We hear it all the time – How do I know what types and how much car insurance to buy? With so many options to choose from, selecting the coverage for your policy could be confusing. In this article, we are taking a much closer look at car insurance and the importance of having the right types of coverage and ample limits.
Compensation for Personal Vehicle Damages or Loss
How much did your vehicle cost you? What will it be worth when you are ready to sell it or trade it in? Whether you financed your car, leased it, or own it outright, chances are you have a lot of money wrapped in your vehicle. Repairing or replacing it could cost thousands of dollars out of your own pocket if you do not have adequate coverage. Whatever the value of your vehicle, two types of insurance coverage – collision and comprehensive – can help protect you against accident and non-accident related losses.
Collision coverage helps compensate you for damages to your vehicle that occur as the result of an accident. That includes multiple-car accidents, as well as single-car accidents involving only your vehicle. If you hit a tree, for example, your collision coverage will pay for repairs to your car.
Comprehensive coverage may sound like all-inclusive coverage for your vehicle, but it is independent of your collision protection. Though comprehensive protection still covers physical damages to your vehicle for the same amounts that collision does, it is designed specifically for non-accident related damages, such as those caused by vandalism, theft, or a weather-related event, such as hail damage.
Collision or Comprehensive? You Need Both
Owning or leasing a vehicle comes with risks. You need both collision and comprehensive coverage to minimize your vulnerability to a potential loss. If you lease or finance your vehicle, chances are your lender will require you to carry both types of coverage to protect their financial interest in the vehicle. If you own the title to your vehicle, collision and comprehensive insurance can still assure you do not find yourself without transportation in the event of an accident or loss.
There are no coverage amounts to select for your collision and comprehensive insurance. If your vehicle is damaged beyond repair, your insurance company will simply compensate you for the loss of your car based on its actual cash value. However, some insurance companies will make exceptions for collector or antique vehicles. In those cases, the vehicle may be insured for an agreed value instead.
The only decision you need to make regarding your collision and comprehensive coverage is the amount of your deductible, which could range between as little as $100 to as much as $1,000 or more. Higher deductibles typically result in lower premiums, and vice versa. Just be sure to select an amount you could easily afford to pay out of pocket toward the cost of your claims in the event of a loss.
Money to Pay for Damages to Other People’s Property
If you are responsible for causing a car accident, you could also be financially liable for repairing or replacing any property you damage. Whether it is a $80,000 luxury vehicle or damage to a storefront you ran into, property damage liability can cost tens of thousands of dollars – or more. Wisconsin requires drivers to carry a minimum amount of property damage liability coverage, but it is hardly enough to cover the cost of damages in a major accident.
Even though the victim’s insurance company may initially pay for the cost of damages, you can be sure the insurer will sue you to recover compensation for those damages. Choosing adequate property damage liability limits is an important part of protecting your financial future and shielding your family against a damaging loss. Here at G&L Insurance, we can help you determine exactly how much property damage liability protection you need to protect your assets, savings, and future income against lawsuits.
Compensation for Harm You Cause Others
Of course, property damage is not the only liability you could obtain after causing a car accident. If the collision happens to injure a victim – whether a pedestrian, cyclist or another driver – you may have a much bigger problem on your hands. After an accident, a jury may order you to pay damages to a victim to cover the cost of medical bills, lost wages, emotional distress, and more. You could also face punitive damages – especially if you were texting while driving or intoxicated at the time of the accident.
Bodily injury liability insurance can financially protect you against injury-related lawsuits, but only up to the limits of your policy. If you stick with only the minimum coverage required by the state, you could be personally responsible for hundreds of thousands of dollars in any unpaid damages that exceed the limits of your coverage. If you do not have enough money to pay the liability out-of-pocket, a judge could order the liquidation of your assets or even garnishment of your future wages to satisfy the debt.
Bodily Injury Liability Coverage Options
Insurance companies may offer bodily injury liability as a combined single limit (CSL) or a split limit. Combined single limits are a flat amount that the insurer is willing to pay for the combined bodily injury liability of all victims involved in an accident. For instance, a 300 CSL represents $300,000 in total available coverage that can be divided up between multiple victims or designated in its entirety to a single victim.
The other type of coverage – split limit coverage – may be expressed as two numbers separated by a forward slash (i.e. 25/50 or 250/500). The first number represents in thousands the maximum amount of bodily injury liability coverage available to each victim in an accident. The second number is the amount in thousands that total bodily injury coverage is capped at per accidents for all victims combined. Currently, Wisconsin requires a minimum 25/50 split, but we here at G&L Insurance recommend much more coverage to minimize your financial risk.
Money to Protect You and Your Passengers against Uninsured or Underinsured Drivers
It may be a law that all drivers carry liability insurance in Wisconsin, but not all drivers do. If you are hit by an uninsured driver or a driver with too little insurance to cover your needs, the uninsured motorist (UI) or underinsured motorist (UIM) protection on your policy can pick up the slack for you and your passengers. Both UI and UIM are very important, if not the most important coverage types on your policy. They ensure that your needs will be met even if the responsible party cannot pay.
Money to Help with the Smaller Things
Sometimes it’s the little things that can add up. Fortunately, your car insurance policy can take care of much more than your injuries, vehicle damages, and liability. In fact, you can custom-tailor your insurance to provide a wide range of coverages, including towing charges, rental car fees, and payments to help cover your health insurance deductible regardless of who is at-fault for your injuries.
Beyond Car Insurance
Some accidents result in extreme liability, such as in the case of a driver who permanently paralyzes a young doctor who would have had decades of future income. The medical bills alone can quickly consume even the highest bodily injury liability limits, potentially leaving hundreds of thousands or even millions of dollars in compensation for lost wages, emotional distress, and future medical needs. Once you reach the maximum on your primary insurance limits, an umbrella policy can provide supplemental protection, extending your liability coverage by $1 million or more. Without it, you could lose your savings and face a lifetime of wage garnishments to help satisfy a major liability. Fortunately, umbrella policies are very affordable and versatile. Contact us here at G&L Insurance to find out if supplemental liability protection could better protect your assets and minimize your financial risk vulnerability.