How much car insurance does the average driver need? Are your coverage needs higher or lower? It can be difficult to determine how much car insurance to buy – particularly if you are not familiar with the various types of coverage available and the limits you might need. In this article, we’ll dive into the many reasons why having the coverage and limits that are personalized according to your risks is an important part of planning for your financial future.
Your Vehicle is Damaged, Destroyed, or Stolen
When will you have your next car accident? Hopefully, the answer is never; but statistics say otherwise. The average driver makes between three and four collision-related damage claims in his or her lifetime, and that doesn’t take into account vehicle damages caused by other non-collision incidents. Considering average body repair costs several thousand dollars, it is easy to see why adding physical damages insurance to your policy is a smart move.
For personal car insurance, you will need both collision and comprehensive insurance to fully insure your vehicle. While both pay for body damage repairs or value reimbursement in the case of a total loss, they vary in the types of events they cover. Collision insurance covers the damages to your car that occur in a collision, whether involving only your vehicle or multiple cars. Comprehensive insurance covers damages that occur as a result of non-collision events, such as theft, vandalism, fire, and damage caused by wild animals.
How Much Coverage Do You Need?
When it comes to insuring your vehicle, there are no limits to choose from. You either have the coverage, or you don’t. Insurers generally cover vehicle repairs up to the actual cash value of the car. If damages will cost more to repair, policyholders typically receive reimbursement from the insurance company for the value of their loss. Occasionally, some drivers will be covered for a different amount, known as an agreed value. This is usually reserved for people who are insuring special vehicles, such as antique and collector cars.
When you add collision and comprehensive insurance, you will be asked to select a deductible. This is the amount you will contribute if you need to file a future claim for damages to your vehicle. Most people choose a deductible based on preference. If you desire a smaller financial burden when you file a claim, you might choose a $100 or $250 deductible. If you prefer to benefit from upfront savings in the form of lower insurance premiums, you might be better suited for a $500 or $1,000 deductible. Just be sure only to select an amount you could afford to pay in the event of an accident.
Do You Need Collision and Comprehensive Coverage?
At Tagge Insurance, we never want to see one of our clients experience a financial loss that otherwise could have been prevented with better insurance coverage. We recommend collision and comprehensive insurance to any policyholder who wishes to protect the value of their car and the investment they have made in it. You may also be required to purchase physical damages protection if you do not own your vehicle in full. Dealers and lenders often require collision and comprehensive coverage as part of a lease or loan agreement.
You Damage Someone Else’s Property
Accidents happen, and sometimes they involve other vehicles or property that is not yours. If you are at-fault for an accident that results in damage to someone else’s property, you can be held financially responsible. The laws here in Missouri require all drivers to carry a minimum amount of property damage liability insurance to help cover the cost of damages in an accident. If you ding someone’s bumper or hit a mailbox, it’s safe to say the bill will probably come in under $10,000. Anything more than that, though, and you might find that the minimum coverage just isn’t enough. In fact, it could leave you with a big problem on your hands.
Take, for example, a driver who nods off at the wheel after a long shift at work. She veers off the road and into the front of a house, but only after sideswiping the brand new luxury vehicle that was sitting in the driveway. The total cost of the property damages is more than $90,000. The victim’s insurance takes care of the bill and then pursues the driver’s insurance company for compensation of losses. Unfortunately, the driver’s policy limits max-out at $10,000, and the insurance company then sues the driver personally for the remaining $80,000. Now the driver might have legal expenses to pay plus a judgment for the damages. She may be forced to liquidate her savings and even make payments from future income to settle the costs. Had she simply increased her property damage liability to $100,000 (it doesn’t cost much at all,) before the accident, she likely would have had no out-of-pocket costs at all.
Continue reading part two of “How much car insurance is enough?”