Full coverage. 100/300/100. Collision. Comprehensive. Deductibles. Are your eyes glazed over yet?
Yeah, you’re not alone.
Some people go their whole lives without really understanding what terms like those mean. But even if you’d rather scrub grout than read an insurance policy, you at least want to know you’re well protected without wondering if you’ve bought more than you really need. Or, worse, end up underinsured.
Over the next few issues of Perspective, we’ll ask our experts for help to break through the insurance fog. Here are five terms and phrases that people stumble over when buying car insurance:
People often ask for a “full-coverage policy” when they’re buying insurance.
But sadly, a “full-coverage policy” is kind of like a leprechaun. As much as we’d love to see one, we never have! Insurance policies are state-regulated contracts that spell out what’s included and what isn’t. No insurance policy can cover literally everything.
That said, your agent can help you tailor a plan to cover the “what-ifs” you’re most likely to encounter and find affordable protection that goes safely beyond state-mandated minimums. Like most people after an accident, you’ll want a policy that:
Protects your assets if you’re found legally responsible for injuring someone or damaging their car or property and pays your legal fees if you get hauled into court. In insurance speak, that’s called “liability” coverage.
Pays to fix your car if it’s damaged, either by you hitting something (like another car) or something hitting you (like a falling tree) and even theft and vandalism. That protection is divided between “collision” and “comprehensive” coverages. More about them below.
Pays to cover injuries and damage if you’re hit by a driver who doesn’t have insurance, doesn’t have enough insurance or flees the scene after an accident. That’s called “underinsured or uninsured motorist” coverage.
Pays your medical bills, lost wages and more, regardless of fault, if you or your passengers get hurt in an accident or if you’re injured as a pedestrian or bicyclist. It’s especially important if you’re not covered by a health insurance plan. It’s called “personal injury protection” or more commonly “PIP.”
Understanding exactly who is covered on your policy is as important as what’s covered. For example, tell your agent if you have a household helper who has regular use of your car or if you drive for Uber or Lyft as a side gig. You’ll also want to discuss extras that are important to you – things like roadside assistance – to achieve your vision of full coverage.
25/50/10, 100/300/100, 250/500/250 … huh?
Those numbers are a shorthand way to say how much liability coverage you’ve purchased on your policy. They’re shown in thousands of dollars.
For example, if you chose 100/300/100 (our most common policy limits), that would mean your policy would pay up to:
$100,000 per person injured in an accident
$300,000 combined total for everyone injured in an accident
$100,000 combined total for property (most likely, cars) damaged in an accident.
You can choose different combinations based on the assets you need to protect and your insurance budget. The most we offer is 500/500/500. You can buy an extra $1 to $5 million in liability coverage with an Umbrella policy.
Washington and Oregon require drivers to maintain minimum amounts of liability insurance. In Washington, it’s 25/50/10 and in Oregon, it’s 25/50/20. (Oregon also requires drivers to have underinsured motorist and PIP coverage.) Although those requirements may be enough for a minor accident, they could leave you paying out of pocket if you’re responsible for something more serious. Imagine you total someone’s new $130,000 Tesla and the most your policy can pay is $10,000!
Besides protecting you from claims if you’re found responsible for injuring someone, your liability coverage also pays for other drivers’ property (including cars) if you damage them. However, it doesn’t protect your own car. For that, you need a combination of coverages (almost always sold together) called “collision” and “comprehensive.” They’re usually required by lenders if you have a loan on your car.
Collision protects your car if you hit something and, sometimes, if something hits you. If you drive an old car that isn’t worth much more than your deductible (see more below), you might not want to buy it.
Another nice thing about collision? If someone hits you and their insurance isn’t paying up promptly, you can skip the hassle and get your car fixed right away using your own insurance. It also covers you for collision damage when you rent a car.
Comprehensive protects your car against pretty much everything collision won’t cover – for example, if it’s stolen, vandalized, flooded, damaged in a fire or crushed by a tree in a windstorm. It has the same deductible considerations and benefits as collision.
Your deductible is the amount you pay out of pocket before your collision or comprehensive coverage kicks in. You choose the amount when you buy your policy ($500 and $1,000 are our most popular amounts).
If another driver is at fault for hitting your car and their insurance accepts liability for the loss, their insurance pays and you don’t owe a deductible. Some exceptions apply (things like shared fault for an accident, hit and runs, etc.). Here’s more about that.
The thing to remember about deductibles is, the higher they are, the lower your premiums. Percentage-wise, you get the most bang for your buck by going from $500 to $1,000. You don’t want to go so high, though, that you’d find yourself unable to comfortably cover the amount unexpectedly.
Have a question about insurance terms and coverages? Let us know in Comments or, for an immediate answer, talk with your local PEMCO agent or call 1-800-GO-PEMCO.
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