Many people have the idea that home and auto insurance is as simple as finding the perfect price that fits their budget. Sometimes, we might consider our state minimums, as well as having coverage that fully covers the damage in case of a loss. But in fact, there is a lot more to home and auto insurance that should be considered when shopping around for the best price with the most amount of coverage.
Have in mind, insurance is here to put in place to indemnify us in case of a loss. In other words, insurance is here to put us back to the same starting point we were at before the hail storm, theft or vandalism, fire, being rear ended and any other unforeseeable or at fault losses. Here are just a few insurance terminologies that you should be prepared to bring up while speaking with an insurance agent about a quote:
- Bodily injury limits
- Property damage
- Full coverage
- Back up and sewer for Homeowners
- Roadside service
What is the Difference Between Liability and Full Coverage?
Auto insurance can be branched into two separate categories – liability and full coverage. You will definitely want to know how to differentiate between the two, which is something your insurance agent should also cover, when quoting for auto insurance.
Liability coverage on a vehicle will cover (up to your limits) the damages incurred on another person’s property and bodily injury (if any) when you are found at fault. Property damage is not necessarily only the other party’s car which you have collided with but it can also be categorized as damage incurred on objects such as a house or a street lamp post; basically anything you have run into with your car that is not yours. Along with property damage, your liability-only insurance policy will cover any bodily injury caused by you in your vehicle, again, only up to your bodily injury limits.
One very important thing to note is that liability coverage may not cover damages on your vehicle regardless if you are at fault or not at fault. This means that if your car was parked and it was vandalized or you rear-ended the car in front of you, your insurance policy may not indemnify you.
Full coverage, on the other hand, will cover the damages to your vehicle as well as any other bodily injury and property damage you may have caused (up to your insurance limits) when you are found at fault or due to an event out of your control. This includes collision accidents, such as rear ending someone or running over the neighbor’s mailbox, which may seem crazy but it can certainly happen in the insurance world. When you are faced with unforeseeable events like a hail storm or vandalism while your car was parked, your insurance will throw in the “comprehensive” aspect of your full coverage insurance policy. They will gladly fix the damages on your car because you are in fact paying for full coverage.
How Do I Know if My Car Needs a Liability-Only Policy or Full Coverage Policy?
Now that we know what both these terms mean, which type of coverage is your vehicle best suited for? For the most part, vehicles with a lienholder on them, or ones that are still being paid off, will require a full coverage policy to be put in place. This is because your car is still an asset to your lender until you have finished paying it off. Keep conscious of the word indemnify. It makes sense for the lender to want to be put back to the same starting point before the loss because they cannot afford to lose thousands of dollars due to a loss when they still have a sharable interest on the vehicle.
Now, if your vehicle is completely paid off and there is no lienholder left in place, the truth of the matter is that only you can decide what is best. Of course your agent will give you a few suggestions but it is ultimately up to the consumer to decide what policy is best. A few tips that will help you choose the best coverage are considering the following:
- What is the value of the equity of your vehicle?
- What is the current mileage on your vehicle?
- When was the purchase date of your car?
- What is the year make and model of your car?
Such questions lead to an even bigger debate – how much money will you get back from the insurance company if you are involved in a total loss? You certainly do not want to pay hundreds of thousands of dollars annually on your car insurance policy, only to get back $1,000 to $2,000 if you are involved in a total loss with your full coverage insurance policy. Consider this tip when deciding what policy to get: weigh the amount of money you invest versus the amount of money you will get back, in case of a total loss, based on the value of your vehicle.
What Should I Set My Insurance Limits To?
We have mentioned the phrase insurance limits, but what do they mean and what should you set yours to? Insurance limits are the numbers you find within your insurance policy that set the bar for the maximum your insurance will pay out in case of a loss. In most states, there will be a state minimum for the limits that you are allowed to drive with. Although they are the state minimum requirements, they may not be the best way to go. A few tips to setting the insurance limits on your policy are:
- Choose limits you would want to be covered by if another person were to crash into you: You do not want to be stuck paying for medical bills or medications out of your own pocket in case the other party’s limits were not sufficient enough to cover you.
- Choose limits that protect all of your assets: If your insurance limits are not high enough, come pay out time due to an at fault accident, the other party may sue and go after your assets if your limits were not high enough to take care of their part of the loss.
- Always keep in mind that family safety comes above all else: A certain price may seem very attractive to your wallet, but assuring that your limits are high enough to cover your passengers (which in most cases consist of your family), is more important, even if the higher limit policy is $10 more a month than that with state minimum limits.
What Company Can I Trust to Have My Back?
With the insurance industry growing day by day, it has become hard to keep track of all the rates offered by companies or brokers, which plays a huge role in deciding over the perfect insurance agent. While price is obviously a major contributing factor, customer service should also be considered. Here are a few tips to keep in mind when deciding what company you want to insure your home and auto with:
- Choose an agent with extended hours: while most insurance agencies are opened 9am-5pm, some are opened until 7pm or 8pm. This is because some, not all, understand your busy work schedule so they try to work around it.
- Chose an honest and straight forward agent: some agents are in it for the monetary compensation, but some are in the field to make sure you are well covered. Let the agent mention to you perks of insuring with them such as unlimited road side assistance or even the back up and sewer endorsement for your homeowners policy. Remember, an agent that offers their full service without fear of rejection is a well-rounded agent.
- Always quote with several companies to see who has the most competitive rates along with the insurance limits of your choice, kind of like comparing apples to apples. While a policy with certain limits with one company may be at $500 for the six month premium, another company may be at $450 with the same limits and perhaps with better service.
- Choose an agent that will work to meet your financial needs: although you may not necessarily be able to put the price on your insurance premium based on the limits of your choice, you can certainly set your deductible amount in case of a loss. Most insurance companies should be able to set your deductible as low as $0.
Once you have chosen the right agent and company, you will be on your way to being well insured and those sleepless nights of overthinking what crash sites you might encounter on your commute to work the next morning will be no more!