Getting your first car is one of the first rights of passage in life. The freedom and subsequent responsibility of owning a car is our first real taste of adulthood, but, just like any other part of adult life, it has to be super complicated. I’m talking about car insurance.
In Louisiana, we are legally required to have a minimum level of car insurance, which means your understanding of how this insurance works is vital.
What makes car insurance confusing for so many people is its many components, so let’s take a look at what all of it means.
When most people think of car insurance, they think of liability coverage. This coverage pays for damages when you are deemed to be at fault for an accident. Liability coverage is divided into two sections: bodily injury and property damage.
Bodily injury liability coverage will cover expenses such as medical costs, funeral costs, lost wages for anyone who is injured or killed by your car and “pain and suffering” costs if third parties sue you. Property damage liability pays for expenses involved in repairing or replacing another person’s vehicle or property damaged by your car.
While liability coverage pays for damage to others’ property, collision coverage will pay for damages to your vehicle. If you hit another vehicle or an object, collision coverage will pay for any repairs or the replacement of your vehicle after you pay a deductible. For example, if you have a $1,000 deductible and suffer damages of $2,500, your insurance company will pay $1,500 once you pay the first $1,000.
Comprehensive coverage is an often overlooked complement to collision coverage. This will cover damages to your car not covered by collision, including a tree falling on your car, damage from animals and theft. Many of you may have recently learned that comprehensive coverage is also what covers your car in case of flooding.
What may be the most integral part of your coverage plan is uninsured/underinsured motorist coverage. While it is legally required that you have car insurance to drive on public roadways, many people don’t have insurance or are improperly insured. In a situation where someone without insurance is at fault for a wreck, you will be looking at paying a large amount out-of-pocket for damages.
Uninsured motorist coverage takes care of you in this situation. Think about this insurance as stepping in for the person at fault. For this reason, you should have as much uninsured motorist coverage as you do bodily injury coverage.
Rounding out the rest of your car insurance is personal-injury protection and medical-payments coverage.
Personal-injury protection will pay for in-home care and lost wages in the event of an accident. This type of insurance can overlap with other health and disability insurance policies, so depending on your insurance needs, PIP may not be necessary over the legal requirements.
Medical-payments coverage will help pay for medical bills for you and your passengers no matter who is at fault in an accident. While you may not need this if you have adequate health insurance, it will help protect any passengers you may have who do not have health insurance.
So that’s the basics of car insurance. I know I threw a lot of information at you — confusing information at that. Being aware of how insurance works is the first step to making sure you are insured effectively for your needs.
Jay is a 22-year-old finance senior from St. Simons Island, Georgia.