Many of the people we represent have issues with their auto insurance, and most are not aware of—even in a general way—the coverages that are included in a standard auto policy. Here’s a relatively quick primer on the subject:
DAMAGE TO YOUR CAR
There are two types of coverage that protect damage to your vehicle: “Collision Coverage” and “Comprehensive Coverage.” Collision coverage is for damage to your vehicle from an accident. Comprehensive coverage is a broader coverage that covers events other than a collision, such as if your car is stolen or vandalized, or a tree falls on it.
Medical bills add up fast and they are the single most troubling problem for people who have been in an accident. “Medical Pay Coverage” pays the medical bills for the driver and their passengers—without regard to who was at fault in an accident. It is protection that takes care of the bills relatively fast. The most common med pay coverage limit we see is $5,000 or $10,000. But in today’s medical world, if you or your family member has an accident, you’ll appreciate it you’ve gotten the higher med pay, like $25,000 of coverage.
YOU DO DAMAGE TO OTHERS
If you or somebody you have allowed to use your vehicle causes an accident, “Liability Coverage” is the protection that provides two valuable protections. First, it provides a defense. If you cause an accident and are sued, your auto coverage provides “free” legal counsel to you as part of the premiums you paid for. Secondly, liability coverage protects you up to the limits of coverage you have purchased. South Dakota law requires a minimum of $25,000 of liability coverage, but given medical bills today, that affords almost no protection for you and your family of drivers. The most common coverage limits we see today are more likely to be $250,000 or $300,000. It’s cheaper the more you buy.
In the next blog we will talk about additional protection that an umbrella policy provides.
THE PERSON WHO HURTS YOU OR YOUR FAMILY HAS NO INSURANCE, OR LITTLE INSURANCE
Your own insurance policy has a protection feature in case you and your family or passengers are injured by a party who has been so irresponsible that he or she has no insurance or has low insurance limits. Many drivers who injure people have no assets with which to pay for the damage they do. Insurance will afford the only protection. Unfortunately, these same people frequently have either no insurance or very low limits of insurance (bought cheap insurance). Your policy provides a protection. It is called “Uninsured and Underinsured Motorist Coverage.” BEWARE—an agent who offers you a “low premium good deal” will frequently do so by shaving off this type of valuable protection—a move you will likely come to regret.
Uninsured Motorist Coverage is also called “UM.” Your policy protects you and your passengers to the limits of the UM coverage, for any damage caused by the other driver—for which the other driver would be liable, but he or she has no insurance.
Underinsured Motorist Coverage is also called “UIM.” UIM applies when the person who hits you or your family member has low insurance limits. In that situation, your real limits for liability coverage become the higher of either their liability insurance coverage limit or your UIM insurance limit.
UM and UIM are sold as one-line item on the policy declaration sheet you see, and it is relatively inexpensive protection for you and your family.
Understanding the different coverages in your auto insurance before you need it is important. Review your policy to make sure you and your family have the protection you intended when you purchased auto insurance.