Introduction to Car Insurance
You got the keys. You're ready to go. Wait. Do you have insurance? What is insurance? Today, we're gonna go over the best insurance tips and overall coverages that you need to know. This is the 101, the Bible of Insurance. Hey, guys. This is Mark Flockhart with Think Insurance. If you're new to this channel, welcome. Don't forget to subscribe if you get value out of this.
The essential reason that you buy insurance is to protect yourself. You have assets to protect your future income to protect. So the biggest way to understand that what you're trying to do is you're trying to make sure that your insurance company has more money than you. And so if your income is here and you own your home, you own your assets, whatever the case is, your level is here. You wanna have your insurance company just a little bit richer than you are financially. So that way, if something does happen and they're gonna sue somebody, they don't sue you. They sue your insurance company instead.
Primary Pieces to Car Insurance
There are three primary pieces to insurance. You've got coverage for others, coverage for you, and coverage for your vehicle. Let's dive into each of these in detail.
Coverage for Others
The first part, coverage for others. You've got bodily injury. That's the amount that your insurance will pay for medical if you injure somebody else in an accident. So if your car hits somebody else's, they go to the doctor or hospital, whatever limit you pick is how much they're gonna cover. They do it in one of two ways. They do a per person and a per accident.
Bodily Injury
- Per Person
- Per Accident
So it's called 10/20 or 100/300. I commonly do the 250/500. What that means is that 250,000 dollars will cover that person's medical if you injure them up to 250,000 per person. Now if there's multiple people in the car, let's say there were three people in the car, a driver, a passenger, and someone in the back, and they all were injured. As long as you don't go above 250,000, they're covered under your policy for that accident. Keep in mind, you have the 500,000 per accident total aggregate limit.
Property Damage
The second part for coverage for others is property damage, and that's essentially the same thing but for someone's car. If you damage their car, their property, then that's gonna cover that. If you hit a house, if you hit their garage, if you hit their vehicle, whatever property that you damage, you're gonna pick a limit. A common one that a lot of people start with is what we call 25/50/25. That's 25,000 per person, 50,000 per accident. That's the medical for others. And 25 is that property damage for their vehicle. And that's really the basis of where people start.
Coverage for You
Well, what about the people in my car? Well, you can pick up a couple things. There's something called medical payments, med pay, and that's coverage for anybody in your car. It's per person. So if you have four people in the car, each person gets that coverage. The most common that I see people choose is 10,000 dollars. You can go higher or lower or sometimes completely remove it, but it's 10,000 per person. So you've got 40,000 coverage total as long as each person doesn't max out over that 10,000. If you chose 30,000, then it's 30,000 per person.
Uninsured and Underinsured Motorist
There's also uninsured and underinsured motors. So if you're not at fault in this accident and someone hits you but they don't have enough coverage, you can kind of self-insure it where you're adding a small coverage that covers those cases. In that way, you don't have to go after the person or sue them. The insurance company will deal with it. They'll pay the bill upfront up to the limits that you pick, and then they'll go after the guy on their own.
Normally, you're gonna match your bodily injury. So if you carry the 100/300 or the 25/50, that's the same thing that you're gonna carry for the uninsured motorist and under insured motorist. So if they hit you, people in your car, same thing, 25,000 per person, 50,000 per accident, and that goes in case of they're not having enough coverage. That leads into underinsured motorist, which is covering the difference between it.
Coverage for Your Vehicle
Uninsured and underinsured property damage is identical. You can pick uninsured property damage. So if the guy hits you, has no insurance, that'll cover your car, and you can pick underinsured property damage where if you have a nicer car, let's say it's a 60,000 dollar vehicle, and you assume that a lot of people only carry the minimums, which is gonna be 10 to 20,000 property damage. Well, there's a 40,000 dollar gap between those two. You would wanna carry the uninsured or underinsured property damage to protect your asset as well.
Comprehensive Coverage
Your vehicle has two options. You can do comprehensive and collision. Comprehensive is what we call acts of god. It's theft, vandalism, hail damage, a tree falls on your car. If you hit an animal is the one unique time while you're driving. In most cases, the car is just sitting there. The only time while it's really moving where it's gonna be covered is if you hit an animal. That's why they say, when in doubt, take Bambi out. It's kind of a joke, but it's not because if you're driving down the road and you see a deer and you have to swerve, you miss the deer and hit the guardrail, the deer is comprehensive. It's an animal. The guardrail is a collision, which we're gonna get into next.
Collision Coverage
Collision is covering your vehicle. This is your car no matter what. If you get in an accident, you hit a car, you hit a house, whatever the collision piece is. You hit your garage. That's that part of it. It's what we call full coverage because full coverage entails comprehensive and collision. They're kind of in order. So when you've got your bodily injury, your property damage, your uninsured, your underinsured, then you've got comprehensive and then collision. So when I say full coverage, I'm saying I want all of this stuff, just one package, and then you have to pick the limits that you want.
Deductibles and Their Importance
As we know, the price of insurance is also important because we've got to afford it. And at the end of the day, we don't wanna pay for something that costs more than our car. It's not really worth it to us. So you've gotta pick and choose which coverages are important to you. This is where deductibles come in. You've got your comprehensive deductible. Most commonly, it's gonna match or be close to the collision deductible, which is 500 on most cases. Personally, I do about 100 dollars on comprehensive, 500 on collision. Some people do 250 on comprehensive, some people do 500 on comprehensive. You can typically go as high as 2500.
The reason we have deductibles is you're taking on a piece of the insurance. It's kind of like getting a loan from somebody and saying, well, I need a loan for 8000 dollars, but I'll put up 2000 dollars on top of it so that I can only borrow 6000. I'm good for the money. Here's 2000 to kinda do like a commitment to that loan. Same thing with car insurance. You're saying, I commit to paying that 500 or that 1000 dollars in the case of an accident. In turn, I want you to lower my rate because I'm showing that I'm committed to not having claims.
Personal Injury Protection (PIP)
If you're in a state like Texas, Florida, Michigan, I believe New Jersey or Pennsylvania as well, there's a handful of states that have something called PIP. It's personal injury protection. Essentially, that's in a medical coverage, and most of the states let you pick limits. So it's something that you're gonna have to work in with your agent and find what's the best fit for you.
But in most cases, the benefit, if you have the choice of choosing MedPay or PIP, then you're gonna wanna choose the PIP as long as the price isn't that expensive because what that does is that works in not just medical coverage because that's all med pay does. The PIP also includes work loss, death benefits, things like that. There's other little packages that cover percentages of things that you could lose. And so if you can't work for three weeks because you're in a hospital and you're trying to recover, you get the medical and you get 80 percent of your wages up to a certain amount. So each state's different. I would recommend talking to an agent with that.
Conclusion
And those are the primary coverages that you have in car insurance. You've got coverage for others, coverage for you, and coverage for your vehicle. Now when you're doing quotes with other companies, there's a couple things that you should know. To get the best rate, you're gonna wanna go through and learn some of the discounts. I'm going to put this video up here so you guys can watch that, and I'm also gonna put another video here that's gonna go over what coverages are most common.
If you guys have questions, put them in the comments below. Otherwise, I'm Mark with Think Insurance. I will see you in the next one.
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