Ah, yes. Personal auto insurance. This is probably the first thing most people think of when you mention insurance. It is required in order to be able to drive a vehicle on public roads. The coverages for auto insurance include both property and liability.
Comprehensive and Collision Coverage
Property insurance takes the form of comprehensive and collision. Comprehensive insurance covers damage to the vehicle (broadly speaking) when it is not moving. Think of broken or damaged windshields or side windows, or theft of a radio from the vehicle as comprehensive coverage.
Collision insurance (seems obvious) covers physical damage to the vehicle when it is moving (mostly.) The collision coverage is on an “actual cash value” basis, which means that it covers what the vehicle is worth at the time of the accident.
If the cost of repair is higher than the value of the vehicle, it will not get repaired. You will just get a check instead for the value of the vehicle. And by the way, you may not like the amount of the check. Some companies are more generous than others.
Gap coverage could be the exception
Gap coverage can cover the gap between the value of the vehicle and the amount you still owe on the loan, but basically, the vehicle value gets depreciated.
If you have a classic vehicle that is worth more than its residual value by virtue of its art value, you would have to get an appraisal prior to the incident. If the vehicle gets stolen or totalled, the appraised value will prevail. There are special insurance companies for classic vehicles, as this is where most of these situations reside.
You can drop comprehensive and collision coverage
There will be deductibles on both comprehensive and collision coverage, which can vary the premium that you pay. Also, and very importantly, this coverage is not required. If you want to self-insure the value of the vehicle (let’s say it is a very old one with little remaining value) you may choose not to cover that portion of the auto insurance.
Liability coverage is not optional in most states. The coverage is available from very low to pretty high. In California, you can get $15,000 all the way up to $500,000. The consideration is what you can afford to lose if you hurt someone else. It covers both bodily injury and property damage (someone else’s vehicle, or a lamppost, or possibly a fire hydrant.)
Let’s check an example: Someone was driving on the freeway when a pedestrian ran across the freeway. The driver hit him, and his leg had to be amputated. Loss of a leg would not be covered by $15,000 and possibly not even by $500,000, but more coverage is always better. You can get low down payment car insurance, but still be adequately insured, and not just the minimum coverage required by the state. I’m speaking mainly about California, where there are many attorneys waiting in line to file suit.
Uninsured motorist insurance
Uninsured motorist coverage protects the driver in case he is injured by another driver who is uninsured or underinsured. In “no-fault states” this is the main coverage. Each person’s own coverage protects him and there is no liability coverage requirement.
Other Coverages and Pitfalls
There are other coverages on auto policies: Medical coverage for incidental medical payments without a lawsuit being filed. Towing, car rental, deductible buyback, and such are all bells and whistles that can be added to a policy.
Let’s talk about Uber and Lyft
Are you driving for either of them? that’s what is called “livery service” in commercial parlance. Commercial premiums are very high for livery service because it is high risk. That undoubtedly means that your current insurance company won’t cover you as an operator. Either get Uber or Lyft to cover you or make sure your current insurance policy will cover you. Otherwise, there could be a very large claim at some point and you won’t have protection.
Motorcycle insurance is structured similarly to auto insurance. I would not skimp on liability coverage, as a motorcycle is a serious hunk of metal at speed and can hurt someone. Similarly, I would not skimp on uninsured motorist coverage nor medical coverage. One is pretty vulnerable on a motorcycle.
When buying a policy, if you will be driving another vehicle not insured by you from time to time, it is important to make sure your policy’s liability coverage goes with you and goes at full limits, no minimum limits. And see if your vehicle is covered for someone else driving your car on occasion. Many insurance carriers quote more competitive rates by not covering these conditions. Buyer beware.
There is a lot more to auto insurance than most people know when they buy. Have good questions to ask when buying. What exactly is specific to your particular situation? If you only go by price, you may have a rude surprise at some point. So, take the time to compare insurance quotes and find out what you are getting for your money.
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