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What Does Auto Insurance Cover?
Auto Insurance is the most commonly purchase insurance product in the country with the exception of health insurance. Auto liability insurance is required by law for all vehicles on the road. Everytime any of us get behind the wheel, there is a very real risk that we may cause bodily injury or property damage to someone else. Likewise, someone else may cause it to you. Most people can not afford to replace someone else's vehicle with their own cash on hand, let alone medical bills, disability, and lost wages if the individual cannot return to work, or even a settlement from a fatality. So we all pay a little money to fund the inevitable chance that something very expensive happens to a small percentage of us.
-Liability to Others: Typically broken into three parts: Bodily Injury Per Person, Bodily Injury Per Occurrence, and Property Damage. This is the most common method, called "split limit". Example: Bodily injury $250,000 per person, $500,000 per occurrence, Property Damage $100,000. -expressed $250k/$500k/$100k.
There is a second method of insuring against liability to others called Combined Single Limit or CSL. This method does not stipulate seperate limits for the three categories above. You would have one single amount of money to pay for any combination of property damage or bodily injury. Example: $500,000 CSL.
CSL may appear advantageou at first, but it is really six one-way, and half-dozen the other. Let's take for example Driver 1 crashes his or her sedan into Driver B's luxury SUV valued at $100,000, the driver and four additional passengers are all injured. The driver sustains $300,000 worth of bodily injury and each of the four passengers suffers $50,000 inbodily injury. Under the split-limit coverage the driver would receive $250,000, and each passenger would receive their full $50,000. Total payout for bodily injury would be $450,000 plus $100,000 for property damage for a total of $550,000. There would be a $50,000 shortage that the driver would be able to pursue in court. Under the CSL method, the driver could receive the full $300,000, each passenger would receive their $50,000 which maxes out the $500,000 limit, the $100,000 car would be left uncovered, and again could be pursued in court. In this example, there is a greater amount left unpaid, but at least all bodily injury was able to be covered.
There is no right or wrong answer as to whether split-limit or CSL is better. The choice is yours based on your comfort level. The higher the limits you purchase the safe you will be financially, but the more expensive your premium. Most people do a balancing act between security and price, however, our philosopy is that you can never have enough liability insurance. Personal umbrella policies providing additional coverage of $1,000,000 or more can be purchased to increase liability limits if you already have the maximum limits auto insurance offers. Be sure to ask about these!
-Physical Damage to Your Auto (Full Coverage): Broken into two seperate parts:
1) "Comprehensive" or ("Other than Collision")
- Things that damage your car, but are not your fault (wind, hail, smoke, vandalism, theft, damage by animal)
- The "At-Fault" auto accident. Damage that occurs because your vehicle struck an object.
(Note: Not-At-Fault accidents that cause damage to your auto would be covered by the At-Fault part's liability insurance.)
-Rental Car Reimbursment: Provides coverage for the cost for you to rent a car, typically with an assigned dollar amount on a per-day basis ($30 per day up to $900) if your car is in the shop due to a COVERED loss. This does not provide money for you to rent a car for pleasure, however, your auto insurance typically covers the insurance on rental cars even for pleasure. If you wreck a rental car, your insurance will typically cover the rental car the same way your auto on the policy is covered, however, you would have to pay the per-day amount to rent the car yourself if it is for pleasure use.
-Roadside Assistance and/ or Towing and Labor:
Each of these typically cover the same things: towing, jump-start, lock-out, ditch-extracton, fuel delivery, and flat tires. The difference comes in with how it is paid for. Roadside assistance is the preferred option. You call a roadside assistance phone number, give them your location and disablement description and the insurance company will make a reservation for a service provider to come help; the insurance company pays the provider directly. Towing and Labor, however is a reimbursement. You call a local towing, or service company, and you submit your receipt to the insurance company after the fact. Most people would agree that roadside assistance is the more favorable coverage. Many times it does make sense to accept towing and labor over roadside assistance if your insurance company has a lower annual premium than another company who offers roadside assistance.