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Ask an Agent-Understanding Your Auto Policies – Part 1

We all know that having adequate car insurance is important, but how well do you know your policy? Some of the language can get a little confusing if you don’t know what you are looking at. Georgia Farm Bureau agent Casey Ryals breaks it down for us... 

 Limits of Liability 

 Liability limits protect the assets you acquire.  I had a farmer with a significant amount of property who had a horse get out and the horse caused an auto accident.  He was sued for more than his policy limit of 1 million and had to pay some of the claims out of his pocket.  Imagine him only having a $500,000 limit.  He would have been in danger of owing over 500,000 out of his own assets.  This is life changing. Choosing limits of liability is often done with lawsuits in mind.

  “Added-on” and “Reduced-by” Uninsured Motorist

 Uninsured Motorist (UM) has two parts.  UM is what your company will pay when you have bodily injury caused by an uninsured motorist or an under-insured motorist (UIM).  That means that someone has caused bodily injury to you and they’re illegally driving without insurance or their liability limits will not cover your medical bills.  

 If the other driver is uninsured, then “Added-on” and “Reduced by” options in UM respond in the exact same way.  “Added on” and “Reduced by” in UM/UIM is referring to what your insurance company pays with respect to what another carrier has already paid.  Therefore, if the motorist who causes you injury is uninsured, there is no other carrier who pays, that is, the amount already paid by another carrier equals $0.  However, if the motorist who hits you is under-insured, the other carrier they have insurance with will have already paid their policy limit to you; and if your bills are higher than those limits that’s where the difference between “Added-on and “Reduced-by” matters.  

 “Added-on” UM means we pay your selected limit “added-on” to whatever the other carrier has paid.  “Reduced-by” means we pay your selected limit “reduced by” what the other carrier has paid.  

For example, assume you have a $100,000 limit on UM/UIM and you are hit by a motorist who has $50,000 liability limits on their policy.  The other carrier would pay you $50,000 and then your UM selection would  determine what your carrier paid under UM/UIM.  If you selected “added on” your carrier would pay up to your limit of$100,000.  If you selected “reduced by” your carrier would pay up to $50,000 (your $100,000 limit minus the $50,000 already paid to you).


 Deductible selection is an important aspect of risk management. The higher the deductible, the lower the premium. The lower the deductible, the higher the premium. When you transfer risk from yourself to your insurance company your premium is higher, but when you retain risk your premium is lower.  No one wants to have to pay $500 or $1000 or $2500 at any time, but I always ask my clients, “If you had to pay this deductible would it put you at risk for making your monthly budget?”  If the answer is “yes” I advise a lower deductible, but if the answer is “no” we consider higher deductibles.  

 Collision vs. Other-Than-Collision.

“Collision” is used when you hit something.  For example, you back into a pole, another car, or are at fault in hitting another vehicle.  “Other than collision”, previously referred to as “Comprehensive” is when something hits you.  For example, a tree or hail falls on the car, a dog or deer runs out in front of you.  Comprehensive also includes theft.

Content provided by Hall County Georgia Farm Bureau Agency Manager, J. Casey Ryals