YouTube Tuesday – Back to Basics

Posted & filed under Car Insurance, YouTube Tuesday.

While we’ve covered most of the basics of car insurance on this site over the years, it’s nice to find an easy to watch video that explains everything logically, in the order in which it should be explained.

This introduction to auto insurance, ‘Auto Insurance 101’ by LIFE Foundation, puts everything you need to know about buying your first auto insurance policy into a few easy to follow bullet points.  It explains what liability cover is very well, and also goes into a lot of detail about the difference between regular medical insurance cover and Personal Injury Protection cover:

The part at 01:23, however, is the most important message I want you to get out of this little video.  It’s very easy to gloss over things like cover ratios when you’re reading an insurance policy through for the first time.  However, it’s important that you understand how things work.  I’ll reiterate her example:

Say you have an accident, and you rear-end the BMW in the video (but a nicer-looking one). You cause minor whiplash to the three occupants, which adds up to $75,000 in medical expenses, plus $13,000 in damage to property.

(Note that none of that damage to property is your own car – since you only have liability insurance, you will not be able to claim for your own damages if the accident was your fault)

You have 25/50/10 cover.  This means that if there was only one driver in the car you hit, they would only pay out a maximum of $25,000 in medical expenses.  However, if there are two or more people in the car, this goes up to $50,000, but no more than $25,000 per person.

The damages total $88,000, of which your insurance is only obligated to pay $60,000 (the 50/10 part of the above ratio). This means you could be out of pocket by $28,000 – not an enviable position to be in.