PBC Insurance Basics: Auto Insurance
Given the sheer number of cars on the road - and the distractions drivers deal with every day - the chances of using your auto policy (making a claim) are higher than ever.
You are, quite literally, at risk every time you get in your car.
It's important to understand what your coverage options are, for you, your vehicle, and the people who may be injured due to negligence.
Know Your Limits, and the Importance of Liability Coverage
People commonly don't understand why they need liability coverage in the first place. The reason is simple: it protects other people from your negligence. Yes, even you are at risk of being negligent on the road.
Liability pays for the damage you do to someone else in an auto accident. It pays for both vehicles involved, and any personal injuries in the accident (a combination which can rapidly add up). Vehicles are more expensive, and more technologically complex, than they have ever been. When you consider the cost of luxury vehicles, and especially the cost of hospitalization, a common auto accident could end up costing in the tens to hundreds of thousands of dollars.
Important Auto Insurance Coverages
When you review your policy details, you may see certain coverages and wonder exactly what they are and why they're on your policy.
Let us clarify a few of the more important ones for you:
Collision Coverage — this is the part of your policy that covers your car in the event you somehow damage the car itself because of an accident with a fixed or moving object, such as another car, a curb, a house, a guard rail, etc.
Comprehensive Coverage —this coverage also protects your car, but the coverage is specific to events where something that is not a fixed or moving object damages your car; for example, theft, a rock that cracks your windshield while you're driving on the highway, an animal that you struck while driving, and so on.
Property Damage — suppose you damage someone's car in an accident, or you damage a guard rail, house, or some other property that belongs to someone else. This is the part of your policy that compensates the other person for that damage.
Bodily Injury Liability — this coverage protects your financial interest in the event you injure another party in an accident. This is the part of your policy that pays that other party for their medical bills and related expenses. Due to the high cost of medical care, it's dangerous to carry liability limits that are too low. This is something we can help you decide on.
Uninsured & Under-insured Liability — this coverage pays you if you are injured by another party and that other party was either unidentified or they weren't carrying a high enough limit of Bodily Injury Liability to cover your expenses. This is also a very important part of your auto policy because you have zero control over how much insurance other people are driving around with.
Common Auto Insurance Rating Variables
Age — insurance companies use your age in their overall rating algorithms. Drivers who are under 25 and those over 65 typically don't get preferred rates because statistics show that those two age demographics have the highest loss frequency and are, therefore, more at risk for financial loss due to an auto accident.
Credit — credit is a metric that has been used in insurance scoring for many years. The better your credit, the more favorable your rates will usually be.
Car — the type of car, engine size, safety features, etc. are all part of determining the rate.
Driving History — your driving record and loss history plays a substantial role in the price. If you have a spotty driving history or multiple moving violations or accidents, chances are you won't get a preferred rate until those things are at least 3 years old.
Household — insurance companies underwrite at the household level, meaning they try to judge based on the entire household, what the probability of loss will be. If there are multiple drivers in the house who are under the age of 25, this will impact everyone's pricing in the household.
If you have questions about your existing policy, or would like to review your coverage, please contact one of our expert agents here at PBC Insurance.