Everything You Need To Know About Basic Auto Insurance

Purchasing insurance can be tricky, and choosing a basic auto insurance policy isn’t always as straightforward as it sounds.

You want to be as protected as possible, but at the same time, you do not want to regret throwing money away on coverage you don’t need. On the flip side, you could overpay for coverage if you’re not careful, or worse, not have all the coverage you need.

There are two primary types of personal auto policies. They are comprehensive and liability, each of which has several potential add-ons for increased coverage.

In this article, we’ll compare these two basic auto coverage options, then dive into the add-ons, financial considerations and what you must know about getting your claim approved.

Knowing Your Coverage Options

Deciding whether you need comprehensive or liability coverage is one of the first things you need to do as it is one of the greatest cost indicators. If you have a loan on your car, your lender will most likely require this coverage.

Comprehensive coverage protects you from incidents like theft and vandalism as well as floods and other natural disasters. With liability insurance, you are simply covered should you be in an accident that is determined to be your fault.

Then there’s collision coverage, which is technically a liability add-on, which helps cover damages from an accident. Below we’ll explain each option in more detail.

Comprehensive Auto Coverage

Comprehensive insurance for your automobile covers all types of damage related to your vehicle that is not caused by a collision.

In a nutshell, it protects your vehicle from the elements, such as hail or wind damage and covers the cost of your vehicle if someone steals it. It will cover damages from hitting a deer and it will cover damage caused by vandalism. It also covers an array of other perils, but you shouldn’t assume it covers your vehicle for everything.

Deductible ranges for comprehensive auto insurance vary, from as low as $100 for some policies, to $1,000 or even more, depending on the value of your vehicle. If your vehicle isn’t worth a lot, it may not make sense to carry comprehensive coverage, especially if you have a high deductible.

While no states require comprehensive coverage, it may be required if there is a lien on your vehicle. Lenders want to protect their investment. Comprehensive auto insurance is also recommended if you live in an area prone to natural disasters like hurricanes or floods. Hail can also do a lot of expensive damage to your vehicle.

Deer collisions are another area to make sure you are covered for depending on where you drive.

The Insurance Institute for Highway Safety reports there are over 1.5 million deer and vehicle collisions every year, which results in over $1 billion in damage.

If you live in an area where theft is common, especially if you have a valuable vehicle, comprehensive insurance might be a good investment. If the vehicle is stolen and the police aren’t able to locate it, your insurance company will cover your vehicle at market value.

Comprehensive auto insurance doesn’t cover towing or fixing a flat tire, though there are separate add-ons that will. It also won’t cover aftermarket parts like an upgraded exhaust system or stereo system. If you’ve made a lot of upgrades to your vehicle, speak with an agent about additional endorsements to cover these items.

If you have personal property stolen from your vehicle, it may not be covered by your auto policy (though you might file a claim through your homeowner’s policy). Glass damage is another area that comprehensive auto insurance may not cover. While it may pay for body damage caused by natural occurrences like hail, window damage is excluded under some policies.

Automobile Liability Coverage

Liability coverage is the basic level of coverage required by law in most areas of the United States.

With this level of auto insurance, you are covered should you be in an accident that is determined to be your fault. It will cover property repairs and medical bills for injuries caused by the accident.

Liability insurance comes in different levels based on how much coverage you want to have. Given the high costs of medical treatment, it is a good idea to opt for coverage that is higher than the amount mandated by law.

Collision Coverage

Collision coverage is an addition to your liability coverage. It protects you if you’re involved in an accident, whether or not it’s your fault.

This add-on can also come in handy if someone is at fault for a collision with your vehicle but doesn’t have insurance, or has such low limits that their policy won’t cover damage to your vehicle.

In addition to a policy covering liability, you get this coverage to pay for not just repairs, but to receive the value of your car should it be totaled in an accident.

This level of insurance is generally recommended for those with newer or high-value vehicles. If your car is old and not worth much, you may find you do not need collision coverage.

Understanding Your Coverage

Too many drivers have had the experience of finding out – too late – that an insurance policy doesn’t cover what they believed it did.

A so-called “full-featured” policy sounds like a good thing, but some can actually be full of value limits, clauses and exceptions, any of which could leave you vulnerable should an accident arise.

Make sure you understand all the legalese before you buy a policy. A good agent will tell you if you’re signing up for a policy that leaves you vulnerable in key areas. Make sure you understand the full extent (and limits) of your coverage.

Reviewing Add-Ons

Now you have a basic understanding of your coverage options. When choosing a policy, you’ll also want to find out what riders are available.

A rider is an add-on provision to your insurance policy with additional benefits. Riders can be useful if you have an expensive car stereo in your vehicle, for example, or expensive aftermarket parts.

Another rider that’s important to some customers’ concerns the use of original equipment manufacturer (OEM) parts as opposed to aftermarket alternatives or parts from scrapped vehicles. If original factory parts are important to you, your agent can add a rider that guarantees damaged parts will only be replaced with OEM ones.

There is more to purchasing an auto insurance policy than just deciding your coverage amounts and whether or not you want just comprehensive, liability or collision. To fully protect yourself, take a look at these 7 basic auto insurance add-ons.

1. Uninsured & Underinsured Motorists

When you are in an accident, the party at fault is the one who will pay the costs associated with the accident.

Uninsured motorist coverage will protect you with an accident caused by an uninsured motorist, or by a hit-and-run. Underinsured motorist coverage is also available, which will pay costs that could arise if the other driver doesn’t have adequate coverage.

If you have uninsured or underinsured motorist coverage, you will still be protected in these scenarios. The way it works is your insurance company picks up the slack and ensures you can get the help you need without having to wait until you are able to take the other driver to court to receive a settlement.

2. Gap Coverage

If your car is a total loss, it’s possible that the cash value your insurance company pays you will not equal the amount you still owe on a financed or leased vehicle. Gap coverage will give you peace of mind, taking care of this gap.

3. Original Equipment Manufacturer (OEM) Parts Coverage

When repairing your vehicle, your insurance company will normally use aftermarket parts.

While there are certain standards these parts must meet, they aren’t made by the vehicle’s original manufacturer. This coverage will ensure that replacement parts used on your vehicle are made by the original manufacturer.

4. Sound System Coverage

If you have an expensive aftermarket stereo in your vehicle, standard coverage won’t cover the cost to replace or repair it if it is damaged or stolen. This option will make sure your audio investment is protected.

5. Glass Coverage

Purchasing this coverage gives you a low or no deductible option when repairing damage to your vehicle’s windshield or other windows.

6. Towing & Labor Coverage

A simple but useful add-on policy that will reimburse you for towing expenses and other costs related to roadside assistance, whether you need a jumpstart or lock yourself out of your car.

7. Rental Reimbursement Coverage

This coverage will reimburse you for rental insurance if your vehicle is in a body shop after a claim. This plan is not usually included with standard comprehensive or collision coverage. Since rental costs can accumulate quickly, this is a popular elective coverage.

Crunch Your Numbers

Whether you need comprehensive, liability, collision or any other insurance policy often depends on the value of your vehicle.

For older vehicles, it simply isn’t worth it to pay for expensive coverage. If you pay $100 a month for comprehensive and collision coverage, the amount you pay over the course of a few years can exceed your vehicle’s value when combined with the deductible.

If these coverages are right for your vehicle, choosing the right deductible is also important. It may not make sense to pay an extra $50 a month for a deductible that saves you just $500 if you do end up making a claim.

Getting Claims Approved

Good adjusters are sympathetic to your situation. They’ve seen it all, but it’s also their job to look for ways to minimize risk for the insurance company.

When you file a claim, keep it simple and stick to the facts. That the adjuster has a clear picture of what happened and you have your best chance for getting your claim approved.

Beware that claims can raise your rates. Say you get into a minor fender bender. Your damages are less than the total deductible on your policy, and so your insurance company doesn’t have to pay out. This doesn’t mean, however, that your insurance premiums won’t be impacted.

Any reported accident, whether the claim falls under your deductible of not, may cause you to pay somewhat higher rates because adjusters now consider you more of a risk to insure.

Finding the Right Auto Coverage

Now you can see that basic auto insurance is not so simple.

If you are uncertain about what types of coverage are best for you, speak with an experienced insurance agent at John B. Wright Insurance.

We will help you weigh the pros and cons so you can find the perfect option for your unique circumstances.