Auto Insurance Basics

It's mandatory because it's important.  Auto insurance does a lot for you.
Auto accidents are very common.  If you cause one, you are responsible for paying for the damage and bodily injury that you cause.  The average amount of property damage in an accident is over $3,000 (and that's just the other guy's car).  The average amount of bodily injury when someone is hurt is over $15,000!

That's where auto insurance steps in.  The limits required by law will take care of those averages so you don't get stuck paying out of pocket.  The policy is a contract between you and an insurance company.  You agree to pay the premium and they agree to take all of that risk for you.  Good drivers are less likely to cause damage so their premium is less.  And drivers that have had a streak of bad luck tend to pay more.

It doesn't stop there...  With traditional insurance contracts, you can also purchase protection for the following:

  • Medical payments :: that takes care of your own injuries and medical expenses if you are hurt using your car.
  • Uninsured and Underinsured Motorist Bodily Injury :: this coverage pays for your injuries if someone hits you and doesn't have any or enough insurance.  Even though they are supposed to purchase coverage, one in seven drivers is uninsured-- even more than that purchase insufficient coverage.  At Kelly Insurance, we recommend always buying as much uninsured and underinsured motorist protection as you are allowed to buy.
  • Uninsured motorist property damage :: this pays for your car if an identifiable uninsured motorist hits you and does damage to your covered auto.
  • Comprehensive :: this is otherwise known as "other than collision" coverage.  It pays for damage to your car that is caused by something other than a collision (for instance, theft, hail, fire, etc).  Of course, there are some exclusions (like damage that you cause intentionally) but this is a great way to get your damages paid for when things out of your control happen...
  • Collision :: as the name implies, collision coverage pays for damage to your car if you hit something or someone else collides with you.  Yes, that even applies to utility poles and pot holes!  This is typically what you would consider an auto accident and tends to affect your rate unless it is well documented that it was someone else's fault (for instance, hit skip accident or accidents where the other person didn't have insurance).
  • Rental Reimbursement or Loss of Use Coverage :: having a car probably means that you count on it being there when you need it.  Usually after an accident, you've got to leave your car at a repair facility for a few days (or longer) so they can fix it.  Rental reimbursement coverage can pay for some or all of the cost to rent a replacement while it is out of service to you.
  • Towing or Roadside Assistance :: Almost every carrier can offer towing reimbursement or roadside assistance coverage on a car that has comprehensive and collision coverage.  Some can also offer coverage on liability only vehicles (ask your agent if you're interested!).  Towing coverage will pay you back for the labor costs that you experience at the side of the road and your cost to tow (certain limitations may apply).  Similarly, roadside assistance will pay the cost directly to the towing company so you don't have the temporary cost out of pocket.  Each method has certain pros and cons but both are extremely helpful when something goes wrong on the roads...
  • Glass enhancement :: Most carriers offer an enhancement for glass claims.  Whether it is a reduced deductible or a waived deductible, for a small additional cost, you can avoid most or all of the cost to replace a windshield.  Ask your agent if you're interested.
  • Loan/Lease Gap :: When you owe more than your car is worth, you should definitely consider loan or lease gap coverage.  There are often restrictions or exclusions that apply to how large the gap can be so be sure to ask or read the fine print.  There are usually exclusions on negative equity that was rolled from your last loan, too.  These are important considerations that are worth discussing with your agent.

Even if it was optional, here's why it would still be worth a buy...
Risk is everywhere!  Can you afford to pay $10,000 or more out of your pocket if you cause damage to someone else?  Thinking of that 'someone else', put yourself in their shoes.  Would you want to be struck by someone and then have to worry whether that person can afford to pay for the damage they caused you?  There are 27,000 auto accident every single day.  The statistics indicate that it will almost inevitably happen to you at some point and your small monthly premium expense can all but remove the concern for you.  It keeps you legal and it should give you a little added confidence that you won't lose your life savings over one, brief, moment of distraction that causes an accident.

Speaking of life savings, if you are rather secure financially, you actually have a bit of a target on your back.  Our society is rather litigious (people like to sue).  Generally speaking, settlements for even minor accidents can get quite expensive.  And major accidents can even exceed your entire net worth.  So take a moment, consider your entire net worth and then compare the amount of your insurance limits.  It adds up fast you should be buying at least as much liability protection as your net worth indicates (if not, more-- It's well worth it).

Agents are here to help...
At Kelly Insurance, we are independent agents.  That means we work for you to give sound financial advice.  While we are always conscientious of your budget, insuring your long term financial well-being is equally important.  Plus, we can share real-world examples of how insurance helps customers just like you.

While you're talking with us, here are some things to consider:

  • If there is damage to your car, how much would you be comfortable paying out of your own pocket?
  • If the numbers are all the same from company to company, which one will be the best to work with during a claim?
  • How important is it that the rate stays stable for you (even after an accident)?  Is it worth it to pay a little extra to protect your rate from surcharges?
  • Life is full of changes.  What changes do you foresee in the next 5 years?  Will you be buying a home?  Do you have children that will be driving soon?  Sometimes it is worth discussing these changes with your agent so you can choose a company now that will best adapt with you as those parameters change for you.

Yes, insurance offers a lot of complexities.  Here at Kelly Insurance, our goal is to work with you to navigate those complexities and manage your policy through changes in your home, changes in the insurance landscape, and even those curveballs that life tends to throw.