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Auto Insurance Explained

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Most individuals who drive a vehicle have that vehicle insured (or should). In many states (including Illinois) auto insurance is mandatory. However, mandatory does not mean adequate. Even the phrase “full coverage” does not indicate adequate coverage for a person or family. The following is a breakdown of what coverages are generally provided on an auto policy, and some ideas regarding the amount those coverages should be.

A. This coverage is for you or a permitted driver of your vehicle that provides liability coverage in the event you are liable for bodily injury from an auto accident. This coverage provides bodily injury protection on a per person and per accident basis. There’s also coverage for property damage. Coverages are stated in thousands of dollars. For example, 250/500/100 means $250,000 of bodily injury protection per person, $500,000 total per accident, and $100,000 property damage coverage. Coverage amounts can be higher (or lower), but 250/500/100 is the minimum one should have.

B. Medical Payments. This coverage is provided to you and occupants of your vehicle for injuries sustained or for you if you’re struck by a vehicle while as a pedestrian (e.g. walking in a crosswalk and hit by a car). Coverage is usually from $1,000 to $5,000 per person, per occurrence.

C. Uninsured/Under-Insured Motorist. This coverage provides you and occupants of your vehicle coverage in the event another party is liable for your injuries and doesn’t have enough of their own insurance coverage (liability) to cover your injuries or they don’t have any insurance at all. Generally, these amounts are going to be identical to Coverage A amounts on your policy.

D. Coverage for Damage to Your Vehicle (Comprehensive and Collision). This coverage is what most people think of when they hear “full coverage”. Full coverage meaning there’s the required liability protection (Coverage A) along with the optional Coverage D (comp and collision). Let’s break comp and collision down further.

a. Comprehensive (or sometimes called Other Than Collision) is coverage for damage to your vehicle arising from theft, vandalism, colliding with a bird, deer, or other animal, glass damage, fire, hail. Generally, there a deductible involved (your sharing in the loss). After the deductible is met, then insurance pays the remainder for damages. Generally, the higher the deductible, the lower the premium. In many cases, damage from comprehensive losses are not considered at-fault (they won’t increase your premiums).

b. Collision is coverage for damage to your vehicle arising from hitting another car, running off the road, hitting a tree, driving into a lake. Like comprehensive, there will be a deductible involved after which the insurance company will pay for the damages. Unlike comprehensive, in most cases a collision claim will result in an at-fault accident that will likely raise your premiums.

c. For both comp and collision consider the age of the vehicle and the age of the driver. If the vehicle is older (10+ years) consider dropping these coverages and carrying liability only. If you have a young (teen) driver, consider rating he or she on a vehicle with liability only. Naturally, you may not have the choice if you have a lien on the vehicle. In that case, the lender may require comp and collision with specific deductibles.

Here are some other aspects of auto insurance that are good to know. In most cases, your coverage will extend to rental vehicles (check with your carrier to be sure). This means many individuals can skip the extra insurance pitched to them when renting a car while on business or vacation.

Insurance follows the vehicle. This means that if you borrow someone’s car or they borrow yours and there’s an accident, the insurance used first is the insurance that on the vehicle involved in the accident, regardless of driver.

Additionally, most policies will not provide coverage outside of the US. Some exceptions are Canada and within a certain distance inside the border of Mexico. Again, check with your specific carrier.

Finally, many carriers will specifically exclude coverage for auto racing, driving a vehicle without permission, business use, being an Uber or taxi driver, or regular use of a vehicle by a driver not underwritten on the policy.

As always, if you have any questions about auto insurance (or other insurance) feel free to contact us. Even though we don’t “sell” insurance, our office is licensed in insurance to give you the advice you need.

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