Over the last year, you’ve probably been subjected to more insurance commercials than any other product; other than possibly beer and cars. Imagine how much you would know about auto insurance if they had actually contained useful information. Instead they seem to want you to believe that all you have to do is switch carriers and you’ll save hundreds of dollars. Unlike the beer and car commercials, the main message you’ve heard for auto insurance is that “cheap is good”.
In 2009, there were 10.8 million automobile accidents in the United States.  They resulted in 33,808 fatalities. When deaths occur people become emotional. People sue because they’re angry and need resolution. With that many accidents and deaths you would think everyone would be aware of the acute need to protect your assets through auto insurance, yet in 2012 a startling 16.1% of drivers were uninsured. 
People say they don’t carry auto insurance because it’s too expensive or they can’t afford it. There doesn’t seem to be a huge amount of concern over this number of uninsured drivers that is reflected in enforcement of the statute requiring coverage.  At the same time we have almost endless concern over the 16.7% of people who don’t have health insurance.
I won’t get into that debate here, but will offer an opinion that improper or inadequate auto insurance can be just as devastating as a similar lack of health insurance.
Recently a $4.25 Million pre-trial settlement was reached for a forty-four year old man who was in a motor vehicle accident, who had a back injury (with minimal treatment) which ultimately required surgery.  The defendants’ attorneys and the insurance company initially argued that these were mere “soft tissue” injuries in an accident that required no towing, no ambulance, and no emergency room care. They also stated the claimant returned to work shortly after the accident, and that the surgery was not related to the accident.
This is not a typical loss. In my five decades in this business the largest auto related loss I’ve seen has been in the $1 million area, but I’ve seen quite a number of those. Usually large losses will occur if there is a death leaving young children needing support, or if the injuries are permanent and limiting. However, the above loss does illustrate that large losses do occur under circumstance when you would think the loss would be much less.
If you have assets to protect, or if you think you will have a fairly good chance for a strong income flow in your future years (including a potential inheritance), you should value “adequate” far more than you do “cheap.” Motions to set aside court awards are rare; and judgments are seldom vacated because the courts wish to retain “finality of judgment” after due process.
Step one in obtaining a good value in car insurance is to find someone who is knowledgeable to help you through the process. Auto insurance does not come in a box with easy-to-assemble instructions.
In the early 90’s I was invited to a luncheon that featured the founder of the University of Phoenix, John Sperling. He was asked if everyone should attend a virtual college.  His answer was surprising. “I believe,” John Sperling stated, “that 75% of what a person learns at a four-year, brick and mortar college is social. Therefore, if a person can afford it, they should attend a traditional institution.”
Like Mr. Sperling I don’t think EVERYONE needs to use an insurance agent. If your assets and probable future income is limited and you have a broad knowledge of insurance products and law, you might be better served buying direct from a company. That is because under those conditions you’re probably buying coverage purely to satisfy a statutory requirement. The more companies (direct or through agents) who quote your insurance, the more likely you will receive the best value.
Progressive sells auto insurance through independent insurance agents and also direct through its website and call centers. For years Progressive published their expense ratios for their two distribution channels. There was very little difference between what it cost Progressive to acquire and service business between agency generated and direct business.
It follows, logically, that there is very little savings to be had by buying direct from an insurance company. Somebody has to do the work of selling and gathering information, and those people need to be paid, whether they are in-house employees or independent agents. The difference in premiums the various companies charge is based on their underwriting philosophies.
The primary issue you and your agent need to weigh is the amount of auto liability limits you need to carry.
Liability is protection against an amount of loss you might suffer because you are deemed responsible for bodily injury or property damage to someone else or someone else’s property through the ownership, maintenance, or operation of a motor vehicle.
What constitutes a bodily injury?
If someone is hurt as the result of an accident for which you may be held liable, that person’s damages may include:
- Medical and hospital bills
- Past and future wage losses or earning capacity
- Costs of ongoing care
- Damages for an inability to participate in the activities enjoyed prior to the injury
- Funeral expenses
What does property damage coverage involve?
Property damage can involve incidents with another car, or someone’s house, tree, fence or other possessions.
If you have an auto accident, a lawsuit may be filed against you. Property damage coverage can provide you with legal protection.
Each state has required minimum statutory limits of liability. For example, my state of Minnesota requires $30,000/$60,000/$10,000. Those are ridiculously low limits, even though they’re about middle of the pack for the limits required by most states. Our neighbor state of Wisconsin has some of the highest required limits at $50,000/$100,000/$55,000.
Even Wisconsin’s required limits are problematic when you consider what is at stake. Their required limits of $50,000/$100,000/$55,000 mean you need to purchase a minimum of $50,000 per person bodily injury, $100,000 per accident bodily injury and $55,000 per accident property damage.
It takes very little in the way of injury to exceed $50,000 per person. A few years ago my heart stopped. Luckily I was in an ambulance when it happened. A wonderful EMT did the necessary to save my life. The next four days I went through surgery and recovery at a cost of over $80,000. Four days in the hospital = $80,000.
The next time you’re on the highway consider the cost of a semi-tractor-trailer unit. A new tractor can easily cost in excess of $200,000. Add in the cost of a trailer and its cargo and you can readily see that an accident you cause that destroys one of those units would render property damage limits of $10,000 (as required in Minnesota, or even $55,000 as required in Wisconsin) woefully inadequate.
About two dozen states require property damage limits of $10,000 or less. While driving, take a look at the cars around you on the highway and decide how many of them could be replaced for $10,000.
Yet, lawmakers have a tough time passing higher requirements because industry and consumer groups oppose them.
Higher limits are usually sold for less than you’d think. If you are carrying $100,000 per accident limits on a single unit auto policy, it would be surprising if the cost to raise that limit to $500,000 would exceed $150 per year.
Most people should consider an excess limits policy that would sit on top your auto policy, offering (normally) $1,000,000 in additional coverage. These can be purchased in much higher limits.
The next most important consideration is your uninsured and underinsured motorist coverage. A large percentage of people carry the minimum limits required by the state on their vehicles. During tougher economic times the percentage of people carrying minimal coverage goes up.
Uninsured Motorist Insurance
Uninsured Motorist insurance protects you from those drivers that do not have liability insurance.
Underinsured Motorist Insurance
Underinsured Motorist insurance is insurance coverage that protects if you’re involved in an accident with someone who does not have enough liability insurance to pay for your damages. If you make the decision to carry $250,000/$500,000 bodily injury liability limits it would seem logical to similarly protect your assets by carrying $250,000/$500,000 U/M and U.I.M. limits. You don’t want someone else’s decision to carry low limits (or no insurance) to mean financial disaster for you.
Medical Payments Insurance
Medical Payments Coverage protects you (as the policyholder), your family members, and your passengers in your vehicle, other vehicles or as a pedestrian. Medical Payments Insurance is typically one of the least expensive auto insurance options, adding only a few dollars to your monthly premium.
Loan/Lease Payoff Coverage, otherwise known as GAP coverage, covers the difference between the Actual Cash value and the amount owed on the auto to a finance company. It might also pay the deductible for your other policy under Comprehensive or Collision.
You need to have extended discussions with your agent regarding GAP insurance to protect yourself from coming up short on a physical damage loss to your car, especially if your car is newer. GAP will pay the difference between Actual Cash value, which is what you will receive from your insurance company on a comprehensive or collision loss and the amount you owe the finance company.
Personal Injury Protection (PIP)
You should also discuss PIP coverage if you’re in a “no-fault” state. PIP will pay for your personal medical expense, loss of wages, and other such losses should you be injured in an auto accident.
If your car is ten to fifteen years old or newer, older and in excellent condition, or financed, you will want to purchase Collision and Comprehensive coverage. Collision is an accident with another vehicle or object. Comprehensive is sometimes called Other Than Collision. This is usually fire, theft, glass coverage, or an accident involving an animal such as a deer. Collision and Comprehensive coverage involves a deductible. Your premium will be reduced as you raise your deductible.
Loss of use and towing coverage can also be purchased.
Collision coverage will pay the loss sustained in a collision with a vehicle or object. The loss will be paid on the basis of actual cash value, which is the replacement cost less depreciation.
High Risk Insurance
Realize that one serious offense, such as driving under the influence of alcohol or drugs, could vault you into the category of what is known as a non-standard or high-risk driver. The impact of this action is that you could have a policy that is three times as costly as the policy your friend has, because she has a good driving record.
The SR-22 certificate is a financial responsibility certification that is sometimes required for high-risk auto insurance customers. Depending on the severity of an offense, typically drivers are required to have SR22 filings for as long as three years after acquiring it. Without it, your license may be suspended for failure to submit an SR-22 within 30 days after the state’s request for proof that you follow the state’s financial responsibility insurance requirements.
Young Driver Insurance
The State of Oklahoma states that 25% of sixteen-year old drivers either receive a traffic ticket or are involved in a crash. 
In the insurance industry we have a saying that if your youthful operator hasn’t had a violation or an accident . . . just wait. It seems to be a rite of passage.
Obviously, these young drivers need to carry insurance. Some people faced with the increased cost to their insurance make the immediate error of trying to save money by carrying minimal limits. Youthful operators pay more because insurance companies pay out a lot more for the accidents caused by youthful operators.
Classic / Collector Car Insurance
“Classic” cars include antiques, collectibles, vintage, modified, muscle cars, street rods, hot rods, and retired models. These vehicles normally are not used for daily transportation. They can be authentic or replicas.
Drivers of classic cars must be especially careful. Classic cars often lack what are now considered basic safety features, such as seat belts and shatterproof glass.
Trucks and trailers need auto insurance. Although not a universal rule, a pick-up is considered a truck when its gross vehicle weight is above a certain level (in some states 8,000 pounds) or it is classified one ton or larger.
Premium is based on such things as: driver’s information, radius of operation, vehicle description, vehicle cost new, current vehicle value, garaging location, loss history, deductibles, coverage limits and commercial use.
Car Rental Insurance
Generally a well-insured driver can rest easy because his own policy extends to the rental car. However, there may be gaps, which should be discussed with your insurance advisor. Some credit card companies will pick up some of the gaps when their card is used to rent the vehicle.
In 2012 there were 10.8 million owned motorcycles in the United States with 5,027 deaths attributed to motorcycles. 
All states but one require that motorcycle owners carry liability insurance. Yet a recent study by a hospital showed that only 46% of those injured in a motorcycle crash had insurance.
Less powerful two and three wheel scooters account for 3% – 5% of motorcycle traffic deaths. These scooters may or may not require insurance. Political subdivisions have become increasingly stringent on the definition of a “motorized vehicle” especially in regards to drinking and driving laws.
Short Term Car Insurance
Short-term, or temporary, car insurance may be purchased for a period of 1 day to 8 months. You might purchase this if you’re going into another country or if your vehicle has seasonal usage. You might also buy short term insurance, if you’re borrowing a friend’s car. Most commonly it is purchased when you rent a car.
Snowmobile Insurance might seem inconsequential in many states, but in my home state of Minnesota we have over 250,000 registered snowmobiles.
Snowmobiles are considered motorized vehicles and often are added to auto policies. The considerations for snowmobile insurance are much like those for auto insurance.
RV / Motor Home Insurance
Recreational vehicles and motor homes are considered motorized vehicles and often are added to auto policies. The considerations for their insurance are much like those for auto insurance. Eight million U.S. homes own at least one RV.
Do you remember when you were a kid in school and you were required to have a note from your mother to skip gym. Proof of insurance (POI) is like that. You should carry proof of your auto insurance with you at all times – either in your vehicle or on your person. It’s the law in many states and most people are aware of this. It’s second nature to keep proof of insurance in your car. Like that note from your mother, you’d better comply.