How well do you know your personal auto policy? In the second and final part of Maximum Octane’s insurance series, Richard Sharman returns to explain what you should know, from how the policy is structured to state limits, coverage types, and exclusions.
Richard, an ATI executive coach with more than 40 years in the collision and insurance claims world, walks Kim Hickey through a declarations page, comprehensive and collision limits, what happens with medical bills when a passenger is hurt, and what to consider before handing your keys to an employee for a quick errand.
This article is for general education only and is not legal or insurance advice. Coverage rules vary by state and policy; talk with a licensed agent about your situation.
What You Will Learn
- Do States have coverage limits?
- What happens when someone gets hurt in your vehicle
- What are comprehensive and collision limits?
- Does carrying the minimum protect you from being sued for larger amounts?
- A quick auto policy breakdown
- Some details of exclusions under liability to others
Do States Have Coverage Limits?
Richard begins with state coverage limits. Most states require drivers to carry minimum amounts of liability insurance. Those minimums are a legal floor, not a recommendation. Your state’s insurance department publishes its requirements, and the National Association of Insurance Commissioners can help you find it.
State minimum requirements vary widely. Some states require relatively low liability limits, while others require more coverage or additional protections such as personal injury protection. A handful of states have no-fault systems, where each driver’s own insurance covers certain injuries regardless of who caused the accident. Understanding your state’s system helps you choose appropriate coverage.
When Someone Gets Hurt in Your Vehicle
Around the 6 minute mark, Richard explains what happens when someone is injured in your vehicle. Medical payments coverage, personal injury protection, and liability coverage may each play a role depending on your state and policy. Knowing how these pieces work together helps you avoid surprises at a stressful time.
Medical costs from accidents can be substantial. Hospital stays, surgeries, rehabilitation, and lost wages can quickly exceed low policy limits. Medical payments coverage and personal injury protection help cover these costs for drivers and passengers, depending on the policy and state. Reviewing these coverages ensures that you and your passengers are protected.
Comprehensive and Collision Limits
Richard explains comprehensive and collision coverage. Collision generally covers damage from hitting another vehicle or object. Comprehensive generally covers other events, such as theft, weather, fire, or a falling tree, a scenario Richard discussed in part one. Each has its own deductible and limits.
Comprehensive and collision coverage are often optional, especially for older vehicles. Owners of older cars sometimes drop these coverages to save money if the vehicle’s value is low. That decision makes sense in some cases but can leave owners without help if the vehicle is damaged. Comparing premium costs with the vehicle’s value and your ability to replace it helps guide the decision.
Shops see the consequences of these choices at the counter. A customer who dropped collision coverage on an older car may be shocked to learn that an accident they caused is not covered. Advisors who understand the difference between comprehensive and collision can explain the situation calmly and help the customer think through repair options. That kind of patient explanation, without giving formal insurance advice, often earns long-term trust even when the news is disappointing.
Does Carrying the Minimum Protect You?
Around the 15 minute mark, Richard tackles a common misconception: that carrying state minimum coverage protects you from being sued for larger amounts. It does not. If damages exceed your limits, you may be personally responsible for the difference. For business owners with assets to protect, that risk is significant. Higher limits or an umbrella policy may be worth discussing with your agent.
Lawsuits after serious accidents can seek damages far beyond minimum coverage limits. If damages exceed coverage, personal assets such as savings, homes, and future earnings may be at risk. Business owners, who often have more assets, are particularly exposed. Umbrella policies provide additional liability coverage above auto and home policies at a relatively low cost and are worth discussing with an agent.
A Quick Auto Policy Breakdown
Richard walks through a policy breakdown, including the declarations page. The declarations page summarizes who and what is covered, coverage types, limits, deductibles, and the policy period. If you only read one page of your policy, make it this one.
Key items to check on your declarations page:
- Named insureds and listed drivers.
- Vehicles covered and their use (personal or business).
- Liability limits for bodily injury and property damage.
- Comprehensive and collision deductibles.
- Uninsured and underinsured motorist coverage.
Beyond the declarations page, policies include definitions, coverage sections, exclusions, conditions, and endorsements. Definitions clarify terms like “insured” and “covered auto.” Exclusions explain what is not covered. Conditions describe policyholder duties. Endorsements modify the standard policy. Reading these sections, or reviewing them with an agent, provides a complete picture of protection.
Uninsured and underinsured motorist coverage deserves particular attention. If another driver causes an accident and has no insurance or too little, this coverage can help pay for your injuries and, in some states, your vehicle damage. Many people carry low limits here without realizing it, or decline it to save on premiums. Asking your agent how this coverage works in your state is one of the simplest ways to close a gap you might never notice until it matters.
Exclusions and Letting Employees Drive
Around the 24 minute mark, Richard covers exclusions under liability coverage. He also raises a scenario many shop owners face: handing your car keys to an employee to run a quick errand. Depending on your personal and business policies, coverage for that situation may not be what you expect. Shop owners should review both personal auto and commercial policies, including garage liability and garagekeepers coverage, with their agent.
Paige Hazeltine discusses another important coverage for shops in How to Make Workers’ Comp Work Both Ways.
Business use of personal vehicles is a common gray area. Personal auto policies may not cover vehicles used primarily for business purposes, and coverage may vary when employees drive owners’ vehicles. Commercial auto policies, hired and non-owned auto coverage, and garage policies can fill these gaps. Shop owners should review how their policies handle situations like test drives, parts runs, and shuttle services.
Insurance Knowledge as Customer Service
Customers often ask repair shops for advice about insurance claims. Shops that understand the basics can guide customers through the process, explain what to expect, and help them communicate with their insurer. That guidance builds trust and positions the shop as a helpful partner rather than just a repair provider.
Shops should be careful not to give legal or insurance advice beyond their expertise, but they can share general information and encourage customers to review their policies and ask their agents questions. Richard’s series offers a helpful foundation for that kind of guidance.
Common Insurance Mistakes Shop Owners Make
One common mistake is assuming personal and business policies will automatically cover each other’s gaps. Personal auto policies often limit coverage for business use, while commercial policies have their own definitions of covered vehicles and drivers. Another mistake is never updating the list of drivers. Employees come and go, and an outdated list can create problems during a claim.
Owners also sometimes choose high deductibles to lower premiums without setting aside cash to cover them. That can work if the shop has reserves, but it can strain finances after a loss. Reviewing policies with an agent who understands repair businesses, and doing so every year, helps avoid these issues before they become expensive surprises.
Policy Questions to Ask Your Agent
- Are my liability limits high enough to protect my personal and business assets?
- Would an umbrella policy make sense for me?
- Who is covered if an employee drives my personal vehicle?
- What exclusions should I know about?
This episode was later replayed as a Maximum Octane throwback.
Frequently Asked Questions
What is a declarations page on an auto insurance policy?
The declarations page is a summary at the front of your policy. It lists the named insureds, covered vehicles, listed drivers, coverage types, limits, deductibles, premiums, and the policy period. It is the quickest way to see what you are paying for and how much protection you have. Keep a current copy accessible, and review it at every renewal to make sure the information is still accurate.
Is state minimum car insurance enough?
State minimums are the legal floor, not a recommendation. If you cause a serious accident, damages can easily exceed minimum limits, and you may be personally responsible for the difference. That can put savings, a home, or a business at risk. Owners with significant assets often choose higher liability limits and may consider an umbrella policy. A licensed agent can help you match limits to what you have to protect.
What is the difference between comprehensive and collision coverage?
Collision coverage generally pays for damage to your vehicle when it hits another vehicle or object, regardless of fault. Comprehensive coverage generally pays for damage from other causes, such as theft, vandalism, fire, hail, flooding, animal strikes, or a falling tree. Both usually carry deductibles and are often optional unless a lender requires them. Your policy defines exactly what each covers, so review it with your agent.
Am I covered if my employee drives my personal car for a shop errand?
It depends on your personal auto policy, your business policies, and your state. Some personal policies cover permissive drivers, while others limit coverage when a vehicle is used for business purposes. Commercial auto, hired and non-owned auto coverage, and garage policies may apply instead. Because the answer varies, ask your agent to explain exactly how a parts run or shuttle trip by an employee would be handled before it happens.
What is an umbrella insurance policy?
An umbrella policy provides extra liability coverage above the limits of your auto, home, and sometimes business policies. If a serious accident leads to a judgment larger than your underlying limits, the umbrella policy can pay the difference up to its own limit. Umbrella coverage is often relatively affordable for the protection it provides. It usually requires you to carry certain minimum limits on your underlying policies.
