Auto Insurance 101 - Understanding Auto Insurance Coverages

Everyone needs to carry auto insurance, it is the law.  But many of us are not sure what coverages we should have.  If you use a loan to purchase a vehicle you are required to carry full coverage until the loan is satisfied.  Once the loan is satisfied you can drop your coverages if you choose.  What should you keep and what should you get rid of?  Below you will find a brief explanation of coverages offered by auto insurance companies.

1.  Bodily Injury Liability Coverage pays for other people's injuries or death resulting from an at fault accident involving an insured vehicle or driver. This may include medical treatment, lost wages, and compensation for pain and suffering. This coverage also includes payments for certain legal fees, bail bonds, and court costs you may incur.
2. Property Damage Liability Coverage pays for damage to other people's property such as; vehicles, shrubs, signs, or buildings, resulting from an at-fault accident involving an insured vehicle or driver.
3. First Party Benefits will provide the named insured, any resident relative who sustains bodily injury from a motor vehicle accident, or anyone who is a quest or passenger in the insured automobile, or is a pedestrian who is struck by the insured auto in the state of Pennsylvania with the following benefits for accidents covered under your policy; medical expenses, income loss, funeral, and accidental death. *For coverages 1-3, you may want to consider carrying a sufficient limit of insurance. In the event of a serious accident the costs can become substantial. Your personal assets and earnings could be at risk, so you should choose a coverage limit that will adequately protect your assets.*
4. Extra Ordinary Medical Benefits Coverage pays medical, dental, hospital, and funeral expenses for you, household relatives, and guest passengers injured in a motor vehicle accident. Also protects you and household relatives if injured while in other vehicles or if injured when struck as a pedestrian. Payments under this coverage plan begin only when covered medical expenses exceeds $100,000, and are capped at the lifetime limit of $1,000,000. *In choosing whether to carry this coverage, you may want to consider your ability to meet your medical expenses and other financial obligations if you were to be injured in an automobile accident.*
5. Uninsured Motorist pays you, your household relatives, and passengers in your insured motor vehicle for damages resulting from bodily injury or death arising out of accidents caused by uninsured motorists.
6. Underinsured Motorist Coverages pays you, your household relatives, and passengers ni your insured motor vehicle for damages resulting from bodily injury or death arising out of accidents caused by motorist whose liability limits are not sufficient to cover you claim.

• For coverages 5 & 6 there are two limits of coverage. The first is the maximum amount payed for injury or death of any one person. The second is the maximum amount payed, regardless of the number of people involved, for injury or death stemming from a single occurrence.
• You may choose between stacked or unstacked limits with these coverages, but you can not carry both. At a reduced rate the unstacked type will pay up to the limits of coverage which apply to one vehicle for any single injury occurrence. With the stacked type the limits for all vehicles on the policy may be combined for any single injury occurrence.

Comprehensive Coverage pays for loss or damage to your vehicle caused by fire,theft, vandalism, hail, windstorm, riot, falling objects, flood, collision with an animal, and other events that may be stated within your policy contract.

Collision Coverage pays for accidental damage to your insured vehicle caused by a collision with another vehicle or a stationary object.  It does not pay for incidents covered under comprehensive.  Collision will also pay for reasonable repair, towing, and storage costs.  If repairing your vehicle is not reasonable, this coverage pays you the actual cash value of the vehicle.

*Both Collision and Comprehensive claims are subject to a deductible.  You should choose a deductible that meets your financial needs. 

*These are optional coverages so you may want to consider whether the present value of your vehicle justifies the cost of these coverages.

 Last year I was driving home from Walmart which is about fourteen miles from my home.  I was driving along a two-lane stretch of road watching the two cars in front of me when I seen a deer dart across the road in between the two cars just safely escaping being hit.  Instinct told me to slow down because deer generally travel in pairs, at least in my mind anyway.  I was now traveling under forty miles per hour.  In a split second I seen the second deer begin to dart across the road directly in front of my van.  I instantly slammed on the brakes and hoped for the best.  BABOOM!!!!  Against my best efforts I struck the deer.  If I could have swerved around it I may have been able to avoid hitting the deer, but I did not have enough time to safely merge into the passing lane.

The moment I struck "my deer" with the passenger side front of my van the airbags deployed.  I was not hurt, but I began crying because I knew it was not exactly cheap to have the airbags reinstalled.  I place my van in park and turned on my four-ways so I could get out and quickly assess if the van was drivable.  I noticed the passenger side of the hood to be buckled slightly, the headlight on that side was smashed out, and the front fender was slightly bent.  The van was still running so I decided it would make it home.  I pulled over first though to pull myself together before driving.  I called home on my cell phone to let my fiance know what happened, and I also called my mom.  Another driver pulled in behind me right away and removed the deer from the road, before he got in his vehicle to leave he came up to my van to ask if I was OK.  He also offered to sit with me until I had calmed down.  I thanked him and told him I was fine and would be leaving in a few minutes.  He got back in his car but did not leave until I pulled out to make the remaining seven mile trip home.

My total damage was going to cost me a few grand, if not more, to fix my van.  It would need the airbags replaced, a new radiator, a new hood, a new headlight plus the headlight assembly, a new fender, and possibly a new brake line.  I called the insurance company for the hell of it and I am now glad I did!

Luckily for us we had comprehensive coverage on our vehicles.  So hitting the deer was covered.  The van, which was a 1998 Ford Windstar, was considered a total loss due to the fact that the cost to repair the airbags along with the other damage was not considered reasonable for a vehicle over ten years old.  It was towed to a scrapyard and was inspected by the insurance adjuster.  The van was inspected to determine the value of the vehicle at that time and to also confirm it was a total loss.

I was contacted by the adjuster with a detailed description of how the value was determined and what amount we would receive for the vehicle.  He told me they determine the value by taking similar vehicle sales amounts in my area to come up with an average price.  Then things like mileage and overall "pre-accident" condition are taken into account.  In my case the amount we could receive was $2900, minus our $500 deductible.  In a few days we received our insurance check for $2400.  We were happy with this amount because we had purchased the van two years prior for $3000.

We were able to purchase a used 2000 Dodge Grand Caravan with only having to pay a few hundred dollars out-of-pocket, compared to a few thousand dollars if we didn't have the comprehensive insurance coverage.