Insurance policies are made up of "coverages" that fit together like puzzle pieces to protect you in an accident. Each has its own purpose, and you're not legally required to buy them all (more about that below). Here's what the main ones do:
- Liability. This protects you from claims for damage or injury others may make against you if you're in an auto accident. It's often shown like this: 100/300/50, which would mean injury coverage up to $100,000 per person for a total of up to $300,000 per accident; plus $50,000 for damage to property like cars or trailers. It also will pay the cost of an attorney to defend you in court if a lawsuit is filed against you for injuries or damages caused by the accident.
- Underinsured (or Uninsured) Motorist Protection. This protects you from other people's mistakes – people who are at fault for damaging your car or injuring you or your passengers in an auto accident, but who don't have liability insurance or don't have enough to protect you. It also pays in case of hit-and-run drivers.
- Personal Injury Protection (PIP). This protects you and your passengers from anyone's mistakes. It pays medical costs, lost wages, and other expenses, regardless of fault. It also pays if someone hits you when you're walking or biking. You could skip it in Washington if you have good health care coverage, but that's risky if you're injured, for example, when you're new to a job and your health insurance hasn't kicked in yet.
- Collision. This protects your car if you hit something or something hits you. If you have a car loan, you're required to have it. If you drive an old car (that isn't worth much more than your deductible), you might not want it. A nice thing about collision is, 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. This protects your car against pretty much everything collision won't cover – for example, if it's stolen, vandalized, flooded, crushed by a tree in a windstorm, or even crunched if a deer jumps in front of you and you hit it. It's optional unless you have a loan, and it has the same considerations and benefits as collision.
- Rental, towing and other convenience coverages. These are nice-to-haves. Insurance really is meant to take care of the big hits. But if it's in your budget, you can add coverage for things like paying for a rental car while yours is in the shop (under a covered collision or comprehensive claim). You also can get roadside assistance like towing or a jump if your battery dies.
What coverages do I need?
Washington and Oregon law require these minimum coverages for all drivers:
Bodily injury liability (per person)
Bodily injury liability (per accident)
Property damage liability (per accident)
Underinsured motorist protection (per person)
Underinsured motorist protection (per accident)
Personal injury protection (PIP)
While those amounts make you legal, they may not protect you well enough! If you're responsible for an accident that injures someone or damages their property and your coverage falls short, you'll have to come up with the money on your own. (Ditto if you're hit by someone who can't pay.) That could leave you paying for years if the accident is bad enough.
Your PEMCO representative or community agent can help you find a policy that not only covers you now, but protects your future earning potential – all within your budget.
This is the first installment in our new series, Adulting 101, with a fresh topics focusing on something you wish you knew or no one's ever told you about.