Video Blog: Basics of an Auto Insurance Policy

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Transcription:

Slide 1:
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Hi! I'm Dan Lyles from Lyles Insurance. And in this video we're going to cover the basics of an auto insurance policy.
 
Slide 2:
 
There are five components to an auto insurance policy. And they are: Liability Coverage, Uninsured and Underinsured motorist coverage, Medical coverage, Comprehensive coverage, and Collision Coverage. And we're going to go over each one.
 
Slide 3:
 
The first component of your auto insurance policy is liability coverage. And that is required in every state. It covers you when you are at fault in an accident that causes injuries or property damage to others. So in other words it pays the other guy for damages you caused, whether it be injury or property damage. And when you see it on a policy it's going to be represented in numbers, for example 100/300/100. But to explain it. I'm going to break it down in parts A/B/C to help you understand it.
 
 
Slide 4:
 
 So, to understand the breakdown of liability coverage, let's use an example where you're at fault an accident with multiple people injured, and there's a little bit of property damage as well…. Part A is the amount in thousands that it will pay any one person for their injuries. Part B is the amount in thousands that will pay maximum in total for everyone's injuries. And Part C is the amount in thousands that will pay for property damage you caused.
 
Slide 5:
 
So as an example, let's take a common level of coverage that most people have, which is 100/300/100. Part A is the amount that it would pay for any one person's injuries. That would be $100,000 maximum. Part B would pay total injuries to multiple people, that would be up to a $300,000 maximum. Part C would pay up to $100,000 maximum for any property damage you caused.
 
Slide 6
 
Now, this is a lot less common than what I just showed you. But some people have what's called Combined Single Limits liability coverage. Which is basically the same thing only it doesn't separate the liability coverage into three different parts A, B and C. It just gives you one grand total for all of it. You don't see this very often, but you will see it, especially with policies that have high levels of liability coverage.
 
Slide 7:
 
The second major component is uninsured and underinsured motorist coverage. What that does is covers you in an accident if someone is at fault and hits you, and doesn't have liability coverage, or has liability coverage but doesn't carry enough to cover for all
the damages they caused. This happens a lot in severe accidents. It's very important not to overlook this because one in every six drivers are driving around without any auto insurance coverage. And of the ones that do have coverage, many of them have very low
levels of liability coverage. And one last thing to keep in mind is that you can only select this level of coverage as high as you selected your levels of liability coverage. So if you went skimpy on your liability coverage and only go with state minimum levels, that's as high as you're going to be able to take on yourself with uninsured or underinsured motorist coverage.
 
Slide 8:
 
The third major part is medical coverage. Now, different states call it different terms. Some states call it Medical Payments coverage. Some states call it Personal Injury Protection. And some states call it Medical Benefits Coverage. They all mean about the same thing and there's very little difference between them. But what they do is they cover you and your
passengers for injuries caused by an accident regardless of who is at fault.
 
Slide 9:
 
Parts four and five, Comprehensive and Collision coverage kind of go together because they are the two coverages that pay for damages done to your vehicle. And having both is what many people refer to as having “full coverage”.  I'm not a big fan of that term because I believe “full coverage” is misleading. But that's what people mean when you hear someone say they have “full coverage”. It means they have comprehensive and collision
coverage on their vehicle. These coverages are both optional. However, if you finance your vehicle, your finance company is going to require you to carry both coverages until you've paid off your car loan.
 
Slide 10:
 
Now, to explain Comprehensive and Collision coverage, I like to start backwards because it's easier to explain. Collision coverage pays for damage to your vehicle due to an accident regardless of who was at fault. Comprehensive coverage pays for any damage besides an accident. For example: Theft, fire, vandalism, weather damage, hitting a deer, etc. In some states it's known as “Other Than Collision” coverage instead of Comprehensive coverage. And to be honest, I like that term better also because I believe Comprehensive coverage is another misleading term. But anyways, they both pay for damage up to the value of your vehicle minus whatever deductible you carry.
 
 
Slide 11:
 
Before we finish, it's important that you understand how deductibles work. Deductibles apply to both parts, four and five, Comprehensive and Collision coverage. It is your out-of-pocket expense resulting from damage to your vehicle. So, as an example, let's say you were in an accident…. You have a fender bender that caused $2,000 worth of damage, and you have a $500 deductible. What your insurance company will pay would be $1,500. That'd be the $2,000 in damages minus the $500 deductible. The same applies if it was comprehensive coverage, and you hit a deer, and you had 500 deductibles, and did 2,000 dollars worth of damage. It would again pay $1,500. So, deductibles and premiums have what what's called an inverse relationship. Meaning the lower deductible, the higher the price, and vice versa. But that's the basics of an auto insurance policy. And it's really important that you know these before you start selecting coverages. So, I hope you learned a lot from this. Thanks and have a great day! 

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