Anatomy of an auto-insurance policy
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5/14/2008 - 5/15/08
Picture this scenario: A woman leaves her car securely locked and safely parked on a quiet side street. But the unexpected happens. When she returns, her car is severely damaged.
This scenario has a happy ending. After the initial shock, she calls her insurance agent. The agent guides the woman through the claim process and explains that her car policy's collision coverage will pay the cost, after the deductible is met, to repair her car.
Why insurance?
State laws require owners and drivers of motor vehicles to be financially responsible for damages they cause in a car accident. Insurance satisfies this requirement. In addition, optional coverages are available that can further reduce your risk of significant financial loss from a car crash, even if it is not your fault.
There are various types of coverage available when purchasing an auto-insurance policy:
Liability: Pays damages for bodily injury to others and damage to property that result from a wreck that is caused by an insured driver under your policy. Also pays for other costs, including legal defense and court fees in the event an insured driver is sued because of a car wreck.
Collision: Pays for damage, after a deductible is met, to your insured car when it strikes, or is struck by, another vehicle or object.
Comprehensive: Pays for damage to your insured car that was not caused by a collision. Some examples include damage caused by fire, wind, hail, flood, vandalism, theft or impact with an animal. There might or might not be a deductible for this coverage.
Medical payments coverage: Pays the reasonable and necessary medical expenses for an insured person who is injured in a crash, regardless of who is at fault for the wreck.
Uninsured motorist: Pays damages to an insured that is injured in a car crash caused by a driver who does not have liability insurance.
Underinsured motorist: Pays damages to an insured that is injured in a car crash when the person responsible for the wreck has insufficient liability insurance to fully compensate for the injury.
Car-rental expense: Pays eligible rental-car expenses if your car is not driveable because of a loss payable under collision or comprehensive.
Emergency road service: Pays for items such as towing expenses, the cost to deliver gasoline and specified labor charges to unlock your car if the key is locked inside the car.
When shopping for insurance, it's important to look at more than the total cost. Become familiar with the amount and type of coverage that is being offered. Also, note what isn't being covered, who is covered while driving your vehicle and the quality of customer service in the event of an accident. And always remember to make sure the company you're insured by is financially strong.
In the end, you should understand your policy and buy the amount of insurance you think you need.
Wayne Steen is a State Farm insurance agent in Santa Fe. His office is at 3005 S. St. Francis Suite 1E, next to the Albertsons at St. Francis Drive and Zia Road. Contact him at 820-7926 or www.waynesteen.com.