What Coverages Should You Carry?

Jenny was having a bad day. A terrible day, really. How else would you describe a day where you were in an accident on the way home from work? 

And, now, Jenny is worried about what will happen:

• Will her insurance policy cover the accident? Will it repair her car?
• Will it pay for the stitches that the other driver had to get from the accident (though, Jenny is glad that it wasn’t worse)?
• How will Jenny get to work tomorrow?

So many questions.

Jenny isn’t alone in that confusion. Not by a long shot. Many people find auto insurance confusing, and, so, they have a hard time figuring out what coverage that they need.

But it doesn’t need to be that way.

See, what coverages that you need comes down to what you want the insurance company to pay for if something happens and, then, picking the coverages that you need for that.

And once you know what a coverage… well… covers, you’ll be able to decide for yourself which coverage that you need and which you don’t..

Let’s start with liability coverage. Most states require that you carry liability coverage (Bodily Injury Liability and Property Damage Liability coverage) to legally drive in that state. That’s to make sure that, if you hit someone, you (through your insurance policy) will be able to pay for the medical bills and car repairs of the person that you hit. 

(As a side note, you may want to carry higher coverage limits than your state requires so that you can make sure that you have enough coverage to pay for most situations. Also, if you have a leased vehicle, your leasing company (check with them) may require you to carry liability coverage with higher limits than the minimum coverages required by your state.) 

In the same way, some states require that you carry Personal Injury Protection coverage (sometimes called PIP and sometimes called “no-fault coverage” because it pays toward medical bills for anyone in your car no matter who was at-fault in the accident). If your state requires that coverage to drive in your state, then, you’ll need to carry it, too.

If your state doesn’t require PIP coverage, you may want to carry Medical Payments coverage (or some variation on that) if you want to make sure that people in your vehicle will have some (maybe all) medical bills covered if you are at-fault in an accident.

Uninsured Motorist coverage? Again, some states require these coverages, some don’t. These coverages pay out if someone hits you and doesn’t have insurance. In some states, these coverages will also pay if the other at-fault person in the accident doesn’t have enough insurance coverage. 

You’ll find the Uninsured Motorist coverage that pay out for medical bills is called Uninsured Motorist or Uninsured Motorist Bodily Injury coverage, and the one that pays out to repair your vehicle is, usually, called Uninsured Motorist Property Damage. In some states, Underinsured Motorist Bodily Injury and Underinsured Motorist Property Damage coverage are separate coverages from the Uninsured Motorist coverages offered in that state.

The rest of the coverages that we’ll talk about for your vehicle are not required by a state. 

If your vehicle is financed, though, two of the coverages we’ll talk about, now, are required by your finance company. Those coverages are Comprehensive and Collision coverage, and they pay out to repair your vehicle in different situations. 

Comprehensive coverage (sometimes called Other Than Collision coverage) pays to repair your vehicle if it is damaged in a situation other than a collision with something other than an animal (read on). So, if your vehicle is damaged by fire, vandalism (someone keys your car, for example), theft (your vehicle is stolen), flooding, hail, an animal jumping out in front of your car, etc., the repair of your vehicle would fall under Comprehensive coverage.

Collision coverage, on the other hand, pays to repair your vehicle if you hit someone else and the accident is your fault.

(If someone else hits you and they are at-fault in that accident, their liability coverage and/or your Uninsured Motorist (and/or Underinsured Motorist) Property Damage coverage is what would pay to repair your vehicle in most states.)

Both Comprehensive and Collision coverage have a deductible that you pick (often $250, $500, or $1,000, though, it may vary) that would be your part of the repair bill that you would pay out of pocket with the Comprehensive or Collision coverage paying for the rest, up to the market value of the vehicle.

And that last part is something to consider, too, when deciding what coverage to carry. In most insurance coverage, the most that the Comprehensive or Collision coverage will pay to repair your vehicle is up to the cost of just buying another of the same year, make, and model of that vehicle. So, if the cost to repair your car would be more than what it would cost to simply buy another of the same year, make, and model of vehicle, that’s when your car is considered a total loss. So, if your car wouldn’t cost much to replace, you need to decide if the cost of the Comprehensive and Collision coverage makes sense to pay instead of just saving up for another car.

Other coverages that you can carry on a vehicle may also include towing coverage, coverage for locksmiths (if you lock your keys in your car), rental coverage to provide a rental vehicle to you if your car is being repaired under a Comprehensive or Collision claim, and a type of insurance coverage which acts something like an extended warranty available on newer vehicles (different companies call this last coverage by different names).

So, going back to Jenny, because she was at-fault in the accident, her Bodily Injury Liability coverage paid for the other person’s medical bills. Her Property Damage Liability coverage is paying to repair the other person’s car. Her Collision coverage will pay for the front fender that she’ll need replaced on her car, along with the paint job. Jenny will just have to pay her $500 deductible, and her Collision coverage is taking care of the rest. And because Jenny chose to carry a rental coverage on her policy, her policy is providing a rental car while Jenny’s car is being repaired under the Collision coverage. No problem getting to work tomorrow.

All-in-all, it was a stressful situation, but it could have been a whole lot worse if the accident had been worse or if Jenny hadn’t had the coverages that she had chosen to carry.

And now that you know more about your coverage options, you may want to check to make sure that you are carrying the coverages that you need, too.

If you have questions about your coverage, simply contact us, and we’ll be glad to help.