If you watch TV or listen to the radio for any length of time, you can’t escape the barrage of insurance advertisements doing their best to entice you.

And if you had to pick a common theme present throughout all of these advertisements, what would you say?

Time and time again, the message is the same: switch and save.

It’s as if buying auto insurance is the same as buying a commodity, where every product is the exact same and the only differentiating factor is the price.

Interesting, according to Merriam-Webster, the definition of commodity is:

A mass-produced unspecialized product

As far as we’re concerned, auto insurance is about the furthest product from a commodity.


For one, not all auto policies are the same. Insurance companies can create their own unique auto policy with their own coverages, terms, conditions and exclusions. And they do.

Second, with the various terms, limits, conditions, endorsements and exclusions attached to each auto policy, there are literally hundreds, if not thousands, of different auto policies available today.

The fact is, auto insurance is highly specialized. It can be extremely comprehensive and cover nearly any type of claim that would occur, or it can be exceedingly limited only providing coverage for a few types of claim scenarios.

So where should an educated consumer, concerned about protecting their financial future, begin?

The best place to start with the Auto Insurance Policy is the 6 distinct coverages included.

Note. This is just the beginning. There are numerous other decisions that are critically important, from selecting the right limits of coverage to determining whether other optional coverages should be included.

But we’ll start with the 6 basic coverages:

1. Bodily Injury Liability

This coverage pays the medical and other expenses of those people injured or even killed in accidents you cause.

This is required by most states; the mandatory coverage in Ohio is $25,000 for any person involved in an accident with you and no more than $50,000 for all the persons in the accident.

Note. These required limits of coverage are very minimal. When considering auto insurance, you’re trying to prepare for the worst-case scenario. If you’re involved in a serious accident where someone is killed, how far do you think $25,000 will go to protect you?

2. Property Damage Liability

Covers the damage your car causes to property. Usually, that’s the other car or cars involved in the accident, but it also covers damage you do to any object you hit.

For example, if you hit a garage, building, lamppost, fence, or even a guardrail. This is also required in most states; the mandatory limit in Ohio is $25,000.

Again, this ‘required’ amount of coverage won’t get you far. Just imagine you’re involved in a multi-car accident for which you’re responsible for fixing three other vehicles. Or you rear-end an $80,000 Porsche.

3. Collision

This is for damage done to your car when it collides with other vehicles (your fault) or other objects (again, your fault).

Note. This coverage is for your vehicle. If you’re at fault for the damage to someone else’s vehicle, that’s where the Property Damage Liability coverage (outlined above) would respond.

You could find yourself in a situation where both Collision and Property Damage Liability coverages respond to the same claim.

Collision Coverage normally has a deductible (the amount you’re responsible for paying if a claim occurs). The higher the deductible you select, the lower your annual premium. Deductible options range from $100 to $1,000 and higher.

4. Comprehensive

Sometimes referred to by its technical name, ‘Other than Collision’, it’s often described simply as ‘Comp.’

Regardless of the term used, it covers damage to your car that results from something other than a collision with another vehicle. Examples include:

  • Fire
  • Natural Disasters (such as hail)
  • Falling objects
  • Vandalism
  • Theft
  • Hitting a deer or another animal

This coverage also carries a deductible, although it’s often a smaller deductible compared to Collision Coverage. For example, if you had a $1,000 Collision deductible, you might have a $500 Comprehensive deductible.

5. Medical Payments

Often referred to as ‘Med-Pay’, it pays medical, and even funeral, expenses for you as well as members of your family and passengers in your car if it’s involved in a collision, regardless of who caused the accident.

It also covers you as a pedestrian if you’re hit by a vehicle.

Medical Payments coverage can cover:

  • Doctor visits
  • Hospital visits
  • Ambulance fees
  • X-rays

There’s no deductible with Med Pay coverage.

6. Uninsured/Underinsured Motorist

Commonly abbreviated as UM (Uninsured Motorists) and UIM (Underinsured Motorists), this coverage pays for injuries to you if:

  1. You’re hit by a driver who doesn’t have insurance – this is the ‘Uninsured’ section of the coverage, or
  2. You’re hit by someone who doesn’t have enough insurance to cover your losses – this is the ‘Underinsured’ section of the coverage

In most states, more than 10% of motorists don’t have any insurance. In some states, as many as 3 out of 10 drivers don’t have coverage.

And to make matters worse, many of those who do have insurance, don’t have enough to cover the damages and injuries that would result in a major collision.

Often, they have those minimum limits required by law that we discussed previously.

If you don’t have this coverage, you are taking a risk. UM/UIM also provides coverage for any injuries you suffer if you are hit while walking or riding a bicycle by a driver with inadequate or no insurance.

These 6 coverages just scratch the surface of the options available to you that you can use to customize your auto insurance policy specifically for your needs.

As tempting as the ads may be, resist the temptation to make your insurance buying decision strictly based on the price of the product. As long time insurance educator John Eubank, CPCU, ARM once said: “The bitterness of no coverage is remembered long after the sweetness of low price has been forgotten.”

If you’d like to learn more, contact one of our Licensed Advisors . We’re here to help.