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How Car Insurance Works

2015-09-28 11:06:33

It helps to start at the beginning. When you buy car insurance, you are buying what is called a policy. Your policy is a combination of factors like…what kind of car you drive and what limits of coverage you want. This bundle of coverages helps protect you and what you accidently do to others. Because let’s be real, stuff happens.

Sections of Coverage

  • Liability - This coverage pays for accidental bodily injury and property damages you cause to others without a deductible. Injury damages include medical expenses, pain and suffering and lost wages. Property damage includes damages to property and automobiles. This coverage also pays defense and court costs. Each state has a required minimum amount but I recommend getting limits to protect your assets and future wealth. Look at $500,000 limits.
  • PIP - Personal Injury Protection (PIP) is required in ND and MN. This coverage pays medical expenses for the insured driver, regardless of fault, for treatment due to an auto accident. North Dakota and Minnesota have enacted auto accident laws permitting auto accident victims to collect directly from their own insurance companies for medical and hospital expenses regardless of who was at fault in the accident. If your injuries cross a certain point you can sue the party at fault to pay the additional expenses.
  • Uninsured Motorist - Pays your injuries when an auto accident is caused by a driver who doesn't have liability insurance.
  • Underinsured Motorist - Pays your injuries when an auto accident is caused by someone who doesn’t have enough liability insurance.
  • Collision - This coverage pays for damages to your vehicle minus the deductible caused by collision with another vehicle or object.
  • Comprehensive - This coverage pays for loss or damage to any vehicle insured on your policy minus the deductible that doesn't occur in an auto accident. The types of damages include loss caused by fire, wind, hail, flood, vandalism or theft.
  • Rental Reimbursement - This type of optional coverage will pay for a rental car while in the body shop if your car is damaged due to an auto accident. There is usually a daily allowance for a rental car. I recommend getting at least $30-$40 a day so you’re not stuck with a Geo Metro.

Find an agent you trust and have a discussion about your driving habits and lifestyle. The more questions they ask the better advice you are going to get. It's good to keep in mind that, just because your state has a minimum amount doesn’t mean it is a good idea; extra coverage is always worth the expense. After all, no one wants to be stuck with thousands of dollars’ worth of bills because of an accident.

We’ve reach the point where the liability options available for an auto policy are not high enough. When you add up the assets you own (home, cars, toys, retirement) or assets you will have as your career grows, a bad accident can take it all away. I recommend getting a separate policy to give another layer of protection. Read my article on Umbrella Policies to give you the peace of mind going forward.

Have questions? Insurance can be really complex. Don’t do it alone. Call Becky, Denise or Jessica at 701-237-6414 for help. You can also email me at jebeling@warnerandcompany.com.