Auto Insurance 101: A Glossary and Comparison

In other words, cutting off your nose to save your face. Although, I'd cut off my nose to lose a pound.


What am I talking about? Good question. I'm glad you stuck around to ask. When it comes to insurance, but for the purposes of this posting, auto insurance, we have found that the majority of people are extremely price conscious. And that is a very smart way to be. Unfortunately, we tend to be more concerned about price than value.


I want to talk about auto insurance today. First, let's visit the Auto Insurance 101: English Edition Glossary.


There are 3 sections to your auto insurance policy. The first part protects the other party, the second protects you and your family and the third protects your vehicle.

Part 1

1. Bodily Injury Liability: If you cause an accident and people are hurt, you could be held legally responsible for medical costs for everyone involved. This coverage can help shield you from losing your home, your savings or having your wages garnished to pay for the injured party's medical, loss of income, pain and suffering, etc. In California, the state minimum is $15,000 per injured person and $30,000 for the entire accident.

2. Property Damage Liability: If you cause an accident and damage another person's car or their property, you could be held legally responsible for repair or replacement costs. In California, the state minimum is $5000. If you are driving around with minimum limits, pray that you do not rear end a Bentley, drive through a storefront because the damages will be exceedingly more than $5000.

Part 2

Uninsured/Underinsured Motorist Coverage: We know that most states, California included, require that all vehicles are insured at least up to the state minimum limits. Unfortunately, not everyone follows the law. If a driver with insufficient or no insurance coverage hits you and you are injured, without this coverage, you would be left holding the bag, so to speak. Having this coverage allows you and your passengers to collect what would have been collected from the other party's insurance, from your own. This inexpensive coverage could be invaluable in the event of an accident.

Medical Payments: Also called "Med Pay". This coverage pays up to the policy limits when you are in an accident that is your fault and you and/or your passengers are hurt.

Part 3

Collision Coverage: Pays for damage to your car if you collide with another car or something else, such as a tree, wall or lamppost.

Comprehensive Coverage: Also known as "Other than collision". This pays for damage to your car caused by something other than a collision. This would include theft of the vehicle, storm damage, a bird flying into the windshield, etc.

Deductible: The amount of money that you are responsible for before the insurance company pays out. As an example, if Joe Smith backs into a pole while exiting a parking garage, this would be covered under the Collision portion of the policy. If the damage to the vehicle is $2000, and the deductible is $500, the insurance company would pay $1500 for the loss.

Now that we have a clear understanding of the basic auto policy coverages, let's get more into the nitty gritty.

Trent Teenager is 19 years old, works as a cashier, lives in an apartment and drives a 1995 Camery. Now, this is someone who is just starting out, doesn't really have assets to protect and is driving an older vehicle. We would recommend to Trent, that he have moderate bodily injury liability limits, usually about double the California state minimum, that he have uninsured motorist liability coverage for the same limits as his bodily injury liability, and then we would discuss whether or not it is worth it to him to have Comprehensive and Collision coverage.

On older vehicles, some people feel it isn't worth the extra premium to carry physical damage coverage for the car, because the car is not worth very much. On the other hand, some people feel that no matter what, they will carry these coverages because even though the vehicle is older, they would rather have the coverage to fix damage caused by an accident.

Now, Henry Homeowner is married, in his 40's, has a family, owns a home, and has 3 luxury cars in his garage. Now, for Henry, the difference between having high liability limits and not could mean the difference between keeping his home or not in the unfortunate event of a catastrophic accident. We would generally recommend he carry very high bodily injury liability limits, with matching uninsured motorist liability limits. Since he owns luxury cars, we would recommend that he does take the Comprehensive and Collision coverages.

Now, whether you are more like Trent Teenager or Henry Homeowner, or somewhere in between, your auto insurance coverage can be customized to meet your needs. Of course, there are additional coverages available that we can get into later.

If you are unsure of what you have and whether or not your policy meets your needs, we are now offering a free Coverage Check-up to anyone who would like a second opinion. We will also go over things such as Accident Forgiveness, Safe Driving Bonuses, Deductible Rewards and Ticket Forgiveness. Please visit our website www.allstate.com/StanGoldhammer , call toll free at 1 800 947 8887 or send us an email at allcaliforniainsurance@gmail.com .