Auto insurance coverage is a complex subject to understand, especially how the price or premium is determined. To many consumers their auto insurance is one inclusive product instead of a package made of many parts. It is common for a misguided customer to possess the mistaken belief that their agent has sold them “complete” auto insurance coverage. Rather, a car insurance policy is composed of a variety of different auto insurance coverage types, each incurring a separate cost, which contributes to the overall price of the premium. Not all auto insurance quotes are going to be for the same levels of coverage.
Auto Insurance Coverage?
Auto insurance coverage can be broken out into the individual coverage which composes the car insurance policy. Each of the separate coverages has its own cost to the customer, who makes their selections along with accompanying deductibles and maximum policy limits. Certain terminology is widely used within the insurance industry, especially with regard to the policy. Fine tune your auto insurance quotes by determining what levels of coverage you need and then requesting auto insurance quotes from different insurance companies and agents.
There are certain types of auto insurance coverage that you are required to purchase by state law, and then there are optional coverage choices that you will need in order to be fully protected.
Types of auto insurance coverage include:
- Collision
- Comprehensive
- Property damage liability
- Bodily injury liability
- Uninsured / underinsured motorist
- Personal Injury Protection
Auto insurance quotes and rates are regulated at the state level, so there is a great deal of variability regarding the requirements from state to state. However, proof of auto insurance coverage is required in most states. For instance, there is a certification known as the SR22. The SR22, also called a Certificate of Financial Responsibility (CFR), is provided by your insurance carrier and filed with the state’s Department of Motor Vehicles.
What is Collision Insurance Coverage?
Collision coverage pays for damage to the insured’s vehicle when it hits, or is hit by, another vehicle or object. It pays regardless of fault, and it is an optional coverage unless a lender or lien holder requires it be carried. A deductible usually applies.
What is Comprehensive Auto Insurance Coverage?
Comprehensive Auto insurance coverage protects the insured’s vehicle from damage sustained as a result of something other than a collision. It also covers the car against theft, and is an optional coverage unless a lender or lien holder requires it to be carried. A deductible usually applies.
What is Property Damage Liability Coverage?
Property damage liability coverage pays for damage to someone else’s property when it is caused by the insured’s vehicle. It may be another vehicle or it may be a fence, planter or bicycle. This coverage will also pay for the insured’s legal defense in the event the policyholder is sued.
In at fault states, this coverage only pays when the insured driver was the at fault party. There is a mandatory minimum coverage amount required by law which varies by state. The policyholder chooses the coverage limit, which is essentially the most money that the policy would pay for property damage for any single accident.
What is Bodily Injury Liability Coverage?
Bodily injury liability coverage pays for injuries or death caused to another person for which the insured driver was responsible. This coverage does not pay for injuries that the insured driver or members of the insured’s household may have sustained. This coverage is typically denoted by two numbers: the first being the amount payable per individual; and the second being the amount payable per accident.
As with property damage liability, in at fault states, this coverage only pays when the insured driver is at fault. There is a mandatory minimum coverage amount required by law that varies from state to state. Again, the policyholder chooses the coverage limits, which is the maximum amount that the policy would pay for bodily injuries sustained as a result of a single accident.
What is Uninsured / Underinsured Motorist Coverage?
Uninsured / underinsured motorist coverage protects the insured driver and passengers from bodily injuries which are sustained as a result of an at fault accident by an uninsured or underinsured motorist, or a hit-and-run driver. As with bodily injury liability, there are coverage limits.
What is Personal Injury Protection Coverage (PIP Coverage)?
Personal injury protection coverage (PIP coverage) pays for injuries that the insured driver and passengers sustain as the result of an accident, regardless of fault. It will pay for necessary medical expenses as well as funeral expenses. There is a maximum coverage limit.
What Other Rate Factors Affect the Cost of Auto Insurance Coverage?
Auto insurance coverage varies from state to state, and from company to company. Statistics are used to calculate risk, which is the basis for determining the auto insurance coverage premium. Premiums are adjusted for a variety of rate factors, including but not limited to:
- The demographics of the policyholder, including age, education, and marital status.
- The driving history / record of the policyholder and listed drivers.
- The geographic area in which the customer resides.
- Types of vehicles owned, how far and often they are driven, and the purpose they are driven for.
- The policyholder’s credit history.
- The policyholder’s claim history.
Armed with a better understanding of how auto insurance quotes and premiums are determined, the customer is better equipped to choose the policy best suited to their individual needs. Whatever the final decision, ultimately it is all about the quality of the customer service being delivered.