Auto Insurance IQ: Your Policy Decrypted

An insurance policy is made up of six types of coverage. Each coverage has an individually calculated premium, and premiums for the six individual coverages are added together to make up your total monthly auto insurance premium. Some of these coverages are required by law, others are optional.

Mandatory Auto Insurance Coverages

Bodily injury liability insurance and property damage liability insurance are required by law in the states we serve. In other states, the mandatory policy requirements may differ. A limit is the maximum amount that your insurance company covers. So if you are involved in an accident where the damages cost more than your limit, you are responsible for the rest. It is a good idea to purchase insurance that goes above the state minimums. The state minimums are typically set well below what you could be sued for.

  1. Bodily Injury Liability Insurance. If someone else is hurt or killed in an accident in which you are at fault, this covers you for their medical and funeral costs. The minimum requirements can be as low as $15,000 but many experts recommend at least $100,000 per person and $300,000 per incident.
  2. Property Damage Liability Insurance. This covers you if you damage someone else’s property. The damage doesn’t have to be to a car, it could be public / municipal property, or private property and buildings. The amount of damages will depend on what you hit. The state minimum is unlikely to cover you if, for example, you hit a Mercedes.

Optional Auto Insurance Coverages

  1. Collision Insurance. Collision coverage protects your vehicle. The required property damage liability (above) only covers damage that you do to other property. Collision coverage will cover damage to your vehicle as the result of an accident in which you are at fault. Remember not to just base this figure on your vehicle’s current value. It should also be sufficient to cover repair costs, which can be more than expected for older / foreign cars.
  2. Personal Injury Protection Insurance. As with property Liability, Bodily Injury Liability only covers expenses incurred by other people. If you want to protect yourself, and your passengers, you need Personal Injury Protection. This will take care of your medical expenses, and the expenses of your passengers. This coverage applies regardless of fault.
  3. Comprehensive Insurance. This covers your vehicle for non-accident damages. Theft, vandalism, or damage from fire, inclement weather and natural disasters are all covered.
  4. Uninsured / Underinsured Motorist Insurance. If you are the victim of a hit and run, or involved in an accident where the other party is at fault but not insured, or not insured for enough to cover your expenses, this policy protects you.This will cover medical and some other expenses.

The Elements of Your Auto Insurance Policy Contract

  1. Declarations: This is your personal information, vehicle information, and your policy number. Ensure that this is correct, as inaccurate information can damage a claim.
  2. Coverage Parts: This is where your coverage options and limits are outlined. It will tell you what policies you have, and the maximum payouts for each policy.
  3. Exclusions: Possibly the most important part of your contract. It tells you what is NOT covered by your insurance company. Pay close attention to this!
  4. Conditions: In this section, the responsibilities of you, the insured, and your insurer are outlined. This is where you’ll find your premium obligations, as well as instructions for filing a claim.
  5. Definitions: This section will define the terms of the policy, your rights, and the rights of the insurance company.

Now that you know how auto insurance works, are you ready to experience the best auto insurance ever? Get your auto insurance quote here.