What is Auto Insurance?

Auto Insurance – One of those things we all have but never really think about. What is it? How does it work? Is it even worth it? Let us break it down for you, without using all of that techno-babble.

At its base form, Auto Insurance works as a safeguard for your financial well-being in case of accidents, theft, or other auto incidents outside of your control. Depending on your level of coverage, your insurance company can help pay for repairs, medical expenses, and damage or injuries caused to others.

What it doesn’t do:

• Cover maintenance or general wear and tear that occurs throughout the course of owning and operating a vehicle.
• Offer coverage for those who may regularly drive your vehicle but are not listed on your policy.
• Driving for ridesharing platforms. Endorsements are available to add on coverages for those driving for Lyft/Uber or other delivery services.

What does Auto Insurance cover?

Getting into the weeds, an auto policy can be broken down into 5 main coverages. The limits may vary by state but standard coverages include: Liability, Comprehensive, Collision, Personal Injury Protection (PIP)/Medical Payments, and Uninsured/Underinsured Motorist Bodily Injury (UM/IUM) and Property Damage (UMPD).
Liability
Auto liability coverage is required in nearly every state. If you’re found at fault in an auto accident, liability coverage can pay for damage to other vehicles, damage to objects, bodily injuries to other drivers and their passengers, and lawsuits if you’re sued due to an accident. Comprehensive
Auto comprehensive coverage protects against anything that is not a collision – vandalism, falling trees, animals, theft, backing into a light pole in the grocery store parking lot, etc. Collision                                Auto collision coverage covers your vehicle if it collides with another vehicle.   Personal Injury Protection (PIP)/Medical Payments            Medical payments coverage is offered in most states, while personal injury protection is a broader coverage that’s available only in the states that require it to be offered. Michigan is a state that requires PIP coverage. Both cover medical bills if you or your passengers are injured in a car accident (regardless of fault).           Uninsured/Underinsured Motorist Bodily Injury (UM/UIM) and Property Damage (UMPD)                                 UM/UIM/UMPD can pay for vehicle damages and injuries cause to you and your passengers when you’re hit buy a driver with no insurance or not enough coverage.

Other Optional Coverages:

• Rental Car Reimbursement: Coverage that can pay for a rental car while your vehicle gets repaired or replaced after an accident.
• Roadside Assistance: Provides help if your vehicle is disabled on the road due to a flat tire, dead battery, or something else.
• Loan/Lease Payoff Coverage: Similar to “gap insurance,” loan/lease payoff coverage may cover the difference, up to certain limits, if you owe more of your vehicle than it’s worth and your car is totaled or stolen.

Frequently Asked Auto Insurance Questions

How much car insurance do I need?                    Every state has set minimum requirements for coverage, typically for liability, PIP, and UM/IUM which is a good place to start in determining the amount of coverage you need. If you have a car loan or lease, your lender will also typically have requirements for having “full coverage,” which includes comprehensive and collision coverage.

How is car insurance priced?                      Insurers consider many factors when determining your auto policy rate, including your age, driving history, location, and car make and model.

What is a car insurance premium?                     Your auto insurance premium is the amount of money you pay your car insurance company in exchange for coverage. You generally have the option to pay your premium monthly, quarterly, semi-annually, or all at once.

What is a deductible?                          Your auto deductible is the out-of-pocket expense you are responsible for before your insurer will cover your claim. For instance, you hit a deer that causes $5,000 worth of damage. You have a $500 comprehensive deductible. The insurance company would cover $4,500 and you would be responsible for the remaining $500.