By Sonya Sellmeyer, Consumer Advocacy Officer for the Iowa Insurance Division
Auto insurance is a contract between an insured and an insurance company that provides protection against financial losses in the event of damage to a vehicle, medical costs for treating injuries, damage to someone else’s vehicle or property, and liability protection if you are at fault for an auto accident.
An auto policy may be purchased directly from the company or through a licensed insurance agent. The agent may be an independent agent appointed with numerous companies allowing them to offer multiple premium quotes or a captive agent that only writes for one company. When an insured applies for auto insurance, companies use underwriting, which is the process of determining the risk and exposure associated with an insured. The underwriting process determines the amount of coverage and the monthly or annual cost of the policy, also known as the premium.
All auto policies list the coverage limits on the declaration or “dec” page at the beginning of the policy. It also lists the dates of coverage, drivers and vehicles insured, and the deductible or the amount of money the insured must pay before insurance makes a payment on a claim. A higher deductible may equate to a lower premium.
There are four main auto insurance coverages to understand. Physical damage includes collision and comprehensive coverage. Collision coverage pays to repair a vehicle if it is damaged due to an accident with someone else or an object. An insured may use their collision coverage whether or not they are at fault but must pay the deductible. Comprehensive coverage, also referred to as other than collision coverage, pays for damage such as hail, vandalism, animal contact (deer), theft, and fire. Both of these coverages may be required if there is a lienholder on the vehicle.
Liability coverage offers protection if you cause an accident, and there is damage to someone else’s property.
Medical payment coverage may pay you and your passenger’s medical bills regardless of who is at fault. Bodily injury coverage may pay for medical bills for people who are injured, not including yourself, if you are at fault. Iowa law requires minimum liability coverage for $20,000 of bodily injury to or death of one person in any one accident; $40,000 because of bodily injury to or death of two or more persons in any one accident; and $15,000 because of injury to or destruction of property of others in any one accident.
If an at fault driver has no insurance coverage (such as a hit-and-run driver), the uninsured motorist coverage on your policy will help pay for medical expenses. Underinsured motorist (UM) coverage pays for medical expenses when the at-fault driver does not have enough insurance.
Always review your auto policy and ensure that all the information on the declarations page is correct, and that the coverage amounts you requested are represented. Read any policy exclusions or instances where the auto insurance policy will not provide coverage.