December 4, 2023

Education

Your Ultimate Guide To Car Insurance Coverage

As a responsible vehicle owner, you know it's important to have insurance. It protects your valuable asset, yourself, and your family. Yet, insurance coverage can be confusing and frustrating. How much do you really need? 

This guide will explain insurance coverage and help you choose the best coverage for you. All drivers need to know about different insurance types to protect their vehicles and themselves financially.

In a nutshell? Our best advice is to get the most insurance you can afford and ensure you read all the fine print in your policy. This way, you can be sure you have the coverage you need. Imagine being stuck by the side of the road in the rain with a flat tire, only to realize you don’t have roadside assistance included in your policy.

We'll go into detail about what is included in each car insurance coverage so you can decide the right choice for you. 

Contents:

The Main Types of Car Insurance 1,2,3

What is liability only car insurance

What is Uninsured Motorist Insurance

What is Collision and Comprehensive Car Insurance?

What is MedPay and Roadside Assistance Car Insurance?

Other Types of Car Insurance Coverage

You can add extra coverage to your car insurance by purchasing optional types.

Let's get into more detail:

What is Liability Only or State Minimum Insurance? 

Liability Only or State Minimum insurance is a basic car insurance policy that meets the state's minimum requirements. This type of insurance includes only Liability Coverage (Bodily Injury and Property Damage). It pays for the other party's injury or property damage expenses if you're at fault in an accident. It doesn't cover your own car's damages or your medical expenses. Although this is the least expensive coverage to own, it offers very little protection for you and your family. Drivers might want to add more coverage.

Who Needs It?

When you buy car insurance, you must also have liability insurance. It's required in almost every state.

Liability car insurance helps when you cause a car crash that harms others. It also allows you to deal with legal matters if someone sues you because of an accident. Here are some situations where liability insurance can assist:

Uninsured Motorist Coverage

What Does It Cover?

If you get into an accident with an uninsured driver, uninsured motorist coverage pays for your medical expenses and injuries. It also covers your passengers. It may also cover damages to your vehicle, depending on your state's laws.

Who Needs It?

If you don't have health insurance, this can help pay for your medical expenses if a driver hurts you without insurance.

If you get in a crash with a driver who doesn't have insurance or has too little coverage, uninsured motorist (UM) insurance and underinsured motorist (UIM) insurance can help you out. Uninsured motorist coverage does not pay for the uninsured driver.

If the other driver's insurance refuses to pay or goes bankrupt, UM can pay your medical bills. It covers:

It's a good idea to include UM (Uninsured Motorist) coverage with your insurance. We suggest getting the same amount as your Liability Protection. For instance, if your Liability Coverage is $25,000 / $50,000, make sure your UM coverage is also $25,000 / $50,000. This way, you're protecting yourself just as much as you're protecting others with your liability coverage.

What is Collision Insurance?3

Comprehensive insurance protects your car from non-collision damages. Collision insurance protects you if your car hits another vehicle or object and causes injury.

Definition of Collision Insurance: Collision insurance is a component of your auto insurance policy designed to protect your vehicle from the financial fallout of accidents. These accidents typically involve collisions with other vehicles, stationary objects, or vehicle rollovers.

Coverage Focus: Collision insurance primarily centers on incidents involving contact. If you have a car accident and your vehicle gets damaged, collision insurance can pay for repairs or replacement, regardless of who is at fault.

Essential for Loan or Lease: If you have financed your vehicle through a car loan or lease, your lender may require you to carry collision insurance. If your vehicle sustains damage or is totaled in an accident, they want to safeguard their financial interest. It's not a choice; it might be a requirement.

What is a Deductible?

In insurance, a deductible is what you pay before your coverage covers the rest. It's your share of the bill for a claim. If you have a $500 deductible and claim $2,000 in damages, you pay $500 first. Your insurance covers the remaining $1,500. Deductibles help lower insurance premiums as you share some risks with the insurance company.

Is it Better to Have a $500 Deductible or $1000?

If you're more likely to get into an accident, you won't want to pay a higher deductible. But, if you're generally a safer driver, your car insurance premiums will be lower with a $1,000 deductible. 

If you have $1,000 or more saved up for emergencies, it's a good idea to choose a $1,000 deductible instead of $500 for your insurance. 

The cost of your insurance can be quite different between a $500 and $1,000 deductible, depending on your car and driving record. If you don't have any accidents for a few years, you can save a lot of money with a higher deductible.

What is Comprehensive Insurance?4

Comprehensive insurance, also known as "comp," is an important part of a complete auto insurance policy. It protects your vehicle from many types of accidents that don't involve crashing. Comprehensive coverage is different from collision insurance. Collision insurance only covers accidents with other cars or objects. Comprehensive coverage also covers accidents that don't involve a direct collision. This includes theft, vandalism, natural disasters, falling objects, and animal collisions.

Scope of Coverage: The safety net helps you in situations where there's no direct collision with another vehicle.

Examples of Situations: To make it clearer, let's consider some real-world examples. Imagine your car is parked outside, and a massive hailstorm damages the bodywork. Or perhaps a vandal decides to leave their mark on your car. In these situations, comprehensive insurance covers the repair or replacement costs.

Optional Coverage: Comprehensive insurance is an optional auto insurance policy component. This means you can choose whether to include it. But just because it's optional doesn't mean it's not valuable. Comp insurance can be a financial lifesaver depending on your location, the weather, and the security of your parking situation.

What Does Medical Payments (MedPay) Cover?5

MedPay, also known as medical payment coverage, pays for medical expenses after an accident, no matter who is at fault.

MedPay coverage pays for your medical bills and those of your passengers if you get injured in a car accident, no matter who caused it. It's often available in small coverage amounts, between $1,000 and $5,000. Please note that MedPay is not available in every state.

What is OCHO Plus?

OCHO Plus is our most basic insurance package, but it differs from the state minimum coverage or Liability only. 

We feel strongly about getting you the proper coverage to stay safe on the road. We give you more coverage as our minimum because state minimum liability insurance is not enough coverage to protect you. 

If you have state-minimum car insurance and hit an uninsured driver, you may be liable for all the expenses not covered in your policy. This means you may be expected to pay out of your pocket to cover the damage to your vehicle and yourself. 

This is a potential financial disaster that we want to help you avoid. OCHO recommends buying as much liability protection as your budget will comfortably allow. 

State minimum insurance is there to protect everyone else, not you and your family. 

OCHO Plus combines Liability with uninsured motorists and medical pay coverage to help provide more adequate coverage. 

This means you are covered for: 

What is full coverage?

Comprehensive and Collision insurance is commonly called "Full Coverage" and is typically purchased together. At OCHO, where transparency is our priority, we want to make it clear that there's no such thing as "Full Coverage." Every insurance policy has limits, meaning no policy can protect you from every possible loss. What some people call "Full Coverage" may still leave gaps in coverage for certain accidents. 

The definition of "Full Coverage" can vary among consumers. Some think it includes collision and comprehensive coverage, while others believe it should also have Roadside/Towing. 

To understand what's covered in your policy, it's important to have enough coverage in case of an accident, within your budget. It's crucial to know that the term Full Coverage can be misleading. Always check your plan carefully. We want you to make informed decisions about your protection.

What is the difference between OCHO Plus and OCHO Plus with Comp and Collision (C&C)?

OCHO Plus + C&C: Includes three coverages – Liability, Uninsured Motorist, and Comprehensive and Collision.

Comprehensive insurance protects your car from damage caused by theft, vandalism, or natural disasters. 

If your car gets damaged by another vehicle or object while you're driving, collision insurance would likely cover it. 

They offer more coverage for your car, handling both accident and non-accident damage. These insurance types can help you fix or replace your car in various situations, giving you more peace of mind.

Choosing the Right Coverage for Your Needs

Now that you understand the differences between Comprehensive and Collision Insurance, State Minimum, and OCHO Plus, how do you choose the right coverage for your unique needs? It depends on several factors.

Value of Your Vehicle: One of the primary factors to consider is the value of your vehicle. Collision insurance is often a wise choice if your car is relatively new, expensive, or still under a loan or lease. It provides peace of mind and financial protection in case of accidents.

Driving Habits: Your driving habits also play a role. If you live where extreme weather happens often, like hailstorms, or park on a high-crime street, comprehensive insurance is important. Check your daily driving routine and surroundings to make an informed decision.

Financial Situation: Consider your financial situation and how much you're willing to pay out of pocket in case of an incident. The deductible for collision insurance is typically higher than that for comprehensive insurance. Make sure you can comfortably cover these costs when choosing your coverage.

Costs and Premiums: What You Need to Know

Understanding how insurance premiums are calculated and what factors can impact the cost of your coverage is crucial to making an informed decision.

Key Points:

Premium Calculation: Insurance premiums are calculated based on a variety of factors, including your age, driving history, location, the type of vehicle you drive, and more. Comprehensive and collision insurance premiums can vary accordingly.

Deductibles Matter: The amount of your deductible also affects your premiums. Usually, if you choose a higher deductible, your premiums will be lower. However, if you need to make a claim, you will have to pay more money yourself. Lower deductibles mean higher premiums but less expense when using your insurance.

It's a good idea to shop around for insurance quotes and check out different insurers. Many companies offer bundling options and discounts to help you save on premiums while maintaining the coverage you need.

More Insights and Tips

To make the most of your comprehensive and collision insurance, consider these additional insights and tips.

Regular Reviews: Periodically review your insurance coverage to ensure it still meets your needs. If your car loan is paid off, you can change or cancel collision coverage if it's not needed anymore.

Bundle and Save: Many insurance companies offer discounts when you bundle your auto insurance with other policies like home or renters insurance. Bundling can lead to substantial savings.

Safe Driving: Maintaining a clean driving record can lower your insurance premiums. Be a responsible driver, and your insurer may reward you with lower rates.

In the world of car insurance coverage, knowledge is your most powerful tool. To protect your finances and have peace of mind, learn about different types of coverage and check your needs. When selecting insurance, think about the coverage choices that suit your car, lifestyle, and money.

Make sure to review your insurance regularly to meet your changing needs and best interests. By taking these steps and making informed decisions, you're a savvy driver and an insurance consumer. Drive safely, and may the road ahead be worry-free.

References

1https://www.forbes.com/advisor/car-insurance/types-of-car-insurance/

2https://www.allstate.com/resources/car-insurance/property-damage-liability-insurance#:~:text=It%20helps%20pay%20to%20repair,a%20fence%20or%20building%20front

3 https://www.libertymutual.com/vehicle/auto-insurance/coverage/bodily-injury-liability#

https://www.forbes.com/advisor/car-insurance/minimum-required-in-state/

5 https://www.progressive.com/answers/comprehensive-vs-collision-insurance/

6https://www.forbes.com/advisor/car-insurance/comprehensive-vs-collision-auto-insurance/

7https://www.progressive.com/answers/medical-payments-coverage/

8https://www.valuepenguin.com/what-full-coverage-car-insurance#

9https://www.marketwatch.com/guides/insurance-services/types-of-car-insurance/