In this article I will like to give a quick breakdown of a typical auto insurance policy and the main coverage that most of us carry or will encounter. By understanding your policy you can be better equipped to compare policies based on equal coverage.
Most common coverage:
Collision coverage covers your car in case that you are involved in a collision. If you are liable or not you can use your collision coverage to cover your covered vehicle if involved in an accident. Anytime that you use your collision coverage you are subject a deductible, which is the amount that you self insure. Deductibles will be discussed a little further later on.
Comprehensive coverage covers your vehicle in the case that your car suffers damages as a result of a non collision. Comprehensive coverage include but not limited to theft, vandalism, fire, flood and animal impacts just to mention a few.
Rental coverage provides a rental vehicle or reimbursement to a rental vehicle while your vehicle is being repaired as a result of a covered loss, such as a collision or comprehensive loss.
Personal Injury Protection
Also known as PIP is not a coverage that is offered in every state but the states that offer PIP do so as medical coverage. PIP normally covers you and your family members listed on a policy for any auto accident related injuries.
Bodily Injury or BI protects you from any liability that you might incur as a result of an injury that you are liable for as a result of an accident. For example the medical bills of an injured party in another vehicle.
Liability coverage, protects you from any liability that you might incur as a result of property damage that you are liable for as a result of an accident. For example the damages caused to another vehicle.
Uninsured and Underinsured Motorist
Uninsured and Underinsured Motorist coverage protects you in case that you are involved in an accident with a party that is liable for the accident but either does not have insurance (uninsured) or does not have enough coverage to cover all your damages (underinsured).
Now these are just your most popular coverage and common, there are many other coverage that we could go into such as medical payments, replacement coverage, custom parts and equipment and such. But for the purpose of simplicity lets concentrate on the most common.
Your coverage would either have a deductible such as collision and comprehensive coverage or will have policy limits such as PIP, BI and Liability.
Deductible: the amount that you choose to self insure yourself, meaning if you use this coverage you will need to cover the deductible amount and then the insurance company will pay the balance after you cover the deductible.
Policy limits are usually set with two numbers for example BI 50/100 this means that in the case of an injury to another party your policy would cover you up to 50,000 for an individual or 100,000 for the accident in total. With that being said if you have a BI 50/100 policy and you cause 100,000 worth of injuries to an individual your policy would only cover 50,000 and you could be on the hook for the balance if it is your only insurance policy.
Looking at another example, let's say that you were liable for an accident where there were 3 cars damaged as a result of your liability and 2 injured. If you car was damaged and you have $500 deductible, you will be liable for the $500 deductible and your insurance will cover the balance to repair your car. If you have rental coverage it will cover you while your car is being repaired. (Rental coverage also has limits for example 30/900 would mean $30 a day or $900 max per incident.)
Then in the same example let's assume that the injuries were $50,000, $10,000 and $30,000, if you have the 50/100 policy that we discussed earlier your insurance would cover all the injuries as they are under your policy limits.
Most people assume that they have "full coverage" insurance and as you can see there is no such thing as "full coverage" insurance. Your policy is a combination of different coverage. If you understand your policy you will be able to not only make good comparisons but also be able to tailor your policy to save you money based on your actual policy needs.