Auto insurance coverage 101

Buying a car can be exciting. Shopping for auto insurance, not so much... but it is important! Not only is it the law in most states, it can also protect your wallet and peace of mind.

Here's how it works: You pay the insurance company a set amount (called a premium) on a set schedule, and the insurance company agrees to pay for losses that are defined in your policy. Those losses can be lumped into six categories:

  • Bodily Injury Liability, which protects the named insured(s) if they cause injury to someone. Your advisor can review who is protected and help you determine how much liability insurance you need.
  • Property Damage Liability covers damages that you or someone driving your vehicle, with permission, may cause to another vehicle or property.
  • Medical Payments or Personal Injury Protection (PIP) pays for treatment of injuries to you or your family members residing in the household.
  • Collision pays for damages to your vehicle when damaged in an accident with another vehicle or object. You will typically have a separate deductible for collision coverage. The higher your deductible the lower your premium.
  • Comprehensive coverage provides reimbursement for damage other than a collision with another vehicle, such as hitting an animal, fire, wind, hail, flood, and vandalism. Comprehensive insurance will also reimburse you if your windshield is cracked or shattered. Your advisor can help you weigh the options to determine the right deductible amounts and how that will affect the cost of your premium.
  • Uninsured and Underinsured Motorist Coverage is needed to protect yourself from an at-fault driver who doesn't have enough insurance to pay for your loss. This coverage will reimburse you, your family members, or a designated driver if one of you is hit by an uninsured or hit-and-run driver or if you are hit as a pedestrian.


A qualified insurance advisor can help you determine how much coverage you will need, but here are some things to consider:

  • Liability coverage limits. A policy's liability limit is the maximum amount that the insurance company will pay if there is a loss. You should be aware that you may be responsible for damages that exceed your coverage limits. The higher your liability coverage limits, the more likely your policy will cover a loss.
  • Deductible amounts. A deductible is the amount of damages that you are responsible for before insurance coverage is activated. For example, if you have a $1,000 deductible, and you have an accident that causes $5,000 in damage to your car, you are responsible for the first $1,000 and your insurance will cover $4,000.
  • Premiums may be lower with a higher deductible
  • Collision coverage protects against damages to your automobile resulting from a collision with another vehicle or object.
  • Comprehensive coverage protects against damage to a covered vehicle resulting from a loss that is not the result of a collision.

You may be required to carry both collision and comprehensive coverage when you have a lien on your vehicle. When the loan is paid off and the value of your vehicle decreases, you might want to consider dropping the coverage to save on premiums.

Protect yourself

An Insurance Advisor can help you put together a comprehensive auto policy. If you have questions about auto insurance or would like to review your current policy, call 1-800-443-6316.

Insurance products are offered through Think Insurance (MN license # IA-538), not Think Mutual Bank. Insurance products are not FDIC insured, are not insured by any federal agency, and are not a deposit or guarantee of Think Mutual Bank.
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Insurance products are offered through Think Insurance (MN license # IA-538), not Think Mutual Bank. Insurance products are not FDIC insured, are not insured by any federal agency, and are not a deposit or guarantee of Think Mutual Bank. This is not a policy. For a complete statement of coverages and exclusions, please see the policy contract.

The financial advisors of Think Financial Planning offer securities and advisory services through Commonwealth Financial Network®, member FINRA/SIPC, a Registered Investment Adviser. Investments are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. Funds are subject to investment risks, including possible loss of principal investment. Think Mutual Bank is not a registered broker-dealer or Registered Investment Adviser. Think Mutual Bank and Commonwealth are separate and unaffiliated entities. Fixed insurance products and services offered by CES Insurance Agency, Think Insurance, or Think Financial Planning. Think Financial Planning is headquartered at 5200 Members Pkwy NW, Rochester, MN 55901. Check the background of this firm on FINRA's BrokerCheck.

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