Car insurance basics

- So cars are something that usually involves some type of insurance. One cars are a pretty expensive asset that many of us own. The other issue is cars are driving around pretty fast and they can actually cause a lot of damage to property or to people. And so the first thing to think about of any type of insurance is what's the premium? What do you pay for that insurance? And then what's the deductible? Remember, in other videos we talk about that deductible. If you have a $5,000 deductible that means you have to spend the first $5,000 yourself. People will often say that's out of pocket and then the insurance kicks in. Usually the higher the deductible for a given amount of coverage or depending on the different dimensions of coverage, the lower the premium's going to be because the insurance company feels like, well, yeah it's gonna be less likely that we're going to have to pay for something. But then above and beyond premiums and deductibles there's a lot of different dimensions of automobile insurance. The first dimension is that of liability. And liability really matters because a car might cost tens of thousands of dollars but if heaven forbid you were to run into someone or cause damage to someone else, especially if they could get really hurt or worse you could be liable for hundreds of thousands of dollars. So it could be much more expensive than the car itself. And many states actually require you to actually have liability insurance, even if you aren't required, I highly recommend that you have liability insurance and no matter how carefully you drive and I do recommend you drive carefully, accidents do happen. People clearly get hurt on the road, and if someone were to sue you and you were to lose a lawsuit that would cost a lot of money. And even if you don't lose the lawsuit the legal expenses can be a lot. So having liability insurance can help out there. Now, beyond liability, obviously, what most people think of when they think of car insurance is your car gets into an accident, there is some damage involved, how do you repair that damage? So that is collision insurance and many car insurances, they'll say, "Okay, we're gonna cover liability for this much. We're gonna cover collision for this much. And that's pure if you get in an accident, you are covered for that." Now, sometimes there's another little piece called uninsured insurance, or if someone is underinsured or uninsured and your car gets damaged, well then, and really they were at fault. Some states don't try to say who is at fault and different people's insurance just covered their own stuff. But in other states they say, "Okay, who is at fault?" If let's say I get into a car accident with you, and if I was at fault, if they decide that I was at fault, then my insurance would have to cover not just the damage to my car, but to your car as well. But then if I wasn't insured, then you would have a situation where you have the underinsured or uninsured policy where if you get into an accident with someone who's not insured, even if they were in fault that it will still cover it. So you have the liability, you have the collision. If you actually get into an accident and there's damage, we could talk about if it covers the uninsured or underinsured side of things. But then what if a situation where you didn't get into a car accident, a tree falls on your car or hail damages your car, or someone steals your car? Well, that's comprehensive coverage. So collision is an accident. Comprehensive covers all of these other things. It is literally comprehensive. And then the last dimension is medical expenses. Obviously, none of us want to fall into one of these situations, but if you get into a car accident, it's not just your car that might get damaged, you or other occupants in your car or someone else's car might get hurt as well. And as you know, medical expenses, or maybe you don't know, medical expenses could easily be tens of thousands of dollars. It could be more costly than the value of the car itself. So once again, that's another piece of insurance. So when you get into a policy look at what you're paying, look at the premium and look at the deductible, but not all insurances are equivalent. Obviously, you have different deductibles but they all have different amounts. Some you should see whether your policy even covers, liability versus collision versus comprehensive versus medical expenses. What are the different deductibles? Do they have limits under those? Do they have certain restrictions where it might not apply? Does it apply if only you're the driver or someone else is the driver? So these are all the details that it's really good for you to know about when you're making insurance purchasing decisions.