All those terms … liability coverage, comprehensive, collision, uninsured coverage … oh my! What does it all mean and what do you really need? Let’s break it down.
First let’s start with some basic terms:
- Premiums – that is the amount you pay to the insurance company for coverage. The premiums vary depending on your driving history, the make and age of your car, your age, where you live, your claims history, your deductible level, and type of coverage.
- Deductible – that’s the portion of the damages you’ll have to pay out-of-pocket before the insurance company pays. Let’s say you get in a wreck and have $3,000 worth of damage to your car. Your deductible is $900. You will have to pay $900 towards the repairs and the insurance company pays the remaining $2,100. Note: the deductible amount is per claim. If you had another fender bender a few months later, you would still be responsible for the deductible amount again … not like health insurance.
- Liability Coverage – this type of coverage doesn’t protect you or your car, but does protect you when an accident is your fault. Liability coverage encompasses bodily injuries and property damage or loss caused to other people. Liability coverage is legally required in Texas and requires Texas drivers to have minimum insurance coverages of $30,000 per injured person, up to at least $60,000 per accident. Additionally, Texas drivers must have coverage for property damage of at least $25,000. This type of policy is called the 30/60/25 coverage and is the very minimum. There are no guarantees that it will address all the costs of recovery and repairs in the event of an accident. And remember, this only covers the damage your car causes, but it does not cover you, your car repair or replacement.
- Collision Coverage – this pays for the damage to your car that is caused by another vehicle, an object or rollover. This coverage would include a deductible amount. Let’s say another driver rear ends you and causes $5,000 in damage to your car. Your deductible is $500. Collision coverage will pay $4,500 to repair your car.
- Comprehensive Coverage – this pays for damages that are caused by other hazards like theft, hail, wind, water, fire, or even an animal. This coverage would also include a deductible to cover repairing or replacing your vehicle.
- Exclusions – these are items that may be specifically denied coverage under the terms of the policy. Most insurers exclude coverage for normal wear and tear, drag racing, and any intentional acts.
- Medical Payments Coverage (MedPay) – this is part of any standard auto insurance policy that provides coverage of medical expenses and funeral bills incurred by you and your passengers in the event of an accident, and regardless of who is at fault.
- Uninsured (UM) and Underinsured (UIM) Motorist – covers you if an accident is caused by another driver who is uninsured or underinsured (not enough coverage to cover damages). If you have collision coverage, you really don’t need this coverage.
- Guaranteed Auto Protection (GAP) – with the cost of new vehicles and the length of auto loans increasing this type of insurance may be for you. Let’s say you purchase your dream car and a few months later the car is totaled in a freak weather accident … you are totally unharmed, but your car is not. You file your claim and find that the insurance company is only going to pay the actual market value and not what you just paid for the car a few months ago nor what you still owe. Depreciation on a new car can be as much as 25% as soon as you drive a new car off the lot. Yikes! That’s gonna hurt. That’s when GAP insurance comes in handy. This would cover the market value of the car and will pay off the remainder of your car loan.
Premium Coverage
As with all types of insurance, there are the nice bells and whistles to Auto Insurance, too. These can include:
- Glass coverage pays to replace your windshield.
- Towing and labor coverage pays to tow your car if it can’t be driven. It also pays for labor to change a flat tire or jump-start your battery.
- Rental reimbursement coverage pays for you to rent a car if yours is stolen or being repaired after an accident. Some policies also pay for taxis or ride-hailing services.
So, what do I do with all this information …
First, talked to an experienced independent agent. At Bennie Camp Insurance, we have been insuring Texas drivers for 45 years. We can help walk you through all the options. We work for you, not the insurance company. We can shop the top insurers to find the policy that’s right for you.
Second, decide on your deductible amount. The higher the deductible amount results in lower premiums. You need to determine what you can afford. If you don’t have $1,000 saved up in an emergency fund, then don’t bankrupt yourself when the unthinkable occurs. Find a deductible amount that fits your budget.
Third, always consider the higher limits of coverage. When the unthinkable happens it could cost you everything. With the rising cost of vehicles, lawsuits, medical expenses, and more, a single accident could wipe you out.
Let’s revisit Liability coverage
Liability limits are usually shown as three numbers, referring to the most your insurer will pay for an accident you cause. A common policy structure has 100/300/50 liability limits, which covers up to:
- $100,000 for injuries per person.
- $300,000 for injuries total, per accident.
- $50,000 for property damage per accident.
Generally, you want your maximum coverage amounts to equal your net worth. To determine your net worth, you add up your assets (home, cars, savings, and investments), then subtract your debt. Let’s say you determine your net worth is $250,000. You might consider a policy that is 100/250/100:
- $100,000 for injuries per person.
- $250,000 for injuries total, per accident.
- $100,000 for property damage per accident.
The second number is for injuries total per accident and this where you want to make sure you have enough coverage. Property damage tends to cost less in an accident.
We are here to help you find the right policy. Give us a call or complete the form below. We will be happy to walk you through your options to find you the coverage you need at a price you can afford.