Not all policies are created equal. You need to know what to look for in car insurance. In fact, there are some common pitfalls that drivers enter when buying basic coverage and set themselves up for catastrophic financial ruin. If you do not have the right policy cover, you could be on the hook for tens of thousands of dollars in damage payments. Forgoing a premium increase of a few dollars a month, as you will see below can be ‘a pennywise but pound foolish’ mistake. Find out what typical car insurance coverage you need to avoid financial ruin.
Poorly Designed Minimums
Although almost every single state in the US requires drivers to have mandatory minimum insurance coverage for Liability, these minimums are often laughable. Take for example the minimum requirements for insurance in Arizona, set at 15/30/10, which equals $15,000 for single person injuries, $30,000 for multiple injury accidents and only $10,000 to cover property damage should you be at fault for an accident.
Now if you compare that with the average settlement or court awarded reward in serious injury accidents you get a bleak picture. Most legal experts suggest that claims are worth two to four times your expenses suffered in an auto accident plus pain and suffering. Typically severe car accidents can routinely be worth $50-$100,000. Could you afford $20-$70,000 in payments over what your basic car insurance coverage would pay?
Consider, that on average you will be involved in 3-4 accidents in your lifetime and that auto accidents are the leading cause of injury in the US with 2.5 million Americans going to an ER and over 200,000 victims being hospitalized annually. It is not a consideration of if, but when you will be involved in an accident that causes injuries. Opt for a much higher minimum Liability cover than basic auto insurance coverage like 100/300/50 that should cover most cases where you are at fault.
On the other side of the equation for settlements, is the risk of uninsured or underinsured motorists that hit and injure you. In the same scenario above, if you are the victim and the driver is underinsured that person may not be worth the amount for your claim and declare bankruptcy leaving you with only bills. If you were hit by a driver without insurance, which in the US ranges from three to over 20% of all drivers, you may end up with no insurance payouts from the at fault driver. When you increase your Liabilities limits your uninsured motorist limits increase by the same amount too.
Not-So Optional Coverage
Below car insurance tips are about helping you see the value of optional covers that comes with a typical full coverage car insurance. They are there to protect you, pay for your damages and liability and they help safeguard your financial position at the time.
When you are at fault for an auto accident Liability does not cover your own injuries or property damage. To cover for these very expensive costs, you will need two other insurance covers to ensure your finances are not put at risk.
First you should have Collision coverage to protect the value of your own vehicle, especially if that vehicle is less than 8 years old. To replace a vehicle totaled in an accident can be an expensive proposition, especially when the values of vehicles have been steadily increasing. In 2015 used car prices jumped 8% representing an increase in their value. Spread out the cost of a major financial burden like replacing a vehicle from an accident with Collision coverage for just a few extra dollars in premiums a month.
While you are looking into your own losses, it is always wise to add comprehensive coverage as well. Collision and Comprehensive coverage may be sold together. Comprehensive cover pays for damages to your automobile from fire, theft, flood, storm and accidental damages. A full cover basic car insurance policies should include both Collision and Comprehensive.
Secondly, most people should have additional Medical Payments coverage specifically for auto accidents. Often your own health insurance is not enough to cover the mounting costs of auto accident injuries that can include time off work, hospitalization costs, recovery time and therapy costs. Hospitalization costs alone for a vehicle accident can be over $50,000 on average.
Lastly, get uninsured and underinsured motorist insurance coverage. They are often automatically added to policies in the same amount of liability that you get, but make sure to get it; especially if you live in a state with high numbers of uninsured drivers.
Avoiding Catastrophe when on a Budget
If you are like most Americans, you survive on a standard budget that has little room for major financial expenses. An auto accident can often have many injury and property damages expenses beyond the basic car insurance coverage. You may not be unaware of them but that doesn’t prevent you facing them unless you buy a good cover. Have a good look at above auto insurance tips to make sure you end up with a good policy.
If your car is damaged and requires repair, can you go without a vehicle for a week? If your livelihood depends on your transportation a few hundred dollars for a car rental can really stretch your finances. Consider adding car rental coverage for a few dollars on top of your basic auto insurance to avoid this one time large cost.
Have you seen towing and labor charges lately? Often in the area of $500, this can put most families in a deep hole after an accident. Again, for a few dollars a month, avoid the risk of this expensive cost.
Typical standard automobile insurance with full coverage can be bought cheaply as many companies are offering them. You may be surprised to see how you can improve your current policy if you compare car insurance prices and coverage before buying it. So, don’t settle for an average policy cover and go for a better one for your protection.
Find out how you can get great coverage at a low cost, that includes all these not-so optional covers, here with our easy to use automobile insurance comparison tool. And make sure the health and vitality of your financial future protected.