Car Insurance for Dummies (Like Me)
By: Jimmy Cerone
Tags: Money, Cars, Car Insurance, Personal Finance, Ideas

Idea of the Day #35 | Finny Edition

Car Insurance for Dummies (Like Me)

Which types of insurance are needed here? Image drawn by Liv Panozzo.

Until now, my parents have been gracious enough to cover my car insurance. But now that I’m out of the house and have the outward appearance of being an adult, the buck is stopping with me next year.

And I have no idea what to do. Naively, I believed that car insurance was simple. Yet like so many other things in #adulting it only appears simple.

What has blown me away most about my post college life is the complexity. You go from school, where you are asked to be an “expert” in Chemistry or Dance or whatever, to real life where you suddenly have to be an expert in insurance and personal finance and interior design.

Even worse, there are real costs for ignorance. While it certainly sucked to fail an exam, I knew there were always more exams and I could quickly get my grades up with some elbow grease. At worst, I lost a letter grade.

The stakes in the real world are much, much higher. Ignorance has a price.

I’ve realized this price in part because of Finny, where I’m learning about all things personal finance. I had no idea there were so many ways to get screwed over, especially when it comes to car insurance.

So today in an effort to keep the ignorance at bay, I’m writing a quick, “Car Insurance For Dummies” to demystify the topic.

The Quick Version

Collision Coverage = Crashes

Comprehensive Coverage = Not crashes (floods & theft)

Liability Coverages = Bodily Injury (BI) & Property Damage (PD)

PD = You broke someone else’s thing

BI = You broke someone else

Personal Injury Protection Coverage = It was no one’s fault = “No-fault”

Rental Coverage = your car insurance probably covers it

States = Every state is different to make things extra confusing

The Deep Dive

When I first saw the Finny segment on car insurance, I thought that car insurance was a monolith. I figured when the time came, I’d run over to State Farm and say, “I’d like car insurance.” Then they’d charge me some money for “insurance” and I’d feel safe.

I had no idea there were different kinds of coverage. No clue.

Turns out things are much more confusing than I’d thought. But, thankfully, Finny made it simple and I can hopefully do what I’ve learned from them justice.

Collision Coverage

I cover crashes and stuff — Comprehensive Coverage

When I thought of car insurance in my ignorant days, I was thinking of collision coverage. Collision coverage covers crashes. Plain and simple.

Comprehensive Coverage

I cover the other stuff — Comprehensive Coverage

Comprehensive coverage is not usually required (unless you are leasing or financing your car), which is probably why I’d never heard anything about it.

When I first learned of it, comprehensive coverage reminded me of homeowner’s / renter’s insurance, which makes sense if you think about it. Your home doesn’t move (hopefully) and in my head, comprehensive coverage covers the bad stuff that happens to your car when it isn’t moving.

Some examples of bad things covered by comprehensive coverage are floods and theft.