Get the Right Coverage to Protect Your Vehicle and Yourself
Car insurance is not a luxury. It’s illegal to drive without it, and you need it to protect your vehicle and yourself. To ensure that you have the right coverage, you must know how auto insurance really works, what it covers, how much it costs, and how much car insurance you need. Read on to learn more about the basics of car insurance, the many coverage options that are available to protect yourself and your vehicle, and how AAA can help you.
How Does Car Insurance Work?
Car insurance is a financial agreement between you and an insurance company. In a nutshell, you make regular payments, and the insurance company agrees to cover certain expenses in case of a collision, loss or theft.
Those recurring payments are called premiums. Depending on your payment plan, your premiums may be due all at once or every month during the time frame of your policy. Your policy’s coverage limits determine which repairs and expenses will be paid for and under which circumstances.
What Coverages are Available?
When you buy auto insurance, you can choose which coverages to include in your policy (beyond the coverages mandated by state law). To make the right decision, it’s important to understand the different coverages available.
It is the single most important type of coverage. Liability pays for injuries and damage you might cause if you’re at fault in a collision. Liability coverage can be broken down into further categories:
Bodily injury liability, which applies if you — or your insured vehicle — cause an injury to other people, including pedestrians, passengers in the car, or people in other vehicles. Bodily injury liability also can cover your legal defense if injury claims or lawsuits are brought against you.
Property damage liability is critical because it covers the expenses if you cause an accident that damages someone else’s car, a building, or some other property. Like the bodily injury liability, this coverage also can pay for your legal defense in case of a lawsuit or damages assessed by a court.
What if you’re injured in an accident where an uninsured motorist is at fault? In this case, you may want to have uninsured/underinsured motorist coverage. Like the name suggests, this provides you with extra financial protection for injuries or death when the at-fault driver is uninsured or underinsured. This coverage also applies if you’re injured in a hit-and-run accident.
Medical Coverage Options
Separate coverages apply if you or a passenger in your car are hurt in an accident. For example, personal injury protection, or PIP, provides medical care coverage, and adds more benefits like reimbursing your wages if you miss work due to your injuries. PIP’s treatment coverage also extends to rehabilitative or psychiatric care.
Medical payments coverage, or MedPay, pays for medical expenses, regardless of who is at fault. It covers injuries sustained if you’re behind the wheel, a passenger in your car, riding in someone else’s vehicle, or injured by a car as a pedestrian. Coverage extends to expenses deemed “necessary and reasonable.” That includes doctor visits, hospital stays, surgeries, x-rays, ambulance fees, and even funerals.
Comprehensive Collision Coverages
What if your own car is damaged, or what if it’s stolen or vandalized? Liability coverage won’t help in that case, but other coverages will. Comprehensive coverage will cover you in the event of theft, fire, vandalism, storm damage, or even contact with an animal. Collision coverage pays to fix or replace your car if it’s damaged in a crash. If you’re financing your car, these two coverages may be required by the lien holder.
These two coverages come with a deductible. A deductible is basically the amount you agree to pay toward the cost of a claim before your insurance foots the rest of the bill. If your policy has a $1,000 deductible, for example, you’ll pay the first $1,000 in repair costs. Your insurance company covers the remaining amount.
Other Coverage Options
Other coverages exist, too. For example, in case you need another vehicle if your car is damaged in a wreck, car rental expense coverage will reimburse you for the cost of renting a car. Roadside assistance coverage typically covers the cost of towing, jumpstart and installing a spare tire. Roadside assistance through your insurance is specific to the car, unlike AAA membership which covers you as a member rather than your car. Available coverages vary by insurance company, so be sure to ask about what your options are.
How Much Car Insurance Do I Need?
The answer to that question depends on where you live and what you need to protect, as well as your budget and how much you want to be responsible for in case of an accident or theft.
Required minimum coverages vary by state. In Washington, your policy must have bodily injury liability coverage of at least $25,000 per person and $50,000 per accident. The state also mandates property damage liability coverage of at least $10,000.
At AAA, we understand that auto insurance isn’t something to cut corners on. We encourage drivers to buy the right coverages, even if it means paying a little bit more, to ensure that they are protected in case of an unfortunate situation.
Carrying too little liability coverage, for instance, can leave you legally responsible for high costs out of pocket. And an estimated 13 percent of drivers nationwide, for example, are uninsured. That number jumps to over 17 percent in Washington state, so uninsured/underinsured coverage might be a wise investment.
A good rule of thumb is to make sure you’re covered for an amount equal to the total value of your assets, like your home, current and future earnings, car, investments, and savings. That way, in a worst-case scenario, you won’t end up underwater.
With protecting your financial security, you can never be too careful.
How Much Does Car Insurance Cost?
Again, this depends. Rates vary by insurance company, but normally, the cost of your policy depends on many individual factors. These factors include your driving record, age, location and marital status as well as the type of car you drive and how much you drive annually. Of course, your price increases if you opt for more coverages or higher limits. And usually, the higher your deductible, the lower your insurance rates.
What’s Umbrella Insurance?
Umbrella insurance is an additional layer of coverage offered by some insurance companies, including AAA’s insurance partners. Rather than a standalone policy, umbrella insurance requires a primary policy before it kicks in. If you’re found legally liable for someone else’s injury or property damage, umbrella insurance takes over after your primary (home or auto) insurance hits its limits.
Umbrella limits start at $1 million, with higher limits available. That may sound like a lot, but the best part of umbrella insurance is often its reasonable price. While your protection is increased substantially, its average cost can be well under a dollar a day.
Say your car slips on an icy road and hits a van full of children. In such a tragic accident, there’s a good chance your current liability limits won’t cover your assets. Umbrella coverage can prevent a bad situation from becoming exponentially worse.
–Written by Arnie Aurellano