As any U.S. driver knows all too well, the need and requirement for automobile insurance goes hand in hand with vehicle ownership. In fact, most of us are not legally allowed to operate a vehicle without it. Insurance is a critical part of vehicle ownership and operation, and careful and thoughtful decision-making about automobile insurance is very important to our economic well-being. Auto insurance can provide protection if we encounter a mishap out on the road and can make the difference between solvency and financial ruin under adverse circumstances. As consumers, we are often faced with a dizzying array of automobile insurance coverages and companies offering them and navigating that morass of choices can be difficult. This post is offered as a quick guide to describe some of the most common types of coverage available to aid decision-making. For purposes of this post, we will divide coverage into two categories: insurance that protects others and insurance that protects you.
Insurance that Protects Others
Insurance that protects others in the event you injure someone or damage another’s property through the operation of your vehicle is called liability coverage. This coverage will typically pay for things like vehicle repair costs, medical bills, a rental car, and injuries for someone who is damaged by your negligent operation of a vehicle. This is the coverage that states require to operate a motor vehicle, and is most often the first, and sometimes only, layer of coverage that drivers purchase. Purchasing liability coverage is the responsible choice and provides a layer of protection for a damaged party and for you, as the at-fault driver in the form of insulating your personal assets from being at risk in a lawsuit (assuming you have purchased enough liability protection). But what if you are in a wreck that is not your fault? This is a critical question to consider when shopping for insurance.
Insurance that Protects You
Beyond liability coverage, there are several insurance products that can offer you protection if you are damaged by a negligent driver. Three of the most important are medical payments coverage, uninsured/underinsured motorist coverage, and gap coverage. Medical payments coverage provides you with money to cover medical bills and expenses if you’re injured in a car wreck. This coverage can be purchased in incremental amounts that typically start at $1,000, $5,000, $10,000 and continues upward from there. Medical payments coverage can be thought of as being similar to one’s health insurance. Uninsured/underinsured motorists coverage is perhaps the most important coverage of all when shopping for insurance products. Uninsured/underinsured motorists coverage provides you with money when the at-fault driver does not have any or does not have enough insurance to cover the damages the at-fault driver caused you in a wreck. The expenses and damages from a car wreck can add up very quickly and state liability insurance minimums are often not nearly enough to cover the totality of the damages an injured person will have in a moderate to severe car wreck. Uninsured/underinsured motorists coverage works to protect your personal assets just as much, if not more so, as liability coverage, by covering medical expenses and damages you would otherwise have to pay out-of-pocket if the driver who hit you does not carry enough liability insurance. Finally, gap insurance is a property coverage that can provide you with the money to make up the difference between the Blue Book value of your car and the amount you still owe on it if you have a loan (since motor vehicles are, by-and-large, depreciating assets that continually lose value through their ordinary operation).
In my experience handling insurance and auto collision cases, I have encountered countless situations where responsible drivers tell me they have “full coverage” only to be left highly disappointed, and highly stressed, to learn their and their insurance company’s definition of “full coverage” mean two different things. Unfortunately, oftentimes, this lesson is learned the hard way where someone is badly injured by a driver without sufficient liability insurance to fully cover the injured party’s damages only to discover they themselves have no or very limited uninsured/underinsured motorist coverage to pay for their damages. Although none of us ever want to think about the catastrophic potential that being in a car wreck carries, it is vital to our overall sense of well-being to recognize that potential and work closely with our insurance agents to make sure that we are covered -- not only for harm that we may cause others, but for harm that may be done to us by an uninsured or underinsured motorist. If you have any doubts or questions about the type or amount of auto insurance coverage you have, you should contact your insurance agent right away to discuss the coverages outlined in this post to ensure you do, in fact, have “full coverage.”