Auto Insurance

How Auto Insurance Works

Small numbers. Big numbers. Acronyms. Lingo.  At a glance an auto insurance quote could make anyone cringe. But don’t beat yourself up! We’re here to help you make sense of it all. Here’s a very basic breakdown of the major components of an auto insurance policy — and what they cover.

Liability insurance: This is the cornerstone of auto insurance policies, given it’s the type of coverage required by nearly every state. Liability insurance actually falls into two buckets. Bodily Injury (BI) covers the cost of any injuries (or death) that result from an accident you caused, while Property Damage (PD) covers the damage made to another vehicle or piece of property your car crashes into.

Uninsured/underinsured motorist insurance: Typically covers you or your passengers if you’re hit by a driver that doesn’t have insurance or has very limited insurance. This covers both bodily injuries (not unlike Med Pay or PIP above but generally provides a much higher coverage amount) and property damage.

Medical expenses or Personal Injury Protection (PIP): These policies typically cover any injuries incurred by you or your passengers regardless of fault.

Collision coverage: Covers any damage to your car incurred in an accident. Typically covers damages sustained by you in a hit and run incident.

Comprehensive coverage: Covers any damage incurred outside of a collision. So think theft, vandalism or falling skies. Collisions with animals typically fall under this category.

How to Read a Car Insurance Quote

Now let’s make sense of what you’re seeing on your quote. Let’s start at the begging with Liability Insurance. The quoted liability limits will in appear one of two ways:

  1. 100/300/100
  2. 500 CSL

Thankfully neither is a mathematical equation. It is actually breaking down the total dollar amount (in thousands) of your liability coverage. Let’s look at example “A”. The first number represents your bodily injury coverage per person. The second number represents your bodily injury coverage per accident and the third number represents your property damage coverage.

So, if you were looking at the digits above, you’d be buying a policy with: $100,000 per person in bodily injury, $300,000 per accident in bodily injury and $100,000 in property damage.

In example “B”, CSL stands for Combined Single Limit and it actually means exactly what it says. You would have a total of $500,000 to pay for all damages you caused in an accident regardless of how many people were injured or what ratio of the damages were bodily injury vs property damage.

The Uninsured/underinsured motorist coverage limits would likely appear in a similar fashion differentiating between your per person and per accident limits (it will not list a separate property limit because the bodily injury and property limits are combined).

It’s important to note that Comprehensive and Collision coverage will have a deductible. A deductible is simply the amount of money that the policyholder will pay for any damages to their own vehicle before the insurance company starts paying. The higher the deductible the lower the premium and vice versa.

One note on price: Not all insurers will quote based on what you’ll pay each month. Some might list the annual or even semi-annual cost of a policy. Prices vary widely enough where it’s easy to get confused on the actual price. That way, you know what insurer is truly offering the best price.

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