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Auto Insurance

Auto insurance can be confusing, and the different types of available coverage can confuse anyone not well-versed in the bewildering terminology of the auto insurance world. Let’s see if we can de-mystify this just a little and define some of the jargon related to auto insurance. After reading this article, hopefully you will understand better how to choose the auto insurance coverage that will be there when you need it.

Remember, as a consumer, it is your responsibility to choose the best insurance policy for you. Nobody will pick your coverages for you, and if you don’t put some thought into picking out the best coverages, you could really lose the farm in case of a bad accident. Nothing is more traumatic than, due to a moment of carelessness, hitting someone in an auto accident and then being sued because you don’t have enough insurance to cover the damage. It’s also heartbreaking to be the victim of an accident that was caused by a driver with little or no insurance, and receiving very little in the way of compensation for your damages because your uninsured/underinsured motorist coverage limits are small and the other driver has nothing to go after. A little thought and prior planning can save you a lot of trauma in the long run.

In a nutshell, here's how auto insurance works. When you buy a policy, in exchange for your premium the insurance company that issues your policy agrees to assume certain risks and cover your financial losses. A minimal amount of auto insurance is mandatory; most states, including Washington, require that you purchase insurance and be able to provide proof of auto insurance in order to legally drive your vehicle. Also, most states, including Washington, have adopted a fault-based, or “tort liability,” system of auto insurance. In a fault-based system, insurance companies pay according to each party’s degree of fault. Lastly, if you and your insurer don’t see eye-to-eye on your claim, you may have to file suit for uncompensated economic damages such as lost wages and medical expenses and non-economic damages such as pain and suffering.

Here’s a quick tour of some of the terms that you'll hear being tossed around in insuranceland.

Property damage liability: This coverage pays for any damage that you cause to other people's property. Your insurance will cover this damage whether you are the driver, or if someone else was operating your vehicle with your permission.

Bodily injury liability: This insurance coverage protects you against the claims for damages in an accident in which other people are injured. Most states, including Washington, have minimum dollar amounts for bodily injury coverage, but this limit is usually fairly low. The bills on this can be devastating, so get more coverage here!

Uninsured/underinsured motorist: This coverage takes the place of the insurance coverage that the uninsured or underinsured motorist should have had in effect. This is also an are where you need to beef up you coverage. Chances are, if the person that hit you has little or no insurance, they also have little or no assets to go after, so you could really be left holding the bag.

Personal injury protection (PIP): This coverage will pay a minimum benefit amount per person for you and your passengers for injuries sustained in an accident. Typical personal injury protection coverage can include things like lost wages, medical expenses, funeral expenses and survivors loss benefits.

Collision and comprehensive: Collision coverage covers damage to your vehicle. It pays the cost of repairing or replacing your car after it has been involved in an accident regardless of who was at fault. The insurance company will pay you the actual cash market value of your vehicle less the amount of your deductible. Comprehensive covers damage caused by something other than a collision, such as theft, vandalism or some other natural disaster. Comprehensive coverage will also pay for a rental car while your car is being repaired or if it has been stolen.

Medical payments: This is optional coverage that pays for the medical or funeral expenses for you and for the other parties who might have been injured or killed in an accident while riding in your vehicle. This coverage will also cover these expenses if you are struck by another motor vehicle while you are a pedestrian or even riding in another motor vehicle as a passenger.

The insurance company will negotiate with you on how much they will dole out in all of the above categories, and will usually want a recorded statement from you if you make a claim. Please contact an attorney before giving a statement so that you can be advised of your rights, and don’t go it alone when negotiating with an insurance company. What may seem like a good settlement at the time may, in the long run, really not be in your best interest.

Also, be careful your coverage isn’t cancelled or non-renewed. Cancellation refers to cancellation during the coverage term, while non-renewals happen between renewal periods. An insurance company may cancel or not renew your policy for several different reasons, such as non-payment of the premium, or if your vehicle's registration has been suspended or revoked. An insurance company must notify you in writing before the date of the policy's cancellation or non-renewal with the details on why they are cancelling or not renewing your policy.

While you should only buy the coverage you can afford, don’t chintz out on coverages that can really save your bacon in case of an accident. For only a few more dollars a month, you can avoid financially devastating consequences. In today’s world of lawsuits and high medical costs, it doesn’t pay not to be covered.

If you are in an accident and have questions about what is or is not covered, please contact us.

Caleb Morgan