Getting a car insurance quote isn’t as simple as it was only 5 years ago. Every insurance company now uses many facets of your personal consumer report (read credit report), as well as the usual driving violations, accidents and type of car. You do not have to sign anything for the insurance companies to look at your credit information, as it is a soft hit on your credit report. If you get car insurance quotes from 5 companies, your credit report or FICO will not be impacted. It is similar to the hit on your credit report when you receive pre-approved credit card offers from banks in the mail. So the days of thinking that my neighbor and I drive the same type of car and should pay the same car insurance premiums, are long gone. Rates can be more than $100 per month higher for people the same age driving the exact same car, depending on their personal information, driving history and consumer report.
Insurance companies will need obscure information like the age, 14 to 17 years old for most people, you were originally licensed to drive. They will also ask more relevant information like: your driver’s license number, social security number, date of birth, how far you drive each day to work, if there is a loan on the vehicle. The insurance company will usually be able to pull your motor vehicle record from the state, as well as all your violations and accidents. They will also be able to see your prior and current car insurance provider, unless your current provider is a very small insurance company.
Now, let’s discuss auto insurance coverage and why going with the cheapest quote is not always the best decision. Always make sure your insurance agent is ready and willing to discuss and educate you on the insurance coverage you are buying. The most common coverage will usually look like this: A 100/300/100, C $10,000, D $500 deduct comprehensive, G $500 deduct collision, ERS, Rental, U 100/300, W 100/300. This has been the standard car insurance coverage for the last 40 years. I will break these coverages down with more detail.
Coverage A is bodily injury liability. This does not cover you or family (resident relatives). The 100/300/100 represents $100,000 potential payment to someone you injure based on your negligence with your vehicle. $300,000 is the most the insurance company will pay cumulatively for any one accident. Ex: you slide through a stop sign and hit a car with 4 people in the vehicle, each person in the vehicle is injured badly and deserves the $100,000 limit per person the insurance company will, but since $300,000 is most per accident, then the 4 people will have to split the $300,000 from the insurance company. The injured people can then sue you personally for additional monies they may be entitled to. That is why this common coverage was ok 40 years ago, but needs to be increased to a minimum 250/500/100. Preferable would be $1 million for liability, especially if you have any measurable assets or have a high income job. Believe me; people will not hesitate to sue beyond the insurance company maximum limits if you have assets they can get or a high income that can be garnished from the court. This coverage is mandatory by the state of South Dakota, but at minimum coverage 25/50/25 which is $25,000/$50,000/$25,000. If you are driving a car that doesn’t have this minimum coverage, and you get pulled over by the police or any reason, your car insurance rates will be very, very expensive when you do purchase auto insurance.
The last 100 number (sometimes referred to as B coverage) in the string 100/300/100, also represents $100,000, but this amount is for property damage – not injury to a person. Ex: You lose control on ice on I29 and force a semi to avoid you and the semi goes into the ditch and overturns. Your vehicle is not damaged at all, but you will still be considered negligent for losing control and will have to pay for the property damage caused by your negligence. The damage to semi-tractor, the trailer (including the contents of the trailer), and signs and fence is all considered property damage. The total damage is $175,000. The insurance company will pay their limit of $100,000 and you will be responsible for the remaining $75,000. Again, this judgment could be financially life changing. That is why I feel higher limits are appropriate. This coverage is also mandatory by the state of South Dakota.
C $10,000 refers to a coverage know as medical payments coverage or medical coverage. Anyone in your vehicle that is injured under a covered loss is entitled to a maximum of $10,000 for incurred medical costs relating to the injury sustained in the accident. There is no deductible associated with this, so the insurance company pays from the first dollar billed. This coverage is optional and you can choose to remove it. You can also choose other amounts like, $2k, $5k, or $25k.
D $500 deductible comprehensive is physical damage coverage for the vehicle you own and insure. $500 deductible is the amount you pay out of your pocket before the insurance company pays anything. If the cost of repairs to your vehicle is less than $500, then there is no reason to turn the claim into your agent. You can choose other deductibles like, $100, $250, $750, $1,000 or even $2,000. This deductible is not like a health insurance deductible, in that each visit to a doctor which you pay for accumulates until you reach the $1,000 deductible. A car insurance deductible applies to each incident. If you hit a deer and the repairs are $3,500, then you pay $500 and the insurance company pays $3,000. If your car is hailed on the day after you get it back from body shop repair for the deer, then you pay another $500 to fix the hail damage and the insurance company will pay the remainder of the bill to fix the hail damage. The most common reasons that this coverage come into play are: hail, wind damage, broken glass, falling objects, vandalism, fire, flood, theft, you hit a deer or other animal. If you have a loan on your vehicle, your lender will most likely require this coverage.
G $500 deductible collision is also physical damage coverage for the vehicle you own and insure. Deductible options are the same as the comprehensive coverage details above and your lender will also require this coverage. The covered losses for collision are different than comprehensive coverage. Collision coverage pays for damage to your vehicle if your vehicle has a collision with another vehicle, regardless of which driver is at fault. You can collect directly from the other driver’s insurance company if they are at fault, but you always have the option to go through your insurance company, pay your deductible and then let your insurance company subrogate (fancy word to collect money) the insurance company for the at fault driver. If you hit a tree, a parking lot pole, something lying in the road or a curb, then these accidents will paid under your collision coverage. Mechanical failure and routine maintenance is not covered under either comprehensive or collision coverage.
ERS is emergency road service. This coverage is similar to AAA towing card that many people have. If your car breaks down, gets stuck or needs a jump, then the insurance company will pay the tow truck. Locking your keys in your car is also part of this coverage.
Rental refers to a rental vehicle for you to drive when your insured vehicle is at the body shop for repairs relating to a loss covered by your car insurance policy. If your head gasket is leaking and you take it to a mechanic for 1 week while he repairs your worn out head gasket, then you do not get a rental car from your insurance company. Mechanical failure is not covered under your car insurance policy.
U 100/300 represents bodily injury to you regarding uninsured motorist coverage. This coverage is very similar to bodily injury liability coverage discussed earlier, but this is for your bodily injury. If a negligent uninsured driver causes injury to you, then you can claim bodily injury and collect from your own insurance company up to $100,000.
W 100/300 represents bodily injury to you regarding underinsured motorist coverage. Same as above, but the negligent driver that hit you has the South Dakota minimum liability coverage which $25k/$50/$25k. If your personal bodily injuries are severe enough, you will be able to collect $25,000 from the at-fault driver’s insurance company. You will also be able to collect $75,000 more from your insurance company to reach your $100,000 underinsured limit.
South Dakota does not have uninsured property damage coverage, so you must go through your own insurance provider and pay your deductible to fix your car when an uninsured motorist causes damage to your car. If you decided not to carry collision coverage to save money, then you are out of luck. Small claims court will the best way to get the money to repair your vehicle, but usually if the person does not have car insurance then they won’t have any money to pay the judgment you receive against them in small claims court. A very unfortunate situation that happens way to frequently.