How much car insurance is the right amount for me? We hear it all the time from our clients. Some are concerned about protecting the income and assets; others are interested in curbing the cost of their premiums. We wish the answer were simple, but it’s not. The truth is car insurance should be personalized to meet your unique needs. However, one thing is always true: Having the right coverage types and high enough limits is always the most important priority when shopping for a policy. In this article, you’ll learn some reasons why.
Money for Your Lost, Stolen or Damaged Car
Collision and comprehensive insurance provide coverage for your vehicle when it is damaged, stolen, or destroyed due to a covered event. Collision coverage is isolated to damages stemming from a car accident. That includes collisions involving multiple vehicles, as well as accidents involving only your vehicle. Comprehensive coverage pays for damages caused by other non-collision events, such as a fallen tree branch, damaging hail, vandalism, or theft. It also covers damages to your vehicle if you hit a deer with your car.
Do You Need Both Types of Coverage?
When cars get damaged, someone has to absorb the loss or pay for the repairs. If you own your car outright, physical damages coverage for your vehicle is optional, but nearly always recommended. Even a minor accident can cause thousands of dollars in repairs, and a more serious incident could damage your vehicle beyond repair. Unless you want to pay for a replacement vehicle out-of-pocket, collision and comprehensive insurance can be a good value.
If you do not own your vehicle, but instead lease it or financed it with a loan, you may be required to purchase and maintain collision and comprehensive insurance by the terms of your contract. So long as someone else owns your vehicle or has a lien against it, it is likely your responsibility to ensure their financial interests are protected.
Deductibles and Limits
Insurers typically require drivers to pay a deductible toward the cost of covered collision and comprehensive claims. You can choose a deductible as low as $100 or as much as $1,000. Lower deductibles are more convenient during the claims process, whereas higher deductibles offer upfront savings in the form of lower insurance premiums. Just be sure to choose a deductible that fits your needs and budget.
You do not have to select limits for your collision and comprehensive coverage. Most insurers provide coverage automatically based on the actual cash value (ACV) of your vehicle. If the cost of repairs for your vehicle exceeds that amount, the insurer will compensate you for the ACV minus your deductible. Exceptions may be made for antique and collector cars, which are instead insured for an agreed value.
When You’re Responsible for Property Damages
Driving is risky business. Every time you get behind the wheel, there is a chance that you could cause an accident. If you are at-fault for damages to another person’s vehicle or personal property, you can be held financially responsible.
Both Wisconsin and Minnesota require that drivers carry a minimum of $10,000 in property damage liability, although in many cases this is not enough to protect against the devastating financial consequences of an at-fault accident. After all, the cost to replace a brand new luxury vehicle or repair someone’s damaged home could cost tens of thousands of dollars. In those cases, state minimum coverage would barely scratch the surface of your liability.
The Dangers of being Underinsured
Liability transcends the amount of insurance coverage you have or don’t have. You can be held personally liable for the value of any damages you cause that exceed the limits on your car insurance policy. The victim’s insurance might cover the initial damages, but it is likely the insurer will pursue you to recover the loss. You could be forced to draw from your savings, liquidate your assets, or make payments from future income to settle the debt.
Having adequate limits on your property damage liability insurance is a much simpler and more affordable way of handling any financial responsibility you might have in an accident. Contact us today for help determining how much property damage liability protection is right for you.
Continue reading part two of “How much car insurance is enough?”.