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Car Insurance Basics: Liability and Uninsured Motorist Coverages

How To Shop For Car Insurance

Car insurance. Do you cringe when you hear those words? It’s a necessary evil in this world where almost every day on the radio or television you hear about car accidents causing injuries or backing up traffic. When you obtain a vehicle, the first decisions that you need to make are those regarding insurance for that vehicle. But where should you begin?

The Two Types Of Car Insurance Providers

You can do your insurance agent/company search in person at a brick-and-mortar building, on the phone, or on the internet. When starting your quest for automobile insurance, be aware that there are two different types of agents — those who represent one company, and those who represent several companies.

The agents who represent one company will usually work in an office with the name of that company on the office door/building or will respond on the website of that particular insurance company. The agents who represent several companies usually work in agencies, and they will offer to ‘shop’ whatever insurance you are interested in purchasing with the various companies that they represent, presenting you with one or two companies who can offer the best coverage for the best price at the end of their search. 

Just be aware that those who represent several companies often receive commissions or incentives to promote one company over another, so while it can be useful to get “insider info” sometimes they are financially biased.

Applying For Auto Insurance Quotes

Once you make contact and request a quote from an agent, their information collection begins. The agent will ask for the ages and driving history (tickets, accidents) of all the drivers in your home, usually the social security numbers (to pull a credit check), and specifics of the car(s) that you wish to have included in your quote. You will choose what coverages and limits that you wish to have quoted for your policy. The basic auto coverages are liability, uninsured/ underinsured motorist coverage, medical expense/personal injury protection, comprehensive, collision, and towing and rental car reimbursement. This article will explain the auto liability and uninsured/underinsured motorist coverages.

Meeting Minimum State Requirements For Car Insurance

Each state has different minimum requirements for auto liability coverage. Check with your state to determine what yours are. Your auto liability coverage is used after an accident where it is determined that you or another driver of your car was negligent and an accident resulting in injury or property damage to other parties occurred as a result.

Each state has its own negligence laws that determine when a driver is held responsible to pay the damages of other parties. Remember, auto liability coverage never pays for YOUR injuries or damages to YOUR vehicle, but instead the injuries and damages for which, because of your negligence, you are held legally responsible. Also, remember that in most cases the insurance follows the vehicle. Thus if you give your car keys to a friend or relative to drive, you are giving them your insurance.

Here is an example: Party A, not paying attention (negligent), runs his vehicle into the rear of the car driven by Party B, who is stopped at a red traffic light. Party A’s bodily injury liability coverage will pay for bodily injury that may result to Party B and any of Party B’s passengers, up to the policy limits. Party A’s property damage liability coverage will pay for the damage to the car driven by Party B that results from the accident, up to the policy limits. In addition, note that property damage liability also covers damage to multiple cars in a multi-car accident, or to other non-vehicular property if, for instance, a car accident causes damage to a private home, commercial building, fence pole, etc. On an auto policy, liability coverage comes in two different forms. The first form is referred to as a split limit and is written as three different monetary amounts, for example:

$50,000 bodily injury per person 
$100,000 bodily injury per accident 
$25,000 property damage

This means that there is $50,000 available for any single person’s injuries that result from an accident, up to a total bodily injury limit for all injured people of $100,000. Also in this example, there is $25,000 available limit for property damage liability. The second form of liability coverage is called a comprehensive single limit, which combines both bodily injury and property damage insurance coverages into one total amount of coverage per accident. It is written like this: $100,000 CSL (combined single limit). In this example, there is $100,000 total liability insurance coverage available for any injuries and/or property damage that results from an accident.

Uninsured Motorist Coverage Is A Good Idea

Uninsured/underinsured motorist coverage comes into play when another party causes a car accident with your vehicle, the accident is his fault, and he has no auto insurance (or not enough insurance, thus underinsured). Your own insurance company steps in and acts as the negligent party’s insurance company, offering you coverage up to the limits that you purchased for uninsured/underinsured motorist coverage towards your injuries/damaged vehicle. Each state has certain qualifications that must be met in order for you to make a claim on this insurance, and in some states, there may be a deductible. 

As mentioned earlier, each state has different minimum insurance requirements for auto insurance liability. Should you purchase the minimum required or more? In a litigious society, it may be a good idea to buy as much auto liability insurance as you can afford, in the attempt to avoid a situation where your insurance limits are not sufficient to pay all of the damages that you may be held liable for, and the injured party, or their insurance company, comes after you personally to pay the balance of the bills.

Once you have your liability insurance in force, don’t forget to drive safely!