Basic liability automobile insurance only includes legally required limits and doesn’t cover your own vehicle. But commonly sold full coverage packages include many optional covers to increase protection to comfortable levels. And the price difference may not be as wide as you think. That is why it is always worth checking what you get for your money. Then, you need to decide if you are happy with the provisions, conditions and premium or you want more.
There are some common pitfalls to avoid in this process that help you prevent serious problems down the line. If you do not have the right policy, you could be on the hook for tens of thousands of dollars in damage payments. Trying to save a few dollars a month on car insurance can be a “penny-wise and pound-foolish” mistake.
These tips can be helpful for new drivers but knowing a lot about a subject may not be enough to avoid pitfalls. So, everyone can benefit from looking into their vehicle insurance coverage closely at least once in a while and see if they can improve it with minimum additional spending. Sparing a few minutes now can prevent financial difficulties in the future.
Poorly Designed Minimums
Almost every state requires vehicle owners to have mandatory liability insurance but its limits are often insufficient. For example, the minimum amount Arizona set is 15/30/10, which equals $15,000 for a single person, $30,000 for multiple injuries and only $10,000 for property damage. Should you be at fault for an accident with injuries and damages these limits are likely to come short to compensate for all the damages and injuries you caused.
Now if you compare that with the average settlement or court awarded figures in serious injury incidents you get a bleak picture. Most legal experts suggest that claims could be inflated two to four times when you add pain and suffering and other legal and administrative costs. Typically severe car accidents can routinely total up to $50,000 – $100,000 of third party claims. Could you afford to pay $20,000 – $70,000 out of pocket because your basic liability car insurance limits are reached without paying for all the losses?
On average, motorists are involved in 3 – 4 accidents in a lifetime. Auto accidents are the leading cause of injury in the US with 2.5 million Americans going to ER and over 200,000 victims being hospitalized annually. This may be a simple reading but it would be a problem if you were to cause a collision that resulted in harm and more. Opt for a much higher liability vehicle insurance limits than the basic. Coverage like 100/300/50 should pay for most damages, if you end up causing a traffic accident.
On the other side of the equation for settlements, you have the risk of Uninsured Motorists hitting and hospitalizing you. In the same scenario above, if you are the victim of such a driver with limited or no auto insurance you may not have any recourse if you don’t have Uninsured Motorist coverage on your policy either. The responsible person may not be worth the amount of the claim and declare bankruptcy, leaving you with bills to pay. If you were hit by a a rough driver, which in the US ranges from 10 to 20% of all drivers, you may end up with no compensation from them. When you increase Liability limits Uninsured Motorist limits increase by the same amount too, providing you have it.
Not-So Optional Coverage
Below recommendations are about helping you see the value of optional extras that comes with a typical full coverage vehicle insurance. They are there to protect you by paying for your damages and faults. They help safeguard your assets at the time in order to make sure you are not worse off.
It is very important to know that liability compensates only third parties assuming you are responsible for the losses. If that is all you have, you are left alone with your damages and injuries. That is why you need to consider adding the following optional covers on your automobile insurance to ensure you are not left high and dry.
First you should have Collision Coverage to protect the value of your own vehicle, especially if it is less than 8 years old. To replace a vehicle totaled in a crash can be an expensive proposition, especially when the prices have been steadily increasing. For just a few extra dollars in premiums a month, collision would protect the vehicle in case it needs accident related repairs or replacement, no matter who is at fault.
While you are looking into your own losses, it is always wise to add Comprehensive Coverage as well. It pays for damages to your automobile from fire, theft, flood, storm and other mishaps like trees falling onto it. Liability, Collision and Comprehensive are the three essential components of a standard full coverage auto insurance.
Secondly, most people should have additional Medical Payments or Personal Injury Protection for traffic related incidents. Your own health plan may not be enough to meet the mounting costs of auto accident injuries that can include time off work, hospitalization, recuperation time and therapy costs. Hospitalization alone for such a case can be over $50,000 on average. This coverage is extra important for people who have no health insurance.
Lastly, get Uninsured Motorist Coverage. In nearly half the states, they are automatically added to policies in the same amount you offer to third parties. Make sure to get it; especially if you live in a region with high numbers of such drivers.
Really Optional Coverage
If it is damaged and requires repair, can you go without a vehicle for several weeks? If you desperately need a vehicle for the commute, a few hundred dollars for a car rental can really stretch the budget. Consider adding Car Rental Reimbursement on your automobile insurance coverage if this is a concern for you. Usually, it is not an expensive add on but you should check the price and decide if it is worth the money.
Have you seen towing and labor charges lately? Often in the area of $500. Always worth checking if this option is available and how much it is. A breakdown can happen even with a brand new auto.
If you are like most Americans, you survive on a budget which has little room for major financial expenses. An auto accident can often have many injury and property costs. You may not be unaware of them but that doesn’t prevent you from facing them unless you buy a sufficient car insurance policy.
Full coverage vehicle insurance can be bought cheaply as many companies are offering them. You may be surprised to see how you can improve the current coverage affordably if you compare prices before buying a policy. So, don’t settle for a basic automobile insurance coverage when you can afford a better policy.