Whether you’re new to your career as an agent or are looking for a refresher, it’s important to know about car insurance coverage types to discuss with your clients. You cannot properly advise policyholders without knowing your business well, so take time to refresh your knowledge regularly.
Read about car insurance coverage types to review with your clients to prepare for your next policy renewal or new business conversation.
Six Car Insurance Coverage Types to Review
Review these six broad auto insurance coverage types and their associated limits to recommend to your customers:
1.) Liability Coverage
Most states require drivers to carry minimum liability limits to drive in the state legally. Liability coverage helps handle damages to third parties — not the insured — and only up to the policy limit. The coverage includes two parts:
- Bodily injury liability coverage helps to cover other people’s injury damages caused by the insured.
- Property damage liability coverage helps pay for damages to other people’s property caused by the insured.
The state-required minimum limits may be lower than you should recommend to your policyholders. For example, California requires drivers to have bodily injury liability limits of at least $15,000 per person and $30,000 per accident. The required property damage liability limits are only $5,000. This may not be sufficient coverage if an insured causes significant damages to another vehicle.
If your insured has a high net worth, they may be at risk of losing their assets if they don’t carry sufficient third-party liability limits. Be sure to review these risks and recommend an umbrella policy if you feel your client needs additional protection.
2.) Collision Coverage
Collision coverage is optional coverage. However, lienholders and leaseholders usually require consumers to purchase collision coverage to protect their investment in the vehicle. Some drivers elect to drop their collision coverage once they have paid off their car loan. Be sure to counsel your policyholders about the risks they assume if they decide to remove their collision coverage to lower their premiums.
Collision coverage is a first-party coverage designed to pay an insured for damages to their vehicle caused by a collision with another vehicle or a fixed object. Most policyholders have a deductible on their collision coverage.
3.) Comprehensive Coverage
Like collision, comprehensive coverage is usually optional coverage unless a lender requires it. But it’s helpful coverage for policyholders to have. Comprehensive coverage helps pay for damages caused by incidents other than collisions. This could include fire, hail damage, partial theft, damage caused by animals, and vandalism. The comprehensive deductible applies to claims an insured makes under this coverage.
4.) Uninsured/Underinsured Motorist Coverage
Abbreviated UM/UIM, uninsured and underinsured motorist coverage protects your insured from the possibility of an accident with an uninsured driver — or with one with very low coverage limits. If your insured is in an accident and their damages exceed the at-fault driver’s limits, they could make a claim under their UM/UIM coverage. This is helpful coverage to recommend, especially if your insureds live in a state with low required state minimum limits.
5.) Medical Payments Coverage
MedPay, or Medical Payments Coverage, is a first-party coverage designed to help cover medical costs from injuries sustained in a car accident. The coverage is usually not expensive but can be valuable for policyholders. Some states require drivers to carry MedPay; in others, it is optional.
6.) Personal Injury Protection Coverage
Personal injury protection (PIP) coverage is only available in some states. PIP also covers first-party medical bills related to an auto accident, like ambulance, ER, or follow-up care visits. But PIP limits are usually higher than MedPay, and PIP can cover some additional costs, like lost wages, funeral expenses, and other expenses incurred due to the accident. Some states allow drivers to purchase both PIP and MedPay.
Stay Current With Resources From the American Agents Alliance
Agents and brokers need to stay current on trends and changes in the auto insurance industry to properly advise their policyholders, including on auto insurance coverage types. Join the leading industry group, the American Agents Alliance, for more helpful resources like this to keep you up to date.
Become a member today for access to exclusive member benefits and valuable discounts. While at it, review your own E&O coverage to ensure your limits and policy continue to suit your growing agency. You can get a free quote anytime from us to check if you could be getting a better rate.