Auto Insurance Basics

Auto Insurance: What You Should Know

Understanding Auto Insurance Starts With “The Big Five” Policies

There is almost as much to learn about auto insurance as there is to learn about driving, but just knowing a few basics about the kind of coverage all drivers should consider is a good starting point. You need to get to know “The Big Five” policy coverage options:

Liability Insurance: All states but one (New Hampshire) require all drivers to either have auto liability insurance or purchase a bond to pay damages if your vehicle is involved in a collision and causes damages or injuries to others. The limits of your liability policy are set by law, but you have the option to purchase higher limits.

Uninsured/Underinsured Motorist (UM/UIM) coverage: This policy is an option in some states (including WA, OR and ID), but is required in some others. Simply put, if you’re in a collision with a driver who has no insurance or not enough to pay your injuries or damages, UM/UIM is coverage that pays the difference between the other party’s available insurance and your actual damages (up to the limits you have purchased).

Collision coverage: Regardless of fault, if your vehicle collides with a tree, power pole, or piles into a snowbank, collision coverage will help pay the cost of repairs.

Comprehensive (or “Other Than Collision”) coverage: If a tree limb falls on your car, or it is stolen or damaged by thieves, or if you hit a deer, comprehensive coverage is the only coverage that will pay to repair or replace your vehicle.

Personal Injury Protection (PIP) coverage: Regardless of fault, PIP coverage pays for medical expenses if you or passengers in your vehicle are injured in a collision, up to the limits of the policy.

Many of these policies are “adjustable” to fit your needs. You may desire higher liability limits to protect against claims that could otherwise expose your personal assets in a lawsuit, for example, or you may want higher UM/UIM limits because the cost of repairing your newer, more expensive vehicle are higher than the liability limits carried by others.

Video: The "Big 5" of Auto Insurance

Here are some links to help you learn more about coverages, options, costs and other common questions. If you’re ready to learn more, or to shop for or review your auto insurance, talk to your insurance company or agent to make sure you’re covered!