I was driving home Sunday night around 9 p.m. when I came upon a herd of deer in the road. It got me thinking how this time of year begins some especially perilous driving conditions. Sure, summer and spring have issues of their own but fall and winter bring deer, ice, snow and slippery roads. Last week we touched on the basics of homeowners insurance so I thought this would be a good time to do the basics of auto insurance. While auto insurance might be simpler to understand than homeowners, we still get questions from time to time that let us know not everyone gets it. And thats ok! That’s why you have a local agent! But maybe if someone were putting things out there that were foundational, you could follow along with what your agent is advising you to do a little bit more easily. Enter… me.
I don’t have a catchy song for you today because the auto policy doesn’t really have ABC’s. Auto insurance can really be broken down into three categories: liability coverage for damage I cause to others, physical damage coverage for my own vehicle, coverage for people riding in my vehicle. When you’re looking at your auto declarations page, the liability coverages are named:
Bodily Injury Liability Per Person
Bodily Injury Liability Each Accident
Property Damage Liability
Physical damage coverage would fall under names:
Other Than Collision (or Comprehensive)
Coverage for riders in your vehicle falls under:
Personal Injury Protection
Uninsured Motorist Bodily Injury Per Person
Uninsured Motorist Bodily Injury Per Accident
Underinsured Motorist Bodily Injury Per Person
Underinsured Motorist Bodily Injury Per Accident
You have probably had a phone call with your agent who starts throwing out industry lingo and asking if you think 100|300|100 is sufficient coverage and you’re like What|In|The|World|?? Before you have a panic attack, forgive your agent. When you do insurance all day er’day it’s hard to stop and talk in english. But we do recognize the need to take a walk in your shoes and explain ourselves. Starting with liability, when your agent says 100|300|100 they are referring to:
Bodily Injury Liability Per Person $100K
Bodily Injury Liability Each Accident $300K
Property Damage Liability $100K
Try it again but in sentence form. If I have the limits listed above and am involved in an auto accident where I am the at fault party ( I ran a stop sign and collided with another vehicle) then my insurance would pay bodily injury damages to the other party up to $100K per person but no more than $300K per accident. My insurance carrier would pay for property damage I am responsible for up to $100K. If the coverages listed above were the only coverages that were listed on my declarations page then my insurance carrier would not pay a dime toward bodily injury for people in my vehicle or property damage for my vehicle.
So now, let’s take this example one step further and add on what agents commonly refer to as “Full Coverage.” (Full coverage does not mean that you have coverage for your vehicle if aliens drop down from space, smear neon green paint-eating slime on your car, and then launch it threw the air till it crashes back into the earth (actually it could mean that. Check your policy, ha!) But the point that I am trying to get across is that just because your agent mentions or uses the term “full coverage” does not mean that you have coverage for literally anything and everything that could ever happen. More on that when we get into other coverages later on.) In the insurance industry we typically use this term to refer to adding coverage for your vehicle. So now, on my declarations page I’ve got 100|300|100 (Don’t gasp. you know what this means now, remember?) AND I have Collision with a $500 deductible listed and also Other Than Collision with a $500 Deductible listed. With these coverages added on, my insurance carrier would pay for repairs to my vehicle for any cost above my portion (the $500 Collision deductible).
One step further. The other party I did damage to is taken care of by my liability limits. My vehicle is taken care of because I purchased Comprehensive and Collision coverage. What about the people I had riding with me and their injuries? Kentucky is a No Fault State. On a Kentucky Auto Policy we have the option for Personal Injury Protection (A.K.A. PIP or No Fault Coverage). PIP operates the very much the same as Medical Payments listed above and really, takes the place of Medical Payments in Kentucky. PIP provides coverage for medical payments and some additional benefits to the people in your vehicle up to $10K per person. You have the option to purchase more if needed. The reason it is called No Fault is because your policy pays it regardless of whether or not you are at fault. The purpose of this is really to protect the insured by making sure you get taken care of in an emergency situation and that your medical bills do get paid. It then leaves the insurance carriers to deal with “who owes who” after the fact. An insured can technically waive their right to PIP when they purchase an auto policy; however, at Bradshaw & Weil, Inc. we do not advise our clients to do so.
Hopefully now you can see the different categories of coverage under an auto policy and how your insurance carrier would respond in an accident based on the coverage you have listed on your declarations page. In this example I did not mention Uninsured and Underinsured Bodily Injury. Really quickly: both of these cover bodily injury expenses for passengers in your vehicle when you are NOT the at fault party. So someone else ran the stop sign and hit your car but they don’t have insurance (uninsured bodily injury coverage) or they do not have enough insurance to cover your bodily injury expenses (underinsured).
Remember to comment and let me know if you have additional questions or a specific topic you want to hear about! Hope everyone has a Merry Christmas! I plan to enjoy it with my family in Alabama this year so I will probably take a week off from the blog! Merry Christmas and a prosperous New Year to you and your kin!