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.
Compensation for Harm You Cause Others
Accidents happen every day in Springfield, and every day, people are injured. If you cause a collision that results in an injury, you could be held responsible. Not only could a jury impose punitive damages on you for negligence behind the wheel, but you could also be sued for the victim’s medical bills, lost wages, emotional distress, and more. It does not matter how the accident happens or whether you are totally or partially at fault; all that matters is that the accident did happen and that you are responsible.
Fortunately, all car insurance policies sold here in Missouri contain an important coverage called bodily injury liability. This mandatory coverage helps pay for the injuries of victims up to the limits of your policy. Although Missouri imposes a minimum bodily injury liability limit, we here at Tagge Insurance believe it is far too low to protect you and your family. Since you may be responsible for paying for damages that would exceed the low limits of state required minimum coverage, you may leave yourself financially responsible; we recommend higher than minimum coverage limits to shield your income and assets against litigation. As someone once said, “Can you afford to provide someone else an income besides your own family?”
Split Limits vs. Combined Single Limit (CSL)
Your coverage limit may be a combined single limit expressed as a single number, such as 300 CSL; this would mean that the insurance policy covers up to $300,000 total bodily injury liability and property damage per accident. Or your coverage could also be a split limit expressed as two separate numbers, such as 250/500; this indicates a maximum coverage of $250,000 per person, with up to $500,000 in total bodily injury coverage available for all victims combined in an accident; plus a third number $100,000 for your liability to property damage. This may be something you wish to discuss further.
Money to Protect You and Your Passengers against Uninsured or Underinsured Drivers
It’s hard enough coping with the aftermath of an accident; it can take years to settle a serious injury caused by an accident. It’s much worse if the person responsible for your accident does not have enough car insurance to compensate you for your losses. Underinsured motorist insurance (UIM) helps fill in gaps left behind by underinsured drivers, ensuring you and your passengers have access to the medical care you need and the loss of other financial resources you may incur. Likewise, uninsured motorist (UI) protection helps cover your injuries if you are hit by a driver who has no insurance at all.
Money to Help with the Smaller Things
Sometimes, it’s the little things that make a big difference. For example, if you need to seek medical attention after an accident, co-pays and health insurance deductibles can quickly add up. Medical payments coverage can provide instant relief, regardless of who was at-fault for the accident. Here at Tagge Insurance, we offer a wide range of extras to help reduce your financial burden when the unexpected occurs. From towing charges to rental car reimbursement.
Beyond Car Insurance the Excess Liability or Umbrella
There may come a time when your high-limit liability coverage still isn’t enough to cover the damages you cause in an accident. If you cause an accident that results in a fatality or permanent disability, for example, you could be sued for millions. If you have $500,000 of coverage, how will you pay for the rest of your liability? Though less common, these are the types of scenarios that cause financial ruin. Here is a question you should ask yourself,” Do you have the resources or ability to pay someone else a lifetime income?”. Don’t risk everything you have worked for and your family’s financial future. Consider an umbrella policy to supplement your primary liability coverage. With limits starting around $1 million and low, affordable rates, umbrella policies provide an easy way to shield your assets from potential lawsuits.