Auto Insurance Basics

What is Auto Insurance?

Auto insurance is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses, whether you’ve caused those losses to others or yourself.

What is covered by a basic auto policy?

Auto Insurance provides the following coverage. Each coverage is priced separately.

  1. Bodily Injury Liability
    This coverage applies to injuries that you, the designated driver or
    policyholder, cause to someone else. You and family members listed on the policy are also covered when driving someone else’s car with their
    permission.
    It’s very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money. Definitely consider buying more than the Tennessee state-required minimum to protect assets such as your home and savings.
  2. Medical Payments or Personal Injury Protection (PIP)
    No fault, no questions asked minor medical insurance payable to anyone injured in your car including yourself. This coverage pays for the treatment of injuries to the driver and passengers of the policyholder’s car. At its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.
  3. Property Damage Liability
    This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else’s property. Usually, this means damage to someone else’s car, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures your car hit.
  4. Collision
    This coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. It also covers damage caused by potholes. Collision coverage is generally sold with a deductible of $250 to $1,000—the higher your deductible, the lower your premium. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you’re not at fault, your insurance company may try to recover the amount they paid you from the other driver’s insurance company. If they are successful, you’ll also be reimbursed for the deductible.
  5. Comprehensive
    This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, vandalism, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer.
    Comprehensive insurance is usually sold with a $100 to $300 deductible, though you may want to opt for a higher deductible as a way of lowering your premium.
    Comprehensive insurance will also reimburse you if your windshield is cracked or shattered. Some companies offer glass coverage with or without a deductible.
  6. Uninsured and Underinsured Motorist Coverage
    This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver.
    Underinsured motorist coverage comes into play when an at-fault driver has insufficient insurance to pay for your total loss. This coverage will also protect you if you are hit as a pedestrian.

Why do I need Auto Insurance?

It’s really about protecting yourself from financial disaster.

First of all, in the state of Tennessee, it’s the law. If you’re caught without auto insurance, you will face fines. You are legally responsible for the damages that you cause to others, whether you have insurance or not. Your minimum legal requirement is to have liability insurance. The Tennessee Code Annotated (TCA) 55-12-102(12) references minimum limits of liability for the state of Tennessee which currently are:

  • $25,000 for one injury or death
  • $50,000 for all injuries or deaths
  • $15,000 for property damage for one accident

While proof of auto insurance is not required to register a vehicle or obtain a drivers license in Tennessee, you are required to carry auto insurance in order to operate a motor vehicle on all Tennessee streets, roads, and highways. A conviction for failure to provide evidence of financial responsibility will be a Class C misdemeanor punishable only by a fine of not more than one hundred dollars ($100.00). Also, once the State is notified of a conviction, the violator’s drivers license will be suspended. For more information, visit the Tennessee Department of Safety website at http://www.tn.gov/safety/driverservices.shtml.

  • If you’re at fault in an accident without insurance, this can adversely affect your credit and cause you to have higher insurance rates.
  • If you’re in an accident or your car is stolen, it often costs a lot of money to fix or replace it.
  • If you or any passengers are injured in an accident, medical costs can be extremely expensive.
  • If you or your car is responsible for damage or injury to others, you may be sued for much more than you’re worth.

How can I get the best deal on Auto Insurance?

Johnston & Associates Insurance represents you, the client. Unlike a captive agent who only represents one company, independent agents offer a greater value by being able to quote your insurance among competing carriers, assuring you of the lowest possible premium available.

Questions to ask your agent:

How much can you afford to pay if you get in an accident? (To keep premiums low you may want to have a higher deductible and be willing to pay more for repairs.)

  • What is the insurance company’s level of service and ability to pay claims?
  • What discounts are available? Ask about good driver, multiple policy and student discounts, which can often reduce your premium by an additional 20%.
  • What’s the procedure for filing and settling a claim? (Ask who to call and what happens after you file a claim.)