My car was hit recently. Thankfully, I was not in the car, and I have auto insurance. Unfortunately, I did not enjoy starting the week discovering my car parked on my property with two wheels scratched, two doors hit, and my rear quarter panel on the other side dinged.
However, being the finance nerd that I am, I enjoy testing how I feel about recommendations in a real world scenario. In this case, I was going to see first hand how my auto insurance worked and whether my coverage was adequate.
There is nothing like a real world test case.
I am of the mindset that you can give truly good advice without ever experiencing something you are giving advice about, but there is a better sense of understanding and a different perspective if you go through it first hand.
For example, I’ve talked with people about life insurance, but it wasn’t until the day I bought term life insurance that I felt it was one of the best investments I had ever made. Now, I can speak more openly about what it did for me. The same can be said for the rent vs. buy decision. Up until a couple years ago, I had only rented. Now, I can truly speak to my own experiences, both good and bad, with home ownership and renting.
Let’s explore auto insurance in more detail and how my real world test case concluded. As with all of my posts, this is only for educational and entertainment purposes. Nothing is advice, and insurance varies by state. You should speak with your own insurance agent.
What Happened?
My car was parked in front of my garage, but I live in Seattle and my garage faces an alley. As such, cars drive by regularly. Someone must have not been paying attention, or they were under the influence when they drove by and hit my car.
We heard nothing when it occurred.
Based on when I parked my car and saw it the next day, it must have happened late in the evening or early the next morning.
As soon as I saw the damage, I took photos of the scene, walked around the car, and photographed the damage. I wanted a record of where the car was located, damage, and a time stamp to prove when I found it.
Looking at the damage, I knew it would be at least a few thousand dollars of damage and likely much more. I also knew I had uninsured/underinsured property damage coverage. Since nobody left a note, that coverage was going to cover this situation. Knowing this, I called the insurance company and started the claims process to learn what I needed to do next.
They asked me a few questions and noted I was also on hold with the Seattle Police Department to file a police report. They offered to send me a list of repair shops in my area I could use that they are contracted with that would make the claims process easy, but told me I also could go to any shop.
After 45 minutes on hold with the Seattle Police Department non-emergency line, they said they would call me back sometime in the next nine hours to file the police report, but couldn’t give me a specific time. When they finally called back, I gave them a quick description of what happened. I asked, “If I find more information, should I call back?” The police officer responded along the lines of, “There are too many hit and runs. We likely won’t follow up. Give it to your insurance company.” ‘Okay’, I thought to myself, ‘I guess I appreciate their honesty.’
I clicked on the link of the repair shops and started reading reviews. Wow, is it challenging to select a repair shop when there are hundreds of shops in the area. I almost selected one shop, but after reading the reviews, the work seemed inconsistent. I finally found another shop that had consistently good reviews.
I called the shop and made an appointment for the following day to bring it. Thankfully, I could drive the car, and it did not need to be towed.
I dropped the car off, and they told me it may take a few weeks, depending on the damage and part availability.
I held off scheduling a rental car because I didn’t need it for the week, but I scheduled it for the following week. I’ve always been tempted to remove the rental car coverage on my auto insurance, but after this experience, I am happy I didn’t, despite the fact that I never used it.
Knowing it was available and would only cost me 20% of the car rental rate per day, up to $1,000, provided peace of mind. It was particularly comforting because rental car prices are through the roof right now. As it turned out, I would only be charged $6 per day for an intermediate car. Looking up rental prices, it appears my insurance company has a lower rate than if I went directly to the rental car company. I can easily see how without this coverage, I could be out of pocket more than $1,000 depending on how long the repairs take.
Lesson learned – I’ll keep the rental car coverage.
Despite thinking it may take a few weeks to get the car back, they had it done in four days. The technician came into the office on a holiday weekend when they are normally closed to finish the car. I was impressed!
Working with a shop that contracts with my auto insurer, I simply had to pay my deductible and the auto insurer should take care of the rest. The estimate is below. As you can see, it was expensive, but I am thankful my insurance covered it.
Although it was a painful start to the week, I was only without my car for less than a week, nobody was injured, and my insurance covered the majority of the nearly $10,000 bill. Interestingly, it was not a horrible process. I was pleasantly surprised, though I know it could have turned out far worse in other scenarios.
Auto Insurance Coverages
Although my insurance did what it was supposed to do, these types of events are good situations to review your coverage. Most people do not pay attention to their coverages until something goes wrong, but that is the worse time. You should do it in advance.
Let’s explore what coverages are available and how you can think about each one.
Bodily Injury Coverage
Bodily injury coverage covers you if you are at fault in an accident that injures the other driver or passengers. It helps pay for medical bills, lost income, and legal fees if the other party files a lawsuit against you.
Generally, I like purchasing the maximum coverage because if you are in an accident, and their medical expenses exceed your limit, you may need to pay out of pocket for the remaining costs. You usually see a limit per accident and a limit per person.
For example, if you had $250,000 per person and $500,000 per accident and three people had medical expenses of $250,000 each, the policy would pay $250,000 to two people ($500,000 total) and then you would be responsible for the third person’s bills of $250,000.
Property Damage Coverage
Property damage coverage covers you if you are at fault in an accident that causes damage to another person’s vehicle or property, such as a fence or building.
Generally, I like purchasing the maximum coverage because if you are in an accident, you never know what type of car you will hit. In Seattle, people regularly drive $50,000+ cars and sometimes $100,000+. Plus, if you hit a building or fence, that can add to the cost.
For example, if you had $50,000 worth of coverage and caused $100,000 worth of damage, you would be responsible for $50,000 because your insurance would cap out at $50,000.
Comprehensive Coverage
Comprehensive coverage covers you if your vehicle is stolen or damaged in an accident that is not a collision. For example, it would cover you if a tree fell on your car, a tornado destroyed it, or vandalism.
I know someone who did not have comprehensive coverage, was in a huge hail storm, and the hail was large enough that it dented the windshield and car, causing over $5,000 worth of damage – all of which had to be paid out of pocket.
Collision Coverage
Collision coverage covers you if your car is damaged in an accident with another vehicle or object, such as a lamppost or tree.
The coverage amount is typically the cash value of your vehicle. If you can’t replace or fix your car after an accident, you likely want collision coverage.
Uninsured/Underinsured Motor Vehicle – Property Damage Coverage
Uninsured/Underinsured motor vehicle property damage coverage covers you if you are not at fault and your car is hit by another driver without insurance or who does not have enough insurance. This is the coverage I used when someone hit my vehicle and drove away without leaving a note.
This coverage can pay for repairs to your vehicle and property, which is why some people insure it near the value of their car and then a little extra, or they purchase the maximum amount possible.
Uninsured/Underinsured Motor Vehicle Coverage
Uninsured/Underinsured motor vehicle coverage covers you when you are not at fault and your car is hit by another driver who has no insurance or does not have enough insurance. Unlike property damage coverage above, this covers your medical expenses and lost income.
For example, if someone hit your car and had only $10,000 worth of coverage and you had $20,000 in medical expenses, your underinsured motor vehicle coverage would cover the $10,000.
Personal Injury Protection Coverage
Personal injury protection coverage covers medical bills and lost income, regardless of fault, for you and your passengers. It can also cover you as a pedestrian or cyclist if you are hit.
This coverage sometimes overlaps with health insurance; however, health insurance usually does not cover lost income. Personal injury protection is required in some states, but not all.
Car Rental/Travel Expenses/Rental Reimbursement Coverage
Rental reimbursement coverage covers you if your car is in the repair shop under a covered collision or comprehensive claim and you need to rent a car while it is being repaired.
If you can afford the cost of a rental car for a few weeks, you may be okay without this coverage. In my case, I can cover it through my emergency fund, but I was happy I had it. Right now, rental cars are $80+ per day. If my car had been in the shop for three weeks, that could have been over $1,600 in rental car expenses. Through the policy, it will cover up to a certain amount per day up to a limit.
In my case, the auto insurer covered 80% per day up to $1,000. In my situation, this meant I could rent a car for 35 days for $6 a day until I hit my limit because my auto insurer had a lower daily rental rate than going directly to the rental car company.
I used to think this coverage was a waste of money, but going through this experience, even though I didn’t use the coverage, I am keeping it going forward.
Selecting a Deductible
The last decision you’ll need to make is selecting your deductible, which is the amount you pay before your insurance company pays. For example, if you had $10,000 worth of damage and had a $500 deductible, your insurance company would pay $9,500, and you would need to pay $500.
The higher your deductible, the cheaper your premium. This is why I usually choose a deductible of $500 or $1,000, but you need to decide how much is comfortable for you. The other important thing to keep in mind is you usually don’t want to file claims for smaller amounts. For example, if you have a $250 deductible and $500 worth of damage, you may want to cover the $500 out of pocket and not file a claim because it could lead to a higher premium.
Auto Insurance Lessons
As I mentioned earlier, until you go through an experience, your experience is based only on best practices, education, and other people’s experiences. Going through this process for the first time, I came away with a few reminders and new lessons:
- File a police report to have a record of what occurred.
- Rental car reimbursement is more important than I thought.
- A lower deductible is okay. I had considered raising my deductible to $1,000, but I am glad it was at $500. Although I pay slightly more in premium, it’s a worthwhile trade-off at this point. I may still raise it in the future.
- Choosing a repair shop that contracted with my auto insurance company made things much smoother. I can only imagine how much longer it would have taken to go to a different shop.
- It might be helpful to have a repair shop picked out in advance. I see it similar to picking out a plumber, heating and repair company, etc. when you first move, so you know who you will call if things go wrong. It’s one less stressor while filing the claim and trying to figure out everything else.
Summary – Final Thoughts
Filing an auto insurance claim was easier than I thought. Although it was not pleasant filing a police report, driving a damaged car across town, and being without a car for a few days, it could have been far worse.
I am glad my coverage was adequate, and it was a good reminder to review the rest of my coverage to see if it needed updating. I recommend you review your coverage, too.