Auto Insurance Coverage
Understanding your auto insurance policy can be difficult. Auto Insurance policies can be complex so we are going to help you understand each part of your auto insurance policy. Many auto insurance companies just sell you a policy and don’t explain to the customer what they are actually purchasing. Here at Cheapest Auto Insurance, we want every customer to understand what you are purchasing from us. We understand the importance of our customers understanding what they are buying. We don’t want our customers caught off guard in the case of an accident and them not have a certain coverage they thought they had. Here are the coverages that are offered on an auto insurance policy:
- Bodily Injury Liability
- Property Damage Liability
- Comprehensive Coverage
- Collision Coverage
- Uninsured Motorist Coverage
- Medical Payment Coverage
- Personal Injury Protection
- Rental Car Reimbursement
- Towing/Roadside assistance
What is Bodily Injury Liability and Property Damage Coverage?
Bodily Injury Liability coverage helps pay for medical expenses due to the other party you harm in an auto accident that is your fault. Most states offer state minimum coverage limits of 25,000/50,000/25,000 or 30,000/60,000/25,000.
- The first number represents the most an auto insurance company will pay in an accident on a third-party medical bill situation in which you harm someone in an auto accident that is your fault.
- 2nd number represents the total amount an auto insurance company will pay for medical bills to a third party in which you harm someone in an auto accident that is your fault.
- 3rd number represents the total amount an auto insurance company will pay for damaged property damage done to a third party in an auto accident that is your fault.
It is very important to make sure you carry the proper amount of liability limits for your situation. If you are involved in an accident that you are found liable for and that accident does more damage than your policy limits will cover then you can be personally liable to for that overage amount. You can even be sued for this extra amount and can get costly very quick.
Here is a real example of what we are talking about. If you are carrying the state minimum liability limits of 25/50/25 and you cause an accident that totals a brand new Range Rover that costs $80,000. Your policy only covers you for $25,000 so the party you hit can sue you for the remaining $55,000. So that balance plus court costs, you can see why we encourage you to carry proper liability coverage.
It is important to remember that you will not personally benefit from state minimum liability auto insurance. This strictly keeps you legal and covers damage you do to a 3rd party only. If you want to receive coverage on you an your car then you will want to explore some of the coverages we will discuss below.
Understanding Comprehensive coverage
Comprehensive coverage is the part of you auto insurance policy covers in case your car is damaged in everything other than a collision. Excluding hitting an animal in your car, this is technically a collision but its covered under the comprehensive section of your policy. Here are a few things that will be covered under comprehensive coverage:
- Hitting an animal
- Falling objects
There are several different deductibles that you can choose from under your comprehensive coverage. A deductible is the part the customer is responsible for in the event of a claim. Here are your deductible options to choose from:
The lower your deductible is the more you will pay on your monthly auto insurance rates and vice versa the higher your deductible is the less you pay on your monthly premiums. I personally have always chosen a $250 comprehensive deductible and gone higher on the collision side. It is important when you are getting quotes to get the different rates for different deductibles so you can choose which option is best for you.
How to understand Collision Coverage
Collision coverage on your auto insurance policy covers your vehicle in case your vehicle collides with another car, property, or object. This is an optional coverage and is sometimes referred to as “Full Coverage”. We need to make clear that there is no such insurance term as full coverage insurance, however this is a term that most all insurance companies use to describe comprehensive and collision coverage. Here are the deductibles you can choose from on collision coverage:
Adding comprehensive and collision coverage to your auto insurance policy is what causes the rates to go up substantially but it gives you the most coverage. It usually costs about twice as much to carry comprehensive and collision compared to just liability only. Depending on the age of your vehicle and if you still have a loan on it will help you determine if you need to carry this coverage.
Most car dealerships and finance companies will require you to carry comprehensive and collision coverage if you are financing your vehicle. If you are purchasing a new financed vehicle from car lot many will not allow you to leave until they see proof of full coverage insurance.
If your vehicle is fifteen years or older, we recommend carrying liability only auto insurance unless your car is financed. Of course, every situation is different and we just give you our opinion, it's important to understand the risk you are taking and decide what is best for you and what you can afford.
What is Uninsured Motorist Coverage?
An uninsured motorist is someone who is driving a car without auto insurance. This can be a very bad situation if an uninsured motorist hits your vehicle doing damage to it or bodily injury damage to you. So we want to explain what uninsured motorist coverage truly covers and what it does not so you can make the best decision possible when deciding whether or not to purchase the coverage on your auto insurance policy.
First off here are the options for uninsured motorist coverage as far as limits are concerned:
The higher amount of uninsured motorist coverage you choose the higher your monthly auto insurance rates will be.
There are two types of uninsured motorist coverage the first being Uninsured Motorist Bodily Injury (UMBI)and the second being Uninsured Motorist Property Damage (UMPD). These are two coverages that are very important to understand because not all states offer UMPD. Our company write auto insurance in Texas and Oklahoma. Texas offers UMPD whereas Oklahoma does not.
So, for states that do not offer UMPD it is important to understand that Uninsured Motorist coverage in those states only cover your medical bills and the passengers in your vehicle. It will not cover the vehicle damage itself. Many people who take out full coverage assume that Uninsured Motorist coverage comes automatically with the policy but it actually does not.
If you want your vehicle covered in case an uninsured motorist hits you then you will need to take out comprehensive and collision insurance. This will cost more but is definitely worth it if you are involved in an accident. It is important to remember that you would turn in this kind of claim on your auto
insurance policy and you would be subject to the policy deductible, which is the part you share in financially to fix your vehicle.
If you are only wanting your medical bills covered in case an uninsured motorist hits you then you would want to purchase the UMBI coverage. This usually increases your monthly rate about $15 monthly in most cases. Some people reject this coverage if they have good health insurance, claiming that their health insurance will take care of their medical bills. I see both sides personally but have always errored on the side of caution and taken out UMBI coverage on my personal policy.
What is Medical Payments Coverage?
Medical payment coverage on your auto insurance policy covers your medical bills or your passengers' medical bills up to the amount of your policy allows in the case you are involved in an accident whether your fault or not. This is the 2nd most common form of coverage people use to commit insurance fraud. Many auto insurance companies limit this coverage very strictly because when a customer is involved in an accident, they can many times collect policy limits on this coverage even though it may not really be needed. So, many auto insurance companies will charge a high premium for adding this coverage especially in the nonstandard auto insurance industry, which is where the majority of insurance fraud occurs. Most preferred insurance companies like a State Farm or Farmers does not charge as much for this coverage.
Most auto insurance companies limit the amount of medical payments coverage to $5,000 but your more preferred carriers will go up to $10,000 of coverage. The higher amount of coverage you choose will increase your monthly premiums. Some of your nonstandard auto insurance companies will only allow $500 of medical payments coverage due to it being so costly for auto insurance companies when it comes to paying claims time.
We recommend discussing medical payments coverage with your insurance agent or insurance company so you fully understand the coverage and can decide on your own whether it is something you need or not. If you do want it be sure and disclose that upfront on the auto insurance quote you are receiving. Most auto insurance companies will not add it on there unless the customer specifically requests it.
Understanding Personal Injury Protection Coverage
Personal Injury Protection Coverage is very similar to Medical Payments coverage and is not offered in all states. This coverage is also known as PIP coverage. PIP coverage is also known as no-fault insurance and it helps pay for your medical expenses, lost wages, and funeral costs after an accident. PIP coverage is the most common form of coverage used in insurance fraud, especially in Florida which has the largest amount of pip claims of any state because it is mandatory to be on the auto insurance policy.
PIP coverage is one of the most expensive coverage you can add on to your policy and many insurance companies do not like writing this coverage because it will be paid out in almost every claim situation whether deserved or not. No doubt many times it is due the customer but it can also be very abused and taken advantage of.
Most states cap the limit of PIP at a max of $2500 per policy. PIP policies have a minimum coverage amount and a per person maximum limit. We recommend consulting your insurance agent or company before purchasing this coverage to make sure you fully understand how the coverage works and what it will pay for.
In most cases your auto insurance rates will not go up after a PIP claim. But if you have too many PIP claims some auto insurance companies can deny you coverage. Which will limit your options and could cause your monthly auto insurance rates to go up. Adding PIP to your policy can increase it between 25%-40% on the monthly premium. So be sure and ask your insurance company exactly how much it will cost before you add it on.
What is Rental Car Reimbursement Coverage?
Rental Car Reimbursement Coverage is an optional coverage that covers your rental car expenses while your car is being repaired as a result of a covered automobile accident. It is important to remember it doesn’t cover your car for mechanical breakdown has to be in result of an insurance claim. Rental car costs can really add up quick. Here are the options of rental car limits to choose from:
- $20 a day for 20 days
- $30 a day for 30 days
- $40 a day for 40 days
- $50 a day for 50 days
The higher amount of coverage you choose the more it will increase your monthly premiums. It usually costs about an extra $10-$15 monthly on your monthly premium. This coverage does not apply if you rent a vacation vehicle. Your liability coverage on your personal auto insurance policy will usually transfer when you rent a car. However, whether comprehensive and collision coverage transfers to the rental car depends on what insurance company you are with.
Most nonstandard auto insurance companies do not allow comprehensive and collision coverage to transfer forcing you to purchase that coverage from the rental car company. Most preferred national companies do allow these coverages to transfer when you rent a car but it's important to read the fine print because most insurance companies will pay the actual cash value of the vehicle at time of loss. If that amount doesn’t line up with what the rental car company wants for the vehicle and they can come after you for the difference. Which is why we always recommend to our customers to purchase the comp and collision coverage from the rental car to be safe.
Roadside assistance and Towing Coverage
Roadside assistance has almost replaced the towing coverage with most all auto insurance companies. The big difference between these two terms is roadside assistance allows the customer to tow their car with no upfront cost. Whereas towing makes the customer pay upfront and then submit a receipt to the insurance company and wait for reimbursement. So you can understand why roadside is so much more preferred by the consumer.
AAA was the first auto insurance company to really put this coverage on the map because they sell it to the consumer whether you are their customer or not. This has caused a lot of other insurance companies to step up their game to match them and offer it on their policies as well against the age-old way of towing reimbursement coverage. Some auto insurance companies put this coverage automatically on every full coverage policy they sell but most don’t. So, if this is a coverage you are looking for be sure and request it upfront to be safe.
In Most cases you will need to have full coverage insurance before you can purchase Roadside Assistance. If you have liability only most auto insurance companies will not offer this coverage, some to though like AAA and any company who partners with Nation Safe Drivers. We have found these 2 companies offer roadside assistance for liability and full coverage policies at an affordable price.
Roadside assistance coverage usually costs between $4-$8 monthly. So, it is a very affordable coverage for the assurance if you are ever stranded on the side of the road to be able to call your insurance carrier for immediate assistance.
Concluding thoughts on auto insurance coverage
We have gone over a lot regarding auto insurance coverage so our best advice to you is to discuss these coverages with your auto insurance agent or auto insurance company and have them go over each coverage with you and you all make the decision together. Be sure to purchase the coverage you need with not wasting money on coverage you don’t need. It is a slippery slope; I personally would always want to be over covered than under covered when it comes to auto insurance. Dealing with lawsuits for not carrying adequate insurance can get very costly and a risk we suggest not taking.