Auto Insurance Expert Jay Davis answers your questions. How much auto insurance should you have? How do you decide how much car insurance to buy? What if the other driver is uninsured in a car crash? And the question we all struggle with, when I rent a car do I buy the extra insurance the rental car company offers?
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Other Frequently Asked Questions
How much insurance should I get?
You should get as much insurance you can afford to protect you and your assets.
What are the different parts of an auto policy?
In the state of Kansas, there are three mandatory requirements: Liability; Underinsured/No Insurance Medical; and Personal Injury Protection. Liability protects the other person, UM/UIMBI protects you, and PIP protects you as well.
Optional coverages required by lienholders are Comprehensive and Collision Coverage. These two have a deductible, meaning you will pay an agreed amount of the first portion of the claim. Most deductibles are $500 to $1,000 but can be higher, depending on your comfort level.
Comprehensive coverage provides coverage for things normally beyond your control: hail; theft; collision with an animal or bird and so forth.
Collision coverage implies you hit something: a vehicle; a lamppost; or the pavement. If someone hits you and leaves the scene of the accident, it would still be considered a collision but this type would be coded as fault-free.
There are other optional coverages such as towing, Glass Deductible buyback, rental reimbursement and other coverages that can be tailored to meet your specific needs.
What is PIP?
PIP stands for Personal Injury Protection and is mandated by the state of Kansas. This is why Kansas is considered a No-Fault State. Because it will pay expenses regardless of who is at fault. If you are involved in an accident, whether you are the driver, passenger, or a pedestrian, you would turn in a medical claim to your insurance company and get medical help. The state minimum requirement is $4,500 and provides medical expenses up to those limits. It also includes lost wages and funeral expenses.
What happens if someone hits me that doesn’t have insurance?
If you are involved in an accident and the other person who is at-fault does not have enough or no insurance to cover your medical expenses, then your insurance policy will cover your medical expenses up to your limits you have agreed to.
What’s a policy limit and what does that mean?
The limit on your policy states the maximum amount your insurance will pay, up to the stated amount. If the claim is more than that, then you will be responsible for the remainder of the settlement from your own net worth.
Is the minimum amount of car insurance required by my state enough?
It is my personal opinion that the minimum state requirement is inadequate. State minimum coverages are 25/50/25. This means that you are only required to have enough coverage to pay for medical expenses per person of $25,000 or a maximum per accident of $50,000. The last amount is property damage or for the vehicle. An average hospital stay for one day is $15,000. The state minimum will be exhausted very quickly. Ask yourself how many cars you pass on the road today that cost more than $25,000? But the state minimum is still better than nothing.
What does deductible mean and how do I figure how high a deductible I should have?
A deductible is basically your out of pocket expense you will pay before the car is returned to you. Insurance has moved from taking care of minor scratches to catastrophic losses. Therefore, the higher the deductible the lower your premium will be. My recommendation is a deductible that satisfies your lienholder requirements but will also be in the range where you can pay for it without putting yourself in a financial burden.
When do I no longer need full coverage on my vehicle?
That is a question that only you can answer. There are several factors one needs to determine before answering that question. First, if there is a lien on the vehicle the lending institute normally requires they are listed on policy. If the vehicle is paid off, then you must ask yourself if I am involved in an accident and it is my fault, “Can I walk away from the vehicle and not feel a financial hardship in replacing that vehicle?” The third factor you need to consider is if you have “liability only”, then your current insurance cannot represent you and you will have to go to small claims court or seek an attorney to represent you.
What’s it going to cost me and how is the premium calculated?
There are several factors that determine the rate: the type of vehicle; your credit score; your driving history; your age; the number of vehicles being insured; the number of drivers as well as the specific coverages you need to be adequately insured.
What kind of car insurance discounts are there?
I cannot speak for every company but Farmers Insurance has found that certain occupations and degrees help to determine their driving habits. We provide discounts, to name a few: Accountants; Attorneys; military; scientists; doctors; nurses; teachers; police officers; firefighters and dentists. We also provide discounts if you bundle your auto with your home, life and boat insurance. Students that have a 3.0 GPA or better receive a substantial discount.
We also have an app that provides a discount if you limit your texting and driving. This has a greater discount for youthful drivers but us seniors can also benefit from it.
Do you have accident forgiveness?
Yes. Farmers Insurance provides Accident and Incident Forgiveness and can be endorsed on new and existing business that have been accident free the past three years.
I have not had an accident or speeding ticket for several years. Why did my insurance premium increase?
Cars on the road are safer now than ever before. We are seeing fewer accidents. However, the accidents are more expensive due to the cost of the vehicles and the safety features built into the vehicles. My first pickup I purchased off of the lot in 1979 cost less than a used vehicle today. When you pay your insurance, those factors: Vehicle costs; repair costs; the number of vehicles on the road; the likelihood of damage a particular vehicle make would cause is all factored in.
Should I get an umbrella policy?
This depends upon your net worth. If you have assets above current liability coverages on your auto, then I would consider an umbrella policy. An umbrella policy is the second cheapest way to protect your net worth. Let’s think of defense strategy of protecting yourself against a lawsuit. The first line of defense is your auto liability amount. When that amount has been exhausted then it moves to your second line of defense, the umbrella. After that, would be your assets. The more defenses that can be put between the lawsuit and your assets, the more secure you become. By the way, cheapest way to protect your assets is to maximize your auto liability coverages. Maximizing your liability coverage will cost an additional $20 to$25 per vehicle per six months.
Can you tell me once and for all if I need rental car insurance?
Most insurance companies extend current coverage to rental vehicles, with restrictions. Most insurance companies do not cover rental vehicles out of the United States. Another area your personal insurance does not cover is loss of use. While the rental is in the shop to be repaired, the rental company can charge you for the days it is in the shop. Many credit card companies provide coverage for loss of use if using their card to rent a vehicle. Personally, I do not use the rental insurance from the rental company unless I am renting a vehicle out of the country or in a high traffic area like Washington DC. Instead, I lower the deductible on my vehicle as low as I can and add rental reimbursement because in the event of an accident, I will have to pay my deductible.