Working as an auto claims adjuster has taught me the intricacies of purchasing versus using your car insurance coverage. There exists a yin and a yang when it comes to car insurance as people are often surprised by their own coverage choices and learn most about their policy only once they are in an actual accident!
Many people misunderstand how auto insurance works and I’d like to clear up some of the confusion.
Purchasing Car Insurance Coverage – Safety vs. Your Wallet
The common view is, auto insurance is forced upon us and must be purchased to obey the law and obtain the ability to drive a vehicle. Consequently, many people opt in for the cheapest coverage, prompting the lowest monthly premium and, of course, the feeling of being invincible along with the highest deductible possible.
However, did you know? There are more than 6 million car accidents in the United States annually. With that said, our natural instinct would be to protect our family and friends, and those around us, meaning we are likely to buy car insurance even if it wasn’t enforced by the law. Keeping your and your family’s safety in mind will help you choose the right kind of coverage versus the cheapest kind.
In my experience as an adjuster, unfortunately most people only learn about their coverages once they’ve been in an accident. Learning from experience is great, but not when it comes to lack of coverage when you need it most. It’s already tough enough to accept an “at fault” accident, and on top of that without collision coverage, in some cases you’re having to fork out repair and rental costs for the other person’s car and your own.
As a wise man once said, there are always consequences to your actions. Before you decide on which coverage to buy, ensure you play out all the potential consequences from the lack of insurance coverage.
Fault Determination and Who Takes Care of the Repairs?
Some states or provinces are what we call no fault insurance, meaning each insurance company covers their own insured vehicle repairs and/or injuries regardless of fault. Other states have tort law, where the insurance company at fault for the accident will cover the repairs of both vehicles.
The overall opinion is that the no fault insurance regime allows for a speedy claim, and also aims to reduce overall premiums. This type of insurance limits as to whether individuals can sue or attempt to recover additional costs from the person or the insurance company responsible for the accident.
Majority of people think insurance companies always go after each other for recovery on repairs or injuries. However that is not the case, some states with no fault insurance include Florida, Hawaii, Michigan, Ontario (Canada) and more. These states do not go after each other for specific expenses and simply cover their policy holders (providing the right coverage was initially purchased). Other states such as New Jersey for example, policy holders are allowed to choose between tort law and no fault insurance.
When purchasing your insurance coverage, I recommend researching the type of insurance regime in your state or province and determine what would happen should you get into an accident. Many wrongly assume the insurance company at fault will cover the repairs and unfortunately may end up with no coverage at all! Knowing how accidents are handled in your state or province will ensure a smooth and confident process should the unexpected happen to you. It’s extremely disappointing when an adjuster has to inform the policy holder they have no coverage due to lack of coverage or the policyholders’ poor coverage choices. It ends up being a poor experience for both the insurance company and the policy holder.
As for fault determination, the insurance company decides who is at fault for the accident. Fault determination rules, legislated in the given state or province, is what the adjuster goes by when determining which car is at fault. These rules are usually publicly available online.
Advice from an adjuster to a policy holder, knowledge is power, inform yourselves and you will hear the answers you want to hear.
Did You Know?
- A “hit & run” accident is covered under collision coverage. If you didn’t buy collision coverage and another car hits you and flees, your car may not be repaired by your insurance company.
- It’s usually up to you how high or low of a deductible you wish to have on your coverage. The amount of the deductible may impact your premium but be prepared to pay the deductible should you get into an accident.
- Not all insurance companies go after each other for recovery on costs.
- A flying object or hitting an animal falls under comprehensive coverage. When seeing an animal on the road unfortunately it is always advisable to hit the animal rather than swerve. Swerving may cause more damage to others and yourself. Should you swerve and hit a barrier, tree or any other object then this type of accident will fall under collision coverage and you would be at fault for the accident.
- Comprehensive coverage has no fault determination, you are never at fault when it comes to comprehensive coverage.
- In comprehensive coverage, the insurance company may subrogate the person/company at fault for the incident, meaning the insurance company may attempt to recover the costs. For example, if you car was damaged in a car wash, the insurance company will repair your car (assuming you purchased comprehensive coverage) and then attempt to recover the costs from the carwash company.