestyle and your budget.
We're going to look at the basic car insurance coverage, a brief definition of the coverage, and include a real example of how the coverage would be used.
Comprehensive insurance provides protection on your car if it is stolen, if there is glass damage, if you hit an animal, if your car catches on fire, or even if an object falls on it.
This coverage may be required if you have a leased car or if there is a lien/loan on your car with a bank or individual. (If your car is paid in full and you own the title, this coverage is optional.) Depending on the age of your car, this insurance coverage may not be available. If your vehicle has any physical damage to the body or glass only, you may be responsible to pay a deductible.
Example: A deer crossed in front of John while he was driving home from work. John did not jerk the wheel to swerve to try and miss hitting the deer. The impact with the animal caused damage to the front of John's truck. Comprehensive insurance would take care of the damage to his truck, after his deductible.
Collision insurance provides protection to repair or replace your car if it is damaged in an accident by colliding into another car, running over an object in the road, such as a bucket or colliding with an object like a tree or wall.
If there is a lien on your car or you have a lease, this coverage is usually required until the contract or lease agreement is complete. If you hold the title of your vehicle, this is an optional coverage. Depending on the age of your car, this insurance coverage may not be available. In order to have your damage repaired, you will be responsible for a portion of the repairs in the form of a deductible.
Example: Susan was driving to the grocery store, when an oncoming car crossed into her lane. Susan swerved to miss hitting the car and collided with a telephone pole. Collision insurance would take care of the damage to Susan's car, after her deductible.
Liability insurance is required by most states for you to drive on the public highways. When you are in an at-fault car accident with one or more cars, liability provides funds for injuries to people and damage to their cars up to the limit you select. Common slang for liability is "Street Legal" or "Minimum Limits."
Liability covers the other person's injuries and other's property damage involved in the accident.
In the example above for collision where Susan collided with a telephone pole. Liability would take care of the damage to the telephone pole. Had there been passengers with Susan who were injured due to the accident, liability would provide reasonable and customary medical treatment for them, as long as it did not exceed her selected liability limits per person.
Most states require a minimum coverage limit. In South Carolina and Ohio, the state minimum limits are $25,000 per person for their injuries, $50,000 per accident for their injuries, and $25,000 for their car or damage done to other property, like a tree or fence.
Deductible is a specified amount of money, usually $500 or $1000, which you selected at the time of your auto insurance contract as your financial responsibility if involved in an accident.
If involved in an accident, usually, the deductible amount is subtracted from the insurance company's settlement payment.
Example: After Ernie's car accident, his car was towed to The Car Repair Shop for repairs. When his car repairs were completed, the shop called Ernie to make arrangements to pick up his car. Ernie's Insurance company had paid The Car Repair Shop for the damages. Ernie would need to pay his part (the deductible he chose was $1000) -- he would need to bring the $1000 payment to The Car Repair Shop before he could pick up his car.
We Are Here to Help
Understanding the basics of car insurance can be daunting if tackled alone -- having an insurance agent to talk through your specific needs and budget can be helpful.
At Consultative Insurance Group, A Relation Company we utilize a consultative insurance-buying process to help our clients maximize their insurance dollar. We are licensed in multiple states, and our team of licensed insurance professionals are available to help make the insurance-buying process easy and educational.