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Auto Insurance 101

Auto Insurance 101

Auto insurance in most states is mandatory. For both commercial and personal autos, this means just purchasing the basics: liability insurance to satisfy the state, and “full coverage” (comprehensive and collision) on newer vehicles only.

There are many other important and useful coverage options available. Your broker tries to sell them to you not just to make more money, but also to increase your coverage and policy satisfaction.

Each additional option will cost a little more money, but the benefits far outweigh the initial premium investment.  Please note that the limits for each option are selected by the policyholder and coverage is subject to the selected limit.  Your insurance broker can help you select appropriate limits of coverage.

THE BASICS

Comprehensive Insurance. This insurance is truly comprehensive. There are almost no exclusions. If your car is damaged in an earthquake or a flood or a riot, those are covered. If you leave a lipstick on the front seat and it melts, that is covered. If a passenger pukes in the vehicle, or you accidentally leave a package of fish in the trunk over the weekend, that is covered. Subject to your deductible.

Collision Insurance. It doesn’t matter if you hit a house, a tree, a mountain lion or another vehicle: if you collide with it, this insurance covers you. Subject to your deductible.

Uninsured Motorist.  Just because auto insurance is mandatory doesn’t mean everyone has it. Murphy’s Law says that if you’re in an accident, the at fault driver probably isn’t going to be insured. Uninsured motorist coverage is an inexpensive way to make sure you aren’t ever subject to someone else’s lack of insurance.

Underinsured Motorist. If the other driver in an accident only has state minimum coverage (the addendum to Murphy’s Law, above) this insurance will fill in the blanks. Where their coverage ends, this coverage begins.

BELLS & WHISTLES

Loan/Lease Gap. Everyone knows your vehicle depreciates as soon as you drive it off the lot. If you’re in an accident before your loan is paid off, chances are the insurance company check won’t cover the full loan or lease balance on the vehicle. This coverage will bridge the gap between what your car is worth and what you still owe the finance company.

Additional Equipment Coverage. Even comprehensive and collision coverage still only covers the standard options on a vehicle. If you upgraded your sound system, got a cool paint job, or had special equipment installed for a handicapped driver or passenger, those things wouldn’t be covered. Talk to your broker about any special equipment and how to cover that in the event of a loss.

Rental Reimbursement. This is fantastic coverage to have in the event of an accident when you don’t have another vehicle available. Coverage can be purchased for a time period and a dollar amount, depending on the type of vehicle you would likely rent. For example, $50 per day for 30 days. If your vehicle is incapacitated, you can rent a vehicle while it is being repaired and your insurance company will reimburse up to $50 per day for up to 30 days of the rental.

Towing & Labor.  This is usually purchased as a fixed amount of $75, $100, etc. If your vehicle breaks down the insurance company will reimburse for towing and/or labor expenses up to that amount.

Personal Umbrella. Auto liability insurance may not be enough to cover every accident, especially if it involves multiple vehicles or property damage. An umbrella policy picks up where the auto liability limit ends.

Limited Ridesharing Coverage.  If you use your vehicle to drive for a ridesharing service, your insurance company may offer this endorsement. Coverage is offered to a driver during the times the ride sharing application is open but there is not a fare in the vehicle. Please note this coverage is not available from every carrier, nor is it available in every state.

COMMERCIAL AUTO OPTIONS

In addition to the options listed above, there are endorsements for commercial autos that may come in handy:

Drive Other Car (DOC).  If your company executives drive company provided vehicles, they may not have a personal auto policy. DOC extends personal auto coverage to named individuals who drive company vehicles, even during personal time.

Hired Auto Physical Damage. When your company rents or hires vehicles for business purposes, this endorsement covers that auto for physical damage sustained in an accident, and may even include coverage for loss of use of the vehicle by the rental company.

Which endorsement(s) should you choose? That depends on your needs. Talk to your Hayes Broker to determine which optional auto insurance coverage may be right for you.

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