Purchasing car insurance is about much more than finding a great rate; it’s about finding the right coverage. Often, drivers ask us, “How much car insurance is enough?” or “How do I know which types of coverage are right for me?” Our answer is always the same – it depends on an assortment of factors that are unique to each person. Ultimately, car insurance should be designed to protect the policyholder, not leave him or her vulnerable to risks. In this article, we will explore reasons by having the right types of coverage, and ample limits is an essential part of long-term financial security.
Money for Your Lost, Stolen or Damaged Car
What are the odds that your vehicle will become damaged at some point while you own or lease it? Statistics show that drivers file claims for an average of three to four accidents during their lifetimes, although some file many more than that. Of course, that’s not accounting for damages caused by non-collision events, such as weather damage, theft, vandalism, and run-ins with wildlife. Instead of spending thousands of dollars to repair your vehicle or much more to replace it, add comprehensive and collision insurance to your policy to protect against physical damages to your car.
Collision – pays to repair or replace your vehicle if it is damaged in a car accident.
Comprehensive – pays to repair or replace your vehicle when it is stolen or damaged due to non-collision events.
Do You Need Both Types of Coverage?
Since collision and comprehensive cover damages related to different types of events, you need both forms of coverage to protect your financial investment in your vehicle fully. Unless you are okay with absorbing the loss of your vehicle and buying another car out-of-pocket, we do not recommend going without this important coverage.
In many cases, drivers are actually required to purchase and maintain physical damages coverage. This is usually due to a contractual agreement between drivers and the lenders or dealers they finance or lease their cars. Collision and comprehensive assure lien-holders and lenders that their financial interest is safe.
Deductibles and Limits
When you file claims for damages to your personal vehicle, your insurer will require that you pay a deductible. This is your ‘share’ of the damages and is an amount that you personally select when purchasing your coverage. Most insurers offer a wide range of deductible options, from as little as $100 to as much as $1,000. While a high deductible might not sound like something you would want to pay, consider that they typically translate to lower insurance premiums. However, you should only choose an amount you can afford. If $1,000 is more than you could pay toward damages to your car, go with a smaller amount instead.
Unlike other types of car insurance coverage, collision and comprehensive do not have ‘limits’. The insured value is pre-determined by your insurance company and is usually based upon the actual cash value of your car. This is the amount the insurer is willing to pay toward repairing your vehicle. If the cost of damages exceeds that amount, the insurer will likely reimburse you for the ACV minus your deductible.
When You’re Responsible for Property Damages
When drivers get into collisions or run their cars off the road, they often damage other vehicles and property in the process. If you are at fault for an accident, you can be held financially responsible for any damages you cause. That is why drivers here in Missouri are required by law to carry a minimum amount of property damage liability insurance. Unfortunately, the coverage required is often far too low to cover all of the damages in an accident.
For example, if a driver backs into the bumper of a car in a parking lot, the damages might fall within the realm of minimum coverage requirements. If that same driver runs a stop sign and totals a brand new 2017 Toyota Land Cruiser, the damages could be closer to $85,000. The same could be said of damages to someone’s home or business. In those cases, $10,000 of minimum coverage just won’t cut it.
If you are underinsured for an at-fault accident, and financial liability that exceeds the limits of your coverage will transfer to you personally. Victims and their insurance companies can sue you in an attempt to recover their losses. If you lose your defense, you could be on the hook for tens of thousands of dollars out of your own pocket.
Compensation for Harm You Cause Others
Approximately 2.5 million people visit emergency departments due to collision-related injuries every year. Hundreds of thousands require time off work to heal and recovery as they remain hospitalized after the accident. It does not matter how an accident happens or whether you are fully or partially at-fault. If you cause an accident, you could be responsible for paying victims’ medical bills and other injury-related costs. If you exhibited negligence at the time of the accident, such as texting while driving, you could also face punitive damages.
Missouri drivers must carry bodily injury liability insurance to help cover the cost of injury-related expenses, but the minimum limits required by the state are too low to provide adequate coverage for the cost of medical bills, emotional distress, lost wages, and other costs. At Mid-Rivers Insurance, we recommend purchasing high-limit bodily injury liability coverage that will better protect your income and assets. Without it, you are vulnerable to lawsuits and any damages that exceed the limits on your insurance policy.
Split Limits vs. Combined Single Limit (CSL)
When you select your bodily injury liability limits, your coverage may be offered as either a combined single limit or a split limit. A combined single limit, or CSL, covers up to a maximum value in thousands per accident for all victims combined without individual caps on coverage. If your policy shows a 300 CSL, for example, your insurance will pay up to $300,000 toward the cost of all bodily injury claims regardless of how many victims are injured.
A split limit features two different numbers on your policy and is more restrictive in how funds are allocated to victims. The first of the two numbers indicates the amount in thousands the insurer will pay per injured individual, and the second number is the maximum total amount the insurer will pay for all individual claims combined. A 250/500 split, for example, pays up to $250,000 per person and up to $500,000 total bodily injury liability per accident.
Money to Protect You and Your Passengers against Uninsured or Underinsured Drivers
If you are the one injured in a car accident, it helps to know the at-fault driver’s insurance will cover your medical bills and other injury-related losses; but what happens if an uninsured driver injures you? One of the most important coverage types you can include in your policy is uninsured motorist (UI), which protects you and your passengers if an uninsured driver hits you. We also recommend underinsured motorist coverage (UIM), which helps pay for injury-related expenses that exceed the limits of the at-fault driver’s insurance.
Money to Help with the Little Things
It’s not just physical damages and liability; several ‘small’ expenses can drain your budget after an accident, too. You might have to pay hundreds for towing charges and hundreds more to rent a car while your vehicle is repaired. You may need to pay co-pays for chiropractic visits or a health insurance deductible for your hospital stay. Instead of paying out-of-pocket, you could rely on your car insurance to cover the bills instead. At Mid-Rivers Insurance, we can help you build and personalize your policy to include coverage for medical payments, towing, rental car reimbursement, and more.
Beyond Car Insurance
Even a well-constructed car insurance policy with high coverage limits can fall short of meeting your needs after an accident. In extreme cases, liability claims can quickly get out of hand, resulting in hundreds of thousands or even millions of dollars in damages. Whether you cause an accident that severely injures multiple people or you happen to injure a young doctor who will be forced into early retirement, even high-limits on your standard liability insurance cannot cover a seven-figure lawsuit.
Instead of risking your income and assets to a major claim, consider purchasing an umbrella policy to help supplement your coverage. Umbrella insurance is high-limit liability insurance that is secondary to the primary coverage on your car insurance policy. It pays benefits once you exhaust the limits on your primary coverage, usually with additional coverage of $1 million or more.
For more information about umbrella insurance or any of the other coverage types listed in this post, contact our office today.
