Over 90% of the prospective clients I talk with have never had an explanation of what’s contained in a car insurance policy. In other words, they are paying for something without understanding what they’re paying for or why. Such was the case when I met with a mom and her adult son to review car insurance quotes I’d prepared for them. Below is an outline of what I presented and what may help you better understand what you have, don’t have, or could have.
Liability Coverage: This coverage, also referred to as Bodily Injury Property Damage (or BIPD), pays when you hit another car, person, or object and are at fault. The bodily injury portion is designed to cover medical bills for an injured person and the property damage is there to repair the other person’s vehicle or whatever you hit. This is the only coverage required on a Texas car insurance policy.
The limits may be expressed in one number or with three numbers. People with one number usually have combined single limit coverage ranging from $100,000 to $500,000. If your limits are expressed with three numbers, then you have split limits which can range from the Texas minimum of 30/60/25 all the way up to 500/500/100. Each number represents thousands with split limits.
Uninsured Motorists: Uninsured / under insured motorist may be referred to as UM / UIM BIPD is optional coverage to protect you when you’re hit by someone with no car insurance or not enough car insurance and it’s their fault. It can be used to cover medical expenses for you and anyone riding in the car with you, as well as to repair your car if it’s damaged. Coverage can be written as either combined single or split limits.
Medical Coverage: There are two types of optional medical coverage available, medical and Personal Injury Protection or PIP. Both provide medical care ranging from $2,500 to $10,000 or more. This is paid on a reimbursement basis. PIP, however, can also be used to cover lost wages or hiring someone to assist with activities you’re unable to do following a car insurance accident. It can also be used by a personal injury attorney in a lawsuit.
Deductibles: The two most recognizable deductibles are comprehensive and collision. Collision pays to repair your car after an accident and comprehensive covers hail damage, falling objects such as tree limbs, fire, flood, if it’s stolen, or you hit a deer or other animal.
For you to have either coverage you must have a deductible. If the deductible isn’t listed on your policy, then you do not have that coverage. All deductibles represent the amount of money you must first pay before the car insurance policy pays.
Roadside Assistance: This usually covers several services including towing, changing a flat tire, unlocking a car, or providing a gallon of gas if you’ve run out of fuel. It’s an inexpensive option and worth it when those kinds of experiences occur.
Rental Reimbursement: It’s hard to get to work or anywhere else when your car’s in the shop after an accident. This coverage is invaluable and lasts up to 30 days. For anything larger than a sub-compact, you’ll need at least $35 a day in any metropolitan area.
Options: Life is full of options and car insurance companies are constantly coming out with new ones. Some of the more common ones include accident forgiveness, new car replacement, GAP coverage, OEM parts, and more allowing you to tailor your policy to your specific needs.
The mom and her son appreciated the overview and asked good questions. Knowing what you’re buying and why enables the people I talk with to be informed consumers regardless of if they become a client. What questions do you have? Share them with me on Facebook, Google +, and LinkedIn pages. I’d love to hear from you!