How Does Car Insurance Work?

For something as fundamental as car insurance, you would think that there would be a course in school which taught what car insurance is and how it works. But no. Most people never get a chance to learn what car insurance is or how it works and that can lead to some big mistakes later on in life.

The Washington Association for Justice produces a pamphlet which is an excellent resource on both car insurance as well as what to do after an accident. It was formerly a hard copy-only booklet, but it is now available as a flipbook online. We encourage you to not only print out a copy for yourself, but share this resource with your clients, friends, and on social media channels to increase accessibility to the information. http://www.trialnews.org/autoinsurance/

Car insurance: The basics.

The simple idea behind car insurance is this: You pay on a regular basis for financial protection. This means that if something happens to you, to your car, or to another person, the insurance company might step in and pay the bills on your behalf.

Think of it this way: you could never afford the hundreds of thousands in medical bills that might come along with a car accident. Your insurance company takes that risk in exchange for your payments. If something happens, they’re supposed to pay.

What does car insurance cover?

Car insurance, at its most basic, is designed to protect other drivers from accidents that involve you. The part of car insurance which the law requires you to have is called “bodily injury liability” and all it does is cover other people. It does not cover you or people in your car. Because of this, most people want to have additional coverage which protects the people in your vehicle, as well as themselves.

So it helps to think of insurance this way: there are three main pieces to your car insurance.

1. The insurance that protects others in case of injury or damage to their property.
2. The insurance that protects yourself in case of injury.
3. The insurance that protects your vehicle.

There are other aspects of car insurance, such as rental car coverage, and so on, but such additions are beyond the focus of this article.  The main thing are those three points. And it is very important you get good coverage in all of them. Here’s why.

How does insurance protect me?

If somebody is injured by you, even though it was an accident, they have the right to sue you for their expenses. Your car insurance should step in and pay.

If you are injured by another, and they have little or no insurance, your own insurance should step in and pay for your expenses.

If your vehicle is damaged, insurance should step in and pay for repairs to the vehicle.

In an ideal world this would work right every single time. However, the reality is often quite different from the idea.

So what’s the problem?

The problem is that insurance companies are businesses. They exist to turn a profit. Most of them have shareholders or owners of some sort who want to see profits for themselves. This means that insurance companies have a huge interest in denying claims, fighting claims, and trying to get out of paying when they should. That’s why personal injury lawyers exist. We put pressure on the insurance companies and make them pay reasonable amounts when they should.

We’ve seen insurance companies do despicable things in the pursuit of profit. They will always downplay the seriousness of the injuries of their own clients. They will drag out the fight for as long as possible, or offer a low-ball settlement to try and get the insured to give up.

Never accept the first offer of the insurance company. They are always going to offer the minimum they think they can get away with, not the amount they know they should pay.

So What Insurance do I need?

The answer is that it’s best to purchase more coverage than the minimum required by law. Consider the cost of medical treatment, rehabilitation, and the cost of lost wages. You can see how it adds up quickly. We encourage all our clients to be well insured for their own protection, as well as for the protection of all the drivers on the roads in Washington.

Don’t be afraid to shop around. All insurance companies fight on claims, so there is no “best” insurance company. Just make sure you get the coverage you need, and never hesitate to call us for advice if you’re involved in an accident.