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How well do you understand auto insurance coverage? New survey reveals knowledge gaps among younger drivers

November 16, 2023

(BPT) - Do you know what your auto insurance covers, and what it doesn't? What does "comprehensive coverage" mean? If you answered no to the first two questions, you're not alone. A recent survey by State Farm found many millennials and members of Gen Z have knowledge gaps about auto insurance. In fact, when asked how well they know their auto insurance policy, nearly half (46%) admit they don't know their policy that well, finding coverage the most confusing topic.

Each year, a new generation of drivers hits the road, making it vital for them to understand auto insurance policies. While the survey found the majority of Gen Z and millennial drivers understood the concepts of collision and liability insurance coverage, two-thirds did not understand what comprehensive auto insurance covers — including losses related to natural disasters like damaging winds, hail, tornados, hurricane, flooding and earthquakes — plus theft and vandalism, animal collisions or your car being hit while parked.

With severe weather events on the rise, according to the Insurance Information Institute, this additional coverage offers protection from unexpected events that can happen even when you're not behind the wheel.

Although survey respondents had a solid understanding of ride-share and under/un-insured motorist coverage, less than half (43%) of Gen Z and millennials correctly identified benefits associated with add-on coverages like rental car and travel expenses; and just 61% correctly identified the benefits associated with emergency road service.

Understanding and choosing auto insurance coverage

Auto insurance is required in almost every state to operate a vehicle, but the cost can vary widely. Cost is partially determined by your vehicle type, your age as well as your car's age, plus the coverage level you select — and can also be affected by other factors like where you live and how much you drive.

Because a car is one of the biggest purchases you make, it's important to protect this asset in case of emergency. Understanding the different types of coverage, benefits and policy options can help you make informed choices when selecting auto insurance. Each type of coverage is priced separately, so there is variability in policy limits and pricing.

Here's a summary of the most common auto insurance coverage types every car owner should know:

Bodily Injury Liability Coverage extends to relatives in your household and those driving your car with your permission. It's important to have enough liability coverage, because if you are at fault in a serious accident, you may be sued for a large sum of money. It's important to purchase enough to help protect assets such as your home and savings, which may be more than minimum liability amounts required by the state you live in.

Property Damage Liability coverage pays for damage you may cause to someone else's property. Usually, this means damage to someone's car, but also includes damage to lamp posts, telephone poles, fences, buildings or other structures your car hits.

Medical Payments or Personal Injury Protection (PIP) Coverage pays for the treatment of injuries to the driver and passengers of the policyholder's car. At its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.

Collision Coverage pays for damage to your car resulting from a covered collision with another car, an object such as a tree or telephone pole, or as a result of flipping over. Collision coverage is generally sold with a separate deductible. Even if you are at fault for the accident, your collision coverage will cover the cost of repairing your car minus the deductible. If you're not at fault, your insurance company may try to recover the amount they paid from the other driver's insurance company, and if successful, you'll also be reimbursed for the deductible.

Comprehensive Coverage provides coverage for loss due to theft or damage caused by something other than a collision with another car or object. Comprehensive covers events such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot or contact with animals such as birds or deer. It will also pay to repair your windshield if it is cracked or shattered. Comprehensive insurance is usually sold with a separate deductible, although some insurers may offer the glass portion of the coverage without a deductible.

Uninsured and Underinsured Motorist Coverage provides coverage if you are hit by an uninsured driver or a driver who doesn't have sufficient insurance to pay for your loss. This coverage also offers protection in the event a covered driver is the victim of a hit-and-run or if as a pedestrian, you are struck by an uninsured or underinsured motorist.

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