Insurance 101 – The Basics of Automobile Insurance
We all buy insurance for our cars, motorcycles, homes and even our own health. It is a wise investment to protect against unexpected losses, but how much coverage do you have? We routinely consult with potential clients who have no idea how much insurance coverage they have and what losses are covered. This article is the first in a series of articles focusing on various important topics on insurance. This information will serve to educate you, the consumer, to make smarter choices and ensure that you and your loved ones are protected.
There are several fundamental types of coverage included in automobile insurance policies. Most automobile policies include the following types of coverage:
- Liability Coverage - This provides payments to others if you cause a crash. Liability coverage will compensate others for injuries caused by the crash. This can include passengers (including family members) in your vehicle if you are at fault for causing the crash that injures your own passengers, in addition to those occupying other vehicles. Most states have a minimum requirement for the amount of liability insurance coverage that drivers must have ($30,000 in Minnesota). However, it is a good idea to have liability insurance that is above your state's minimum liability coverage requirement, as it will provide extra protection in the event you are found at fault for a crash, as you are responsible for any claims that exceed your coverage's upper limit. You wouldn't want to run the risk of having to pay a large amount of money because your policy limit has been exceeded. Liability coverage will also cover the cost of repairing any property damaged by the accident (other than your vehicle).
- Collision Coverage - If there is a crash, collision coverage will pay for the repairs to your car. If your car is totaled (where the cost to repair it exceeds the value of the vehicle) in an accident, collision coverage will pay the fair market value of your car. If your car is older, it may not be worth carrying collision coverage on it, depending on the value. On the other hand, if you have a more expensive car or one that is relatively new, collision insurance can help get you back to where you were before any damage to your car. Note: If your vehicle is financed or has a lien holder, this coverage may be required.
- Comprehensive Coverage - This coverage provides payment for damage to your vehicle unrelated to a collision with another vehicle (i.e. weather damage) or if your vehicle is stolen. Comprehensive coverage is a good option if it fits in your budget, especially if you have a newer or more expensive vehicle. Note: If your vehicle is financed or has a lien holder, this coverage may be required.
- Underinsured (UIM) and Uninsured (UM) Motorist Coverage - While state laws mandate that all drivers be insured, often times there is not adequate insurance available from an at-fault party to cover the damages caused by a crash or the at-fault driver does not have insurance. Underinsured motorist coverage provides payments to you (and those covered under your policy) if another driver hurts you in a crash and that driver does not have enough liability insurance to pay for the harm to you. Uninsured motorist coverage provides payments to you when a driver without insurance causes a crash in which you (or those covered under your policy) are hurt. Many people focus on liability coverage but in reality most people are cautious drivers and should be more concerned about being hurt by someone with inadequate or no liability insurance. Therefore, it is recommended that you carry UIM/UM limits equal to or greater than your liability coverage. Fortunately this coverage is relatively inexpensive for the protections it can afford to you and your loved ones.
- No-Fault/Personal Minnesota is fault car insurance coverage. The benefit of this coverage is that, regardless of how or why the accident happened, you as the named insured and your resident relatives are eligible to receive payment of your medical bills and reimbursement of your income loss. The typical No-Fault policy will provide at least $20,000 in medical expense benefits and $20,000 in payments for lost wages and/or replacement services, subject to a maximum of 85% of average weekly wage up to $250 a week for lost wages and $200 a week for replacement services. However, if you insure multiple vehicles with the same company you can elect to "stack" the policies to increase your medical and wage loss coverage. Thus, for example, if you have two vehicles and elected to stack the two policies, you would have $500 in weekly wage loss coverage with a total wage loss coverage of $40,000 and $40,000 in total medical expense coverage.
- No-Fault coverage benefits are available regardless of health insurance coverage. If you have health insurance, the No-Fault medical expense benefits are primary and should be paid before you need to access your own health insurance.
We will explain these different types of automobile coverage in greater detail in future articles so please check back for additional information. Injuries of any sort, including but not limited to, injuries arising from automobile accidents, are very disruptive to your life and are a source of great medical and other types of expense. Should you find yourself in such an unfortunate set of circumstances, you will at least be thankful you took the time to understand and be certain you have suitable and adequate automobile coverage.
NOTE: The coverage afforded under each policy is dependent on the individual policy and you should always consult with the actual policy to understand what is and what is not covered. Please call the experienced personal injury lawyers at Maschka, Riedy & Ries (507-625-6600) for a free consultation and review of your current coverage before you have an accident to ensure you and your loved ones are adequately covered.