Car Insurance For Basic Bitches
“But I have full coverage!”
“What do you mean I have to pay my deductible?”
“What do I have insurance for then??!”
I get these questions a lot… I’m super fun at parties.
I work in the insurance industry, so it isn’t that weird. Car insurance is one of those things that most of us have, but few understand. I want to help you understand more of what you’re paying for out of legal obligation.
Alright kids, tie up your bibs, we’re going to learn about car insurance today.
This is going to be a basic overview, so let’s begin by defining common terms.
Insurance: Is the agreement between the company and the policyholder (that’s you, who bought insurance). You agree to pay a premium, report incidents timely, and not commit fraud, and the company agrees to indemnify your property.
Indemnify: Means to “make whole.” It’s to return your property to its original state, or the state before the incident. All states vary on coverages you need to have, but all states (except New Hampshire for some weird fucking reason) require some amount of car insurance to drive legally. When you buy an auto insurance policy you’ll get a declarations page.
Declarations Page: A document with explanations of your coverages on it.
Types of Insurance: There are two basic types of insurance on your policy: 1st party and 3rd party. This part is easy!
First party: You and your stuff.
Third party: Other people and their stuff.
Property Damage Liability: This is for when you, a listed driver on your policy, or someone you let drive your vehicle, damages someone’s thing. Usually this means a car, but can be a fence, a house, a pole, or any other object considered property.
Bodily Injury Liability: Self explanatory, bodily injury is basically the legal and medical liability if you hurt someone.
These coverages are considered liability insurance. Most states require this at minimum. On your declarations page you will generally see one or two monetary amounts. Those are your liability limits. This is the maximum your insurance will pay out. Yes, that means that if there are costs above that, you could be held personally liable for them.
The first number is what your insurance will pay per person/thing. The second number is what your insurance will pay per incident.
Case Study Time
Let’s say you get into a car accident. It happens, it’s okay. You didn’t realize traffic had slowed, and you rear end the car in front of you. Bummer. The car had 5 people in it. Super bummer. It was Brenda’s Chevrolet. The driver, front passenger, and one rear passenger have some minor injuries that require some continuing treatment. Super super bummer.
Your liability coverage looks like this:
Property Damage: $25,000
Bodily Injury: $50,000/100,000
Let’s say you did $6,000 worth of damage to Brenda’s Chevrolet. Brenda had a rental car while her vehicle was being repaired costing about $900. You’re good here, that’s under your property damage limit.
Now the bodily injuries. Brenda and two of her passengers were hurt and required an ER visit and a doctor visit. Brenda and her front passenger required physical therapy and they had lost wages from being out of work. They both need about $15,000 each. You’re good! Up to 50k per person. The third passenger is mostly fine so their expenses are only about $3,000 (woo! The US health system is functioning totally fine, it’s fine.) That’s well under your per person limit, and your total exposure is a little over 30k.
You’re still good because the max would be 100k for the whole incident.
Now imagine if all the inhabitants were injured, severely. It gets a bit more scary.
Pretty much every policy is going to have some amount of the above coverage. Most states will require this. Liability isn’t the only type of coverage you can get, though.
You can have collision coverage which available for when your vehicle is in a collision with another car or object, or your vehicle is rolled over.
Comprehensive coverage is for repairs to your car resulting from non-car damage like weather, vandalism, theft, or an animal (don’t let bears in your car, kids).
These coverages will have a deductible. That’s the amount you would have to shell out for the repairs and your insurance will pay the rest of the bill. Higher deductible, lower premium, vice versa.
You should carefully examine these parts of your policy. These ones are usually optional unless you lease or have a lienholder on your car, so you may not automatically have them. The amount of people that are shocked to learn that they have to pay out of pocket for their repairs when they get into an accident is too many. KNOW YOUR COVERAGES.
There are other types of insurance like Personal Injury Protection, which is for if you or any of your passengers incur medical expenses from an accident. PIP, as we’ll call it, will also cover you if you’re injured as a pedestrian, or you lock your kid’s hand in the door. I didn’t say on purpose, relax.
In some states (like New York and New Jersey) you have to use this part of your coverage regardless of fault. That’s what is really meant by “No-Fault state.” Some states don’t require this part (though I’d recommend it) and some states use Medical payments which functions largely the same.
*DISCLAIMER: I don’t work with no-fault or medical claims often so my knowledge ends right about here.
So let’s take the original example where you rear ended Brenda. Your car took some damage too. Your first party coverage looks a bit like this:
Collision $500
Comprehensive $500
PIP/Med Pay $5,000/each
Tow/ERS full
Rental Reimbursement 30/900
So to fix your vehicle it’s going to cost $3,450. Yikes. Your collision will cover this. You would pay the first $500 and your insurance will pay $2950. Phew. It will take about 7 days to fix and you need a car to get to work. You can rent a car for up to $30 a day for the reasonable repair time for the car up to $900 and no more than 30 days. You find one for $25 a day for 7 days so you’re good there. You had your car towed at no out-of-pocket cost (or were reimbursed) and your hospital visit was covered in full.
I threw another policy term on there for you: Rental reimbursement. RR is for when your vehicle needs to be repaired from a covered loss. As in if it’s not from something your insurance would not cover, like wear and tear, this would not apply. Also remember this is another optional coverage.
Long story short: Take the time to fully understand your insurance. Know what is optional and what is mandatory. Study your declarations page so you know what you are paying for and aren’t thrown off guard if/when something happens!
Insurance is peace of mind. If you are liable for someone’s damage or injuries, your insurance will help you pay for that, including the legal fees if you are sued or served. Keep in mind an insurance company will not cover you for things you don’t have the coverage for. You also could be denied coverage if you do something on purpose, so you can be held liable for those things personally. These are just things to keep in mind.
*Use Referral Code: 224550