You got the keys, you’re ready to go. Wait, do you have insurance? What is insurance? Today we’re going to go over the best insurance tips and overall coverages that you need to know. This is the 101, the bible of insurance. Hey guys, this is Mark Flockhart with Think Insurance. If you’re new to this channel, welcome! Don’t forget to subscribe if you get value out of this. You may have heard this line before: if you go back about four or five years, I actually made a video called Insurance 101, and that still holds true. If you get time, go back and watch it. It’s about 22 minutes long, and I thought I’d make a faster version because over the past decade, I’ve learned some new ways to explain insurance that makes it a lot simpler.
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Now, keep in mind the disclosure is the same. I don’t know exactly what state you’re in, whether you’re in New York versus Michigan versus Florida, and we may talk about those throughout this video. But this is kind of the generalized version of how insurance works. At the end of the video, I’m actually going to show you some examples and recommendations of things that I would lean towards in other videos that you should look into that will give you more advice going forward.
That being said, the essential reason you buy insurance is to protect yourself. You have assets to protect, your future income to protect. So the biggest way to understand that what you’re trying to do is to make sure that your insurance company has more money than you. If your income is here and you own your home, you own your assets, whatever the case is, your level is here. You want to have your insurance company just a little bit richer than you are financially, so that way if something does happen and they’re going to sue somebody, they don’t sue you; they sue your insurance company instead.
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I hope you’ve got a pen and paper because we’re going to dive in. There are three primary pieces to insurance: coverage for others, coverage for you, and coverage for your vehicle. The first part, coverage for others, includes bodily injury, which is the amount that your insurance will pay for medical expenses if you injure somebody else in an accident. If your car hits somebody else’s, they go to the doctor or hospital, and whatever limit you pick is how much they’re going to cover. They do it in one of two ways: they do a per person and a per accident.
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It’s called 10/20 or 100/300. I commonly do the 250/500. What that means is that $250,000 will cover that person’s medical expenses if you injure them, up to $250,000 per person. If there are multiple people in the car, let’s say there were three people in the car—a driver, a passenger, and someone in the back—and they all were injured, as long as you don’t go above $250,000, they’re covered under your policy for that accident. Keep in mind you have the $500,000 per accident total aggregate limit, which means that if these three people collectively are over $500,000, it cuts off there as well.
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The second part for coverage for others is property damage, which is essentially the same thing but for someone’s car. If you damage their car, their property, then that’s going to cover that. A common one that a lot of people start with is what we call 25/50/25. That’s $25,000 per person, $50,000 per accident for medical for others, and $25,000 for property damage for their vehicle.
Now, what about the people in my car? You can pick up a couple of things. There’s something called medical payments (med pay), which is coverage for anybody in your car. It’s per person, so if you have four people in the car, each person gets that coverage. The most common that I see people choose is $10,000. You can go higher or lower or sometimes completely remove it, but it’s $10,000 per person, so you’ve got $40,000 coverage total as long as each person doesn’t max out over that $10,000.
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There’s also uninsured and underinsured motorist coverage. If you’re not at fault in this accident and someone hits you but they don’t have enough coverage, you can kind of self-insure it by adding a small coverage that covers those cases. That way, you don’t have to go after the person or sue them; the insurance company will deal with it. They’ll pay the bill up front up to the limits that you pick, and then they’ll go after the person on their own.
You’re going to match your bodily injury, so if you carry the 100/300 or the 25/50, that’s the same thing that you’re going to carry for the uninsured motorist and underinsured motorist. If they hit you, people in your car, same thing: $25,000 per person, $50,000 per accident.
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