Caleb Meriwether, Haven Insurance Partners, visits with Dan Reaves, host of ‘The Dan Reaves Show,’ today and each Wednesday at 3:30 p.m., to discuss all things insurance.
Auto insurance protects you financially if you’re involved in an accident, your vehicle is damaged, or you cause injury or damage to someone else. While policies can look complicated, the core concepts are straightforward. This guide explains how auto insurance works, what coverages mean, and how to choose the right protection.
Why Auto Insurance Exists
Auto insurance serves two main purposes:
- Protects you from financial loss – Accidents can cost tens or hundreds of thousands of dollars. Insurance prevents one mistake from becoming a financial disaster.
- Protects others from your actions – If you cause injury or damage, insurance pays for their losses.
In Tennessee and most states, auto insurance is required by law.
The Six Core Coverages (What They Mean)
Every auto policy is made up of several coverages. Each protects against different risks.
- Liability Coverage (Most Important)
Liability pays for damage or injuries you cause to others.
It includes two parts:
- Bodily Injury Liability – Pays for medical bills, lost wages, and legal costs if you injure someone.
- Property Damage Liability – Pays to repair or replace vehicles, buildings, or property you damage.
Example:
You rear-end another driver and cause $40,000 in injuries and $15,000 in vehicle damage. Liability coverage pays those costs.
This does NOT cover your own vehicle.
- Collision Coverage
Collision pays to repair or replace your vehicle if it’s damaged in an accident, regardless of fault.
This includes:
- Hitting another car
- Hitting a tree, pole, or object
- Single-vehicle accidents
- Rollovers
Example:
You slide off the road and hit a fence. Collision pays to repair your vehicle.
- Comprehensive Coverage (Other-Than-Collision)
Comprehensive covers damage from events outside your control, such as:
- Theft
- Hail
- Fire
- Flood
- Falling objects
- Animal strikes (deer)
- Vandalism
Example:
A deer runs into your car. Comprehensive pays for repairs.
- Uninsured / Underinsured Motorist Coverage (UM/UIM)
This protects you if another driver:
- Has no insurance, or
- Doesn’t have enough insurance
Example:
Someone hits you and has only $25,000 in coverage, but your injuries cost $100,000. Your uninsured/underinsured coverage pays the difference.
This is one of the most important coverages you can carry.
- Medical Payments Coverage (MedPay)
This pays medical expenses for you and your passengers, regardless of fault.
It covers:
- ER visits
- Surgery
- Ambulance
- Medical bills
It typically pays quickly and without legal disputes.
- Rental Reimbursement and Roadside Assistance (Optional)
These convenience coverages include:
Rental reimbursement – Pays for a rental car while your vehicle is repaired.
Roadside assistance – Covers:
- Towing
- Dead battery
- Flat tire
- Lockouts
- Running out of gas
What Is a Deductible?
A deductible is the amount you pay before insurance pays.
Example:
- Repair cost: $5,000
- Deductible: $500
- Insurance pays: $4,500
- You pay: $500
Higher deductibles reduce your premium. Lower deductibles increase your premium.
Most people choose $500 or $1,000.
What Auto Insurance Does NOT Cover
Auto insurance typically does not cover:
- Routine maintenance
- Mechanical breakdown
- Wear and tear
- Intentional damage
- Using a personal vehicle for business without proper coverage
Full Coverage vs Liability Only
Liability only
- Covers damage to others
- Does NOT cover your vehicle
Full coverage
Includes:
- Liability
- Collision
- Comprehensive
If your vehicle has significant value, full coverage is usually recommended.
What Determines Your Premium
Insurance cost is based on risk factors such as:
- Driving record
- Age
- Location
- Vehicle type
- Credit history (in most states)
- Annual mileage
- Coverage limits and deductibles
Safer drivers pay less.
When Insurance Pays and When It Doesn’t
Insurance pays when there is:
- An accident
- Theft
- Covered damage
- Injury to others
Insurance does not pay when:
- Coverage was not purchased
- Limits are exceeded
- The damage is excluded
How Claims Work
If an accident happens:
- Ensure everyone is safe
- Call police if necessary
- Exchange information
- Contact your insurance company
- An adjuster evaluates damage
- Insurance pays based on coverage
The process is designed to restore you to where you were before the loss.
