Understanding Your Auto Insurance

Writing is a passionate hobby of mine but in my day job I am a licensed Property and Casualty Insurance Agent in the state of Tennessee.

We are required by law to have auto insurance if we want to drive. But what are we really buying? How do we know if we have enough coverage? Everyday I meet with people who do not understand their' auto insurance policies. What is covered, what is not or even how to file a claim.

In this article I hope to help you understand your auto insurance policy so that you will be able to walk into your' agents' office knowing how much coverage you need and what the different parts of your' policy mean.

A personal auto policy has three basic parts; A Declaration Page ( commonly referred to as a 'Dec sheet' ), a Policy Form and a Definitions Section.

The Declarations Page is the "who, what, when, where and how" page. This page states who is covered, what vehicle(s) is covered, when the coverage begins and ends, where the vehicle 'lives' (your address), and how much coverage applies to the vehicle(s).

This is your' "at a glance" page. When someone changes insurance companies, we often ask for a 'dec sheet' because we can see at a glance everything that we need to know (with the exception of your personal information) to start a new policy.

The second part of your' policy is the Policy Form. This is the part of the policy that confuses most people. The policy form is broken down into four separate coverages or parts.
Part A is Liability coverage
Part B is Medical Payments coverage
Part C is Uninsured Motorist coverage
Part D is Physical Damage coverage

Every policy is as unique as the person who buys it. Some policies include all four parts or coverages. Some have just parts A and B. Some just have Part A. It depends on how old your' car is, the coverages required by your' state or by your' Lien holder and your' budget.

Let's look at the different parts. Part A - Liability Coverage. If you are in an accident with another car - I want to be specific here because liability does NOT cover hitting an animal or a tree. If you hit another car and cause the other person bodily injury (B.I. on your' Dec sheet) or property damage (P.D. on your' Dec sheet) your' insurance company will pay damages up to the limits of your' policy.

Your' policy limits look like this on your' Dec sheet 25/50/15. This means that the policy will pay $25,000.00 per person for bodily injury. $50,000.00 per accident for bodily injury and $15,000.00 per accident for property damage.

25/50/15 are the minimum insurance requirements in most states. On a personal note, I will not write these low limits for my clients. Here is why; let's say that your' policy has 25/50/15. You are driving along and a dog runs out in front of you. You swerve to avoid the dog and end up crossing the yellow line and hit another car head on. The dog is fine but the other car is totaled and the driver is seriously injured.

The victims' medical bills cost $40,000.00 and a judgment is entered against you. Your' insurance is going to pay $25,000.00 per person for bodily injury. You are responsible for the remaining $15,000.00.

As for the victim's car, it was totaled, remember? It was worth $25,000.00 but your' insurance is only going to pay $15,000.00 for property damage. You are responsible for the remaining $10,000.00. So now you owe the victim $25,000.00. Can you pay it? Most people can't. Always buy as much coverage as you can afford. The more, the better for you if you are at fault in an accident.

Part B - Medical Payments Coverage. I include this coverage on all of my clients policies even if they only carry liability coverage. This does not cover injuries to those in the other vehicle. Your' liability coverage does that. Medical payments coverage covers medical expenses and funeral services that are a result of an accident within three years from the date of the accident. The medical payments coverage protects you and your' passengers regardless of who was at fault.

Here is an example; You hit another car. The people in that car were badly injured. You and your' best friend are in your' car and both of you are also badly injured. The medical payments coverage will cover the medical bills for you and your' friend up to your' policy limits.

If your' policy limit is $5,000.00 per person and your' friend's medical bills are $4,200.00, your' insurance company will pay $4,200.00. If your' medical bills are $7,500.00, your' insurance company will pay $5,000.00.

Part C - Uninsured Motorist Coverage. This part of your' policy is designed to protect you from bodily injury losses if you are hit by an uninsured motorist or by a hit and run driver. In some states you can also have property damage covered if you include it on your' policy with an endorsement.

Here is an example; You are driving to work and stop at a red light. The car behind you fails to stop and hits you. Your' air bag deploys, breaking your' wrist and causing whiplash. When the police arrive, you are told that the other driver has no insurance. This is what your' uninsured motorist coverage is for. It will pay your' medical bills up to your' policy limits. Like I said before, it also applies if you are in a hit and run accident and are injured.

Part D - Physical Damage. This means damage to your' car. It does not include damage to the personal property inside of your' car.
There are two types of coverage under Part D. They are Collision Coverage and Other than Collision Coverage (abbreviated to OTC).Collision Coverage is for when your' car collides with another car or an object such as a tree, building or telephone pole.
Other Than Collision Coverage pays for just about anything else that could damage your' car. Examples would be things like; the neighbors tree fell on your' car. Your' car is stolen and damaged. A windstorm threw the neighbors fence into your' car and dented it. Your' car catches fire.
There are hundreds of examples but basically, OTC coverage is for anything that you did not collide with that damages your' car.

Part D also covers your' transportation expenses should you need a rental car while your' car is being repaired or replaced. On your' policy you will see this written as 20/600 or 30/900, etc. This means that your' insurance company will pay $20.00 per day up to a maximum of $600.00 for your' rental car or $30.00 per day up to a maximum of $900.00 depending on the amount of coverage that you have.

The last section of your' policy is the Definitions Section. There are a lot of insurance terms used through out your' insurance policy. The definitions section is like a mini-dictionary or a glossary where you can look up the meaning of those insurance terms and understand them.

That is your' personal auto insurance policy. I hope that I have helped you to understand it so that you know, or at least have an idea of what you want when you are shopping for auto insurance.