Insurance 101: What Does It All Mean?
Let's just get it out there. Insurance can be boring. And confusing. And exhausting. If you've ever actually read your insurance policy (which I would guess 95% of you haven't) then you know that the language used can sometimes require a dictionary, an encyclopedia, and an insurance professional just to make it through the opening paragraph.
And so, here at Smart Insurance, we've decided to take you to insurance school in order to break down some of those insurance terms and coverages that you deal with every single day, but you may not properly understand. We all spend plenty of money each year on insurance (us included) so it only makes sense that we should try and understand what we're spending our money on.
First up, auto insurance. But let's break it down even further. Let's talk about the liability portion of your auto policy, or maybe you think of it as JUST THE MINIMUM. You know, the coverages REQUIRED by the state of Missouri.
There are two different types of liability:
1. Bodily Injury: This coverage covers the injuries sustained by the OTHER driver & their passengers if you are in an AT FAULT accident.
Bodily injury coverage can pay for medical expenses (hospital visits, doctors appointments, therapy, follow-up care that comes as a result of the accident), legal fees (if for some reason the situation warrants a legal presence), pain & suffering (in the instance that the other party feels emotional distress or other lingering injuries), or even funeral costs if the unthinkable happens.
For the state of Missouri, individuals are required to carry bodily injury limits of $25,000 per person & $50,000 maximum per accident. This will typically be shown as 25/50 (in thousands) on your insurance policy and these are the MAXIMUM amounts that the insurance company will pay on your behalf. For any damages/injuries that exceed these amounts, you could be required to pay for these damages out of your own pocket. Note: These are just the state requirements for insurance. At Smart Insurance, we recommend that you carry limits higher than this (50/100; 100/300; 250/500), and would be happy to discuss what is appropriate for your individual situation.
Bodily injury DOES NOT provide any coverage for your own PERSONAL injuries or lost wages; or those of your own passengers.
2. Property Damage: This coverage will repair the damage done to another's property (vehicle, fence, building, etc.) if you are at fault.
Property damage coverage will pay for another's property that is damaged as a result of your accident. Most typically, this would be another's vehicle; but there are plenty of instances where this coverage has paid for a fence, a sign, or a structure such as a commercial building or private residence. Think about those unfortunate times when someone accidentally hits the gas instead of the brake...Whoops!
In auto insurance, your liability limits will typically be shown as 25/50/25 (in thousands). The first two numbers refer to the bodily injury coverages listed above, while the third number refers to property damage. In the state of Missouri, the property damage minimums were just increased on July 1, 2019 to $25,000 per accident. Again, this is JUST the state requirement and is not necessarily the recommended coverage as $25,000 will not provide adequate coverage for most newer model vehicles on the road today (especially when Kelley Blue Book states the average cost of a brand new vehicle today is over $35,000)
In addition to the two types of liability coverage listed above, personal auto policies in Missouri may also include the following coverages:
1. Uninsured Motorist (UM) Coverage: Uninsured motorist coverage is required by the state of Missouri. This coverage is to offer YOU medical coverage in the case that you are hit by an uninsured motorist. UM coverage does NOT automatically cover property damage to your own vehicle; however, some carriers may offer this as an endorsement available at the insured's request. The state of Missouri requires you to carry limits of $25,000/$50,000 for UM coverage; but is typically matched to your standard bodily injury & property damage limits.
2. Underinsured Motorist (UIM) Coverage: Underinsured motorist coverage is not required by the state of Missouri. However, many drivers are on the roads today with ONLY the state minimum coverage, and as you can see from those numbers---it doesn't take long today to quickly surpass those amounts. Trust me, you would be TERRIFIED to know how many drivers are on the road each day with NO COVERAGE AT ALL. UIM coverage provides a second layer of protection in the case that the at-fault driver's insurance limits are not enough to cover the total amount of injuries---hello AMBULANCE RIDE$$$$! This coverage mirrors what is covered by bodily injury liability and also typically matches the bodily injury limits as well.
3. Medical Payments: Medical payments are NOT required by the state of Missouri. However, here at Smart Insurance Agency, we offer medical payments for all personal auto policies unless specifically excluded by you, our insured. While this coverage is not meant to replace health insurance, it provides a minimum amount of immediate coverage for the insured, along with each passenger in the insured's vehicle. Medical payments coverage is typically a smaller amount ($1,000-$10,000) per person and is ONLY available for medical expenses (or possibly funeral costs).
Whew...that was a LOT. If you're still with me, give yourself a pat on the back and go get a snack! However, we hope you have a little bit better grasp on these coverages that are REQUIRED by the State of Missouri, but also some of those coverages which can better protect your assets & your loved ones. Next up...we'll talk about coverage for YOUR car which typically is described as full coverage or comprehensive/collision!
Not sure if you've got sufficient coverage? Have even more questions? Make sure you contact our office @ 417-258-2541 or click the CONTACT US button to reach out!
*Statements on this website as to policies and coverages and other content provide general information only and we provide no warranty as to their accuracy. Clients should consult with their licensed agent as to how these coverages pertain to their individual situation. Any hypertext links to other sites or vendors are provided as a convenience only. We have no control over those sites or vendors and cannot, therefore, endorse nor guarantee the accuracy of any information provided by those sites or the services provided by those vendors.