Auto Insurance 101

Demystifying Auto Insurance: 

A Beginner's Guide

Auto insurance is a fundamental aspect of responsible vehicle ownership, yet it can be confusing for many people. Understanding the basics of auto insurance is essential for making informed decisions and ensuring adequate coverage. In this blog post, we'll delve into the fundamentals of auto insurance, breaking down key concepts and terminology to help you navigate this complex landscape with confidence.

Types of Coverage:

• Liability Insurance: This type of coverage pays for damages and injuries you cause to others in an accident. It typically includes bodily injury liability and property damage liability.

• Collision Coverage: Collision insurance covers damage to your vehicle resulting from a collision with another vehicle or object. The amount listed for collision is not a coverage limit, but rather your deductible. This is the amount you pay out of pocket.

• Comprehensive Coverage [aka Comp]: Comprehensive insurance protects your vehicle from non-collision incidents, such as theft, vandalism, or natural disasters. The only “moving accident claim” that falls within comprehensive coverage is hitting an animal. Just like collision, the amount listed for comprehensive is not a coverage limit, but rather your deductible. This is the amount you pay out of pocket.

• Personal Injury Protection (PIP): PIP covers medical expenses and lost wages for you and your passengers, regardless of fault. This coverage is most important for those who rely on an income from physically going to work, those who don’t have medical insurance, and those who have passengers in their vehicle often.

• Uninsured/Underinsured Motorist Coverage: This coverage protects you if you're involved in an accident with a driver who has insufficient or no insurance. In WA, there are two parts to this coverage:

  1. Bodily Injury: Covering the injury portion of the bill that would have otherwise been covered by the uninsured party’s insurance.

  2. Property Damage: Covering your vehicle for damage caused by the other party. It important to always be sure this coverage amount is more than the value of your car to protect you in the case of a total loss.

Factors Affecting Premiums:

• Driving Record: Your driving history, including accidents and traffic violations, significantly influences your insurance premiums.

• Vehicle Type: The make, model, and year of your vehicle, as well as its safety features, impact your insurance rates.

• Location: Where you live affects your insurance premiums due to factors such as crime rates, traffic congestion, and weather conditions.

• Coverage Limits: Higher coverage limits result in higher premiums, as they provide greater financial protection.

• Deductible: Choosing a higher deductible lowers your premiums but increases your out-of-pocket expenses in the event of a claim.

• Claims History: Having claims on your record can result in policy surcharges and removal of discounts. The more claims that exist, the higher risk the policy is considered.

• Credit Score: Yes, insurance companies use your credit score in part to determine your premium rates. Don’t worry, it’s not a hard pull and it will it hurt your credit.

• Pay Plan: Most companies offer better prices for those who opt in to auto pay or one payment per policy period.

  It’s important to remember that there are countless factors that go into rating and unfortunately, there are times when even us agents can’t see exactly what those factors are.

Understanding Policy Terms:

• Premium: The amount you pay for insurance coverage, typically billed monthly, semi-annually, or annually.

• Policy Term: The duration of your insurance coverage, usually six months or one year.

• Declarations Page: A summary of your policy details, including coverage types, limits, and premiums. This is the page that lienholders and lessors request when you have a loan or lease on your vehicle. It can be found in your new policy packet, in your renewal, or can be requested from your agent.

• Exclusions: Specific events or circumstances not covered by your insurance policy. For example, track racing is a common exclusion on most policies. If you race your car and wreck, there will be no coverage.

• Endorsements: Optional additions to your policy that provide additional coverage or modify existing coverage. For example, many policies have the option to add an endorsement for OEM parts. This endorsement replaces parts on your vehicle with OEM factory parts instead of aftermarket in the case of an accident.

• Deductible: This is an amount you select that you would pay out of pocket if you were to file a claim for that coverage type. The higher the deductible, the less you pay on your normal bill.

• Excluded Driver: If someone is listed as an excluded driver on your policy, that means that they are not covered to drive your vehicles for any reason what so ever.

• Rated Driver: This is someone who is covered to drive your vehicles regularly and they should typically live within the household.

• Permissive-Use Driver: A permissive-use driver will not be listed on the policy. This is someone who does NOT live in the household or regularly drive your vehicles. A good example would be a family member visiting for the weekend and borrowing your car for those couple days with your permission.

Navigating the world of auto insurance doesn't have to be daunting. By familiarizing yourself with the basics of coverage types, factors affecting premiums, and policy terms, you can make informed decisions to protect yourself and your vehicle on the road. Remember, auto insurance isn't just a legal requirement—it's a crucial financial safety net that provides peace of mind and protection against unforeseen events. But don’t worry, you aren’t alone. We are here to walk you through the process from start to finish, assuring you have all the tools and recommendations to make the best decisions for you!

Lauren Gurske